As bitcoin tumbles, more and more credit card companies are preventing their customers from buying cryptocurrencies with borrowed money. This is great news, and not just because it may protect speculators from getting into unsustainable debts in the bitcoin markets. It could signal a change of approach from card companies, who have done far too little to let customers protect themselves from risky transactions.
When you use a credit card, your provider knows what kind of shop or trader you’re spending money with. That’s because everyone who takes payments has to declare this information, by using what’s called a merchant category code. This information is what partly feeds the increasing number of smart-spending apps that group and colour code your spending. But it could – and should – also be used to allow you to take more control of your spending, by limiting your spending to the merchant types you choose.
Blocking bitcoin is a good step. But why can’t you also choose to block gambling transactions? Why can’t you block online, or offshore transactions, to protect yourself against fraud? Why can’t you set your credit card to only work at supermarkets, to help you resist the temptation to shop elsewhere? And why not go one step further? Wouldn’t it be nice to put a daily limit on your spending so you can’t go overboard on a whim? Some people would like to stop themselves spending money after midnight on a Friday, because they know that’s the moment when their willpower ebbs away.
Some might laugh at this idea. No one is forced to spend money on things they can’t afford – why do you need your credit card to tell you what to do?
The truth is not all of us have willpower – and hardly any of us have willpower all the time. Research by the Money and Mental Health Institute, where I was until recently director, has shown that as many as a third of us regret the things we buy online – and half of those with mental health problems do so. Whether it’s late at night, after a bad day, or during a period of poor mental health, people can often spend money on impulse that gets them into serious financial difficulty.
Of course, not everyone will want to put restrictions on what they can and cannot spend. For many, willpower is enough. But these kind of features are technologically possible, and they ought to be available for those who want them – and especially for those who need them.
There’s a growing market in fintech for high control financial products, helping people to boost their willpower with technology. Some app-based banks, for example, let you turn your debit card off and on again with your phone – handy when you’re not sure if you’ve lost it or left it in another jacket. And a very few high street banks have dipped a tentative toe into offering card restrictions – blocking online payments, in particular.
But mostly, the mainstream banks hold up their hands and say nothing is possible. They tell a big sob story about how their customer databases mostly run on creaking, decades-old, patched software that’s hard to update. What they seem to forget is that merchant category code blocking is already available for businesses. If you set up a corporate credit card, you’ll usually be offered a menu of restrictions you might want to impose on your employees. That might be blocking them from withdrawing cash, or it might – wisely – be blocking them from spending money on MCC 7273 (escort and dating services).
It shouldn’t be difficult to make these kind of restrictions available in the consumer market, too. That would allow those who have had trouble with gambling too much, spending too much, or fraud, to protect themselves, while still having a credit card if they want one.
The exciting thing about the trend for bitcoin blocking is that it proves the banks really can act – if they want to. So no more excuses: let customers set their credit cards up the way they want, with restrictions in place to help them manage their spending choices and stay out of unmanageable debt.
• Polly Mackenzie is director of the thinktank Demos