Last week, a number of bitcoin investors reported that popular cryptocurrency exchange – Coinbase withdrew unauthorized money out of their accounts.
The increasing number of consumer complaints on Coinbase’s Reddit Account reveals that a number of customers were slapped with ghost charges on their credit cards after buying cryptocurrencies from the exchange.
Founded in 2011, Coinbase is one of the most popular digital currency exchanges in the world and has more than 1 million users. Over the years, the company has successfully raised over $225 million worth of venture capital.
In a blog post, Coinbase revealed that cryptocurrency purchases made between January 22nd, 2018 and February 11th, 2018 have been reprocessed and refunded. There were multiple erroneous charges worth many thousands of dollars.
A large number of consumers also reported being charged more than once for their purchases. In fact, one person reported that he was charged 50 times for around $67,000. Others confirmed they were charged at least twice, while one user reported he had received $5,000 in his account.
Explaining the issues, Coinbase revealed on Twitter that the payment glitch happened due to the changes in the MCC (merchant carrier code) by the banks and card issuers. The credit card processors weren’t able to update the codes in time, which resulted in multiple erroneous charges.
In addition to changes in the MCC, some major financial institutions and banks have started charging additional cash advance fees on cryptocurrency transactions. And that’s not all, major banking institutions including Bank of America, Chase Bank, Capital One and Citi Bank have blocked purchase of cryptocurrencies on credit cards owing to the price volatility and high risk associated with cryptocurrencies.
According to trading and finance experts at thebankly, VISA issuers and Mastercard are in the process of reclassifying the way cryptocurrency purchases via credit cards are processed. Visa issuers and Mastercard are now pursuing cryptocurrency transactions as “cash advance” instead of “purchase.” Cash advance of credit cards is subject to an additional feel. In case of cryptocurrency transactions, this fee may be an additional 5% in addition to the 4% credit card transaction fee levied by Coinbase.
Now that credit card issuers and banks have started charging an additional fee for cryptocurrency transactions, more people will start using crypto-friendly debit cards such as Cryptopay, Coinsbank, and BitPay, according to industry experts.
Coinbase issued an official apology and clarified that affected customers do not need to worry as the company will refund their money in full in the course of the next few days. Further, these refunds will be processed directly through the banks. The company has urged affected customers to get in touch with its support team at support.coinbase.com to report any events of erroneous charges on their credit cards.
In the interim, the company has temporarily stopped withdrawals via PayPal and has restricted U.S. customers from adding credit cards as a payment option.