The use of plastic to purchase virtual currencies such as Bitcoin (BTC) is being reviewed by leading financial institutions such as Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC). This comes a fortnight after Capital One Financial Corp. (NYSE:COF) disclosed that it had prohibited virtual currency purchases. Additionally TD Bank, a subsidiary of Toronto-Dominion Bank (NYSE:TD), has also refused to process some bitcoin transactions over security concerns. And for over three years now the use of Discover Financial Services (NYSE:DFS)’s credit cards to buy virtual currencies has been prohibited.
One of the concerns that the financial institutions have is money laundering. This is in light of the fact that banks have an obligation to monitor transactions in order to prevent criminal activities including laundering of money. Earlier in the year the relationship between Visa Inc and WaveCrest, a firm which allows customers to load their prepaid cards with cash converted from virtual currencies, was ended.
The review of policies being conducted by Bank of America and Citigroup with regards to the use of its credit cards to purchase cryptos comes in the wake of the former eliminating the eBanking account product which was popular with low-income earners. Users of eBanking accounts have now been moved to an account which charges a monthly maintenance fee for those who fail to make a direct deposit or keep a minimum balance.
The product was introduced eight years ago and it lasted a few years before it started being phased out. For a couple of years now there has been no enrollment of new customers.
With the eBanking account customers had a checking account which did not incur a monthly fee as long all transactions were conducted at ATMs or online. However a monthly fee of $8.95 was charged for transactions done in banking halls. Getting statements by physical mail also attracted the monthly fee.
Core Checking account
Customers holding eBanking accounts have now been moved to a product known as Core Checking which attracts a monthly fee of $12 if a direct deposit of at least $250 is not made or $1,500 in minimum daily balance is not maintained. According to critics, the low-income customers of the bank will struggle to abide by the requirements of Core Checking.
“Without access to safe and affordable bank accounts, low-income consumers often turn to costly alternative financial services, such as currency exchanges or check-cashers … the most financially vulnerable need more and better options to transact their business…” said Woodstock Institute’s president, Dory Rand.