The Commodities Futures Trading Commission’s (CFTC) ban on the use of credit cards for U.S. forex transactions, announced in early December, took effect on Saturday, Jan. 31. The forex credit card ban came about to protect ill-informed retail forex investors from fast and mounting debt and was welcomed by members of the National Futures Association.
In a recent article on Bloomberg.com, the NFA revealed an alarming statistic: that 72 percent of US retail forex traders suffered net losses in the fourth quarter of 2013, and that most retail forex traders in the US fund their transactions by credit card.
Defining Forex: Is it Gambling?
Forex, short for foreign exchange, is the hedging of one currency against another within a specific time period – minutes, hours, days and months. There has been an ever-present debate over whether forex trading is gambling. In some countries, forex trading is overseen by governing gaming commissions while others report to governing bodies such as the CFTC.
Forex Credit Card Ban: What Does it Mean?
Simply put, US forex traders will no longer be permitted to use a credit card to fund transactions. They are, however, allowed to use a debit card, wire transfers and electronic checks, which allows for immediate and direct payments.
Jaclyn Klein of FXCM.com said she didn’t anticipate the forex credit card ban would have a significant negative effect on her company. “The fastest way to fund your account is with a credit or debit card,” she told Bloomberg.com
After filing a Mar. 17 statement with the Securities Exchange Commission (SEC) decrying the forex credit card ban, officials at Gain Capital Holding, Inc., believe the change wouldn’t significantly harm shareholders because of the alternative payment options.
Instabill Offers Forex Merchant Accounts
It remains to be seen what effect the forex credit card ban will have on the US market. Instabill, however, remains on the cutting edge of payment processing for forex merchants, offering offshore and international banking options. Chat with a merchant account manager by selecting the option below or call 1-800-318-2713.