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What your credit card won't let you buy

Some card companies have policies that restrict even legal purchases.

By MSN Money Partner May 31, 2011 10:17AM

This post comes fromQuentin Fottrellat partner site SmartMoney.


A little-noticed move by American Express to ban the purchase of medical marijuana with its credit cards has reignited a longstanding debate: How much can a credit card company control what you buy?


To the surprise of consumers, major credit card companies are making decisions about what they can and can't buy with their credit cards. What's off-limits? Legal purchases like gambling chips and donations to at least one controversial nonprofit organization; in some cases, buying pornography is also restricted, and so is medical marijuana. Last month, shortly before Delaware became the 16th state to legalize medical marijuana, American Express told merchants that its cards could not be used to buy it.


Companies say they're protecting themselves against legal risk, but critics say this kind of corporate policy is an inconvenience for merchants, infringes on consumers' rights and amounts to moral policy-setting. "You ought to be able to use a credit card for any legal purchase," says John M. Simpson from the nonprofit Consumer Watchdog. "It seems to me that credit card companies are imposing their moral values on the world."


AmEx is the most conservative

The specifics of the companies' policies vary. American Express is the most conservative of the big three: It bans the purchase of online pornography and medical marijuana in the 16 states that have legalized it. Visa and MasterCard allow both for their credit and debit card holders. Last winter, Visa and MasterCard prevented cardholders from using their cards to donate to the whistleblower website WikiLeaks. (The site never accepted American Express.)


All three forbid using their cards to buy chips in a legal bricks-and-mortar casino. (Paying for online gambling, which is illegal in the U.S., is also prohibited.) Post continues after video.

But the gambling restrictions also point out the gray areas in these policies, which critics say don't always make sense. While cardholders can't charge gambling chips, they can use their cards to get a cash advance at a casino's ATM -- cash they might then use to buy chips. "It's arbitrary," says Curtis Arnold, founder of the credit card comparison website


MasterCard and Visa said their cards can be used for any legal purchases, though they declined to comment on the legal purchase of gambling chips. A MasterCard spokesman also said that the company has a number of programs that it uses to "combat illegal or brand-damaging behavior."


Reducing risk

American Express explained a more nuanced calculus: It said its business model, which primarily issues cards directly to customers instead of through a bank, requires it to be more conservative about risk. The company says it abides by federal law and prohibits transactions where the risk of dispute is unusually high.


The company also says its total ban on online pornography helps in the fight against child pornography, which is commonly disseminated or sold online. The ban on all pornography, even legal adult material, is "an additional safeguard," said company spokeswoman Christine S. Elliott. As for marijuana, American Express points to federal law, which still prohibits the use of marijuana even for medical purposes. "We wouldn't want to unduly inconvenience cardholders," Elliott says, "but we are adhering to federal law."


That's not unreasonable, says Warren Redlich, a lawyer in Albany, N.Y., who specializes in consumer issues and criminal law. If the federal government were to ramp up its efforts to stop the sale of medical marijuana in states, it could theoretically try to implicate financial services companies that support the industry, he says. "You could sympathize with AmEx's position," Redlich says. "I wouldn't be surprised if MasterCard and Visa eventually go along with it."


Some of these policies have been longstanding. American Express first banned the purchase of online pornography in May 2000, saying it faced an unacceptably high level of disputed transactions. "It's a risk-based decision," Elliott says. "This is not a moral judgment." The company allows the purchase of pornography from brick-and-mortar stores.


But as more states legalize marijuana, the company's policies are drawing criticism from new sources, including medical groups and doctors who support the medicinal use of the herb. Lester Grinspoon, associate professor emeritus of psychiatry at Harvard Medical School who served for more than 40 years as senior psychiatrist at the Massachusetts Mental Health Center in Boston, notes its medicinal properties to lessen nausea, incontinence, and symptoms of Tourette syndrome. "Yet you get American Express saying they won't honor a charge for that purpose," he says. "That's amazing."


As of now, there has been little pressure on credit companies to reverse their policies. Industry experts say consumers may have little choice but to watch credit card companies further restrict their spending habits, especially where there is a legal question mark.


Arnold says, "Given their track record they're going to be much more cautious when it comes to these grey areas given the increasingly strict regulatory environment."


In other words, when in doubt, pay cash.


More on SmartMoney and MSN Money:

May 31, 2011 3:21PM



Some folks use credit cards for all purchases - small or large - to rack up points, discounts, cash back, etc., and then pay the balance in full every month to avoid APR.

May 31, 2011 3:30PM
Skyhawk: Don't assume a person using a credit card for such purchases is paying an APR at all. They could be the type of consumer we a ll would be in a perfect world -- pay their balances in full every month. Also, a person could also be earning rewards on their card for making purcases with it, and every purchase adds up in circumstances like that.
May 31, 2011 3:23PM
just go to ATM take out cash on credit card and by-pass their **** block ..
May 31, 2011 3:36PM
So American Express wants to dictate to me what things I can and cannot legally purchase? Wow! Looks like it's time to drop my American Express card!!
May 31, 2011 2:48PM
Credit is a privilege not a right. If a private company issues you credit, they should have the right to dictate where they will allow it to be used. After all it's their money you are spending, until you pay it back. Just as if you went to the bank and got a home improvement loan, they can inspect the property to see how the loan was used. (Hopefully you don't use it to buy a bunch of weed)
May 31, 2011 2:56PM
Hey John M. Simpson - you have a completely wrong view of the world - no wonder consumer protection looks more and more like the government every day.  Look - it's competition - go get another credit card.  Rights.... please!  This is a product purchase you are making (choosing which credit card you will use), not some servitude you are forced into.  As far as I'm concerned, competition is the best consumer protection - and here you are wanting to strangle the credit card companies into a government approved, one size fits all, solution for everyone.  Knock it off and start actually thinking about what really benefits us consumers!!!!  Here - let me simplify:
Knowing Amex blocks certain purchases - good.
Competition between credit card companies - good.
Jumping to talking about 'rights' - bad

Bottom line - if this business practice was so bad, then why aren't people running away from Amex like the place was on fire?  What if there is someone out there that believes just the opposite that you do?  Tough for them?  We all just have to think the same thing you do and we'll all get along?  What do you work for Obama or something?  You know what is best for us poor stupid commoners?  Let me tell you something John M. Simpson, just the difference in you and I's geography (where we live) I guarantee you would alone cause many, many, differences in our wants and needs.  You should actually think about what's best for consumers instead of just phoning it in.  Did you go with the 'seems to me blah blah, big companies are evil blah blah...' line because you knew it would generate applause?

I swear, the more I think about your response, the more I wonder if you actually know anything about how businesses work and how free markets work.  This attitude smacks of political appointee.  Don't worry about me and business X coming to an agreement that we both find agreeable - no no... you need to control both what the business sells and what I can buy - and call it the opposite of what it is - consumer protection.

May 31, 2011 3:05PM
yea- they're starting to do that at different gas stations too.. holding up to 500 dollars per pump using debit cards..forcing you to wait a few days to have it returned to you.

I had nothing but problems with that, so best to buy gas with cash.. no more of that crap.


In regards to credit... you guys need to watch out. My wife had spotless credit record, paid all bills on time, never late on a single payment anywhere. One day, something showed up on her credit record, we didnt know it appeared until it was too late, with the information showing up in the mail.. as a debt collection issue.

It placed a negative entry in the credit record. Then a week later, we started getting letters from all the banks, etc, in which we held credit cards (etc) accounts with. They were systematically closing all the accounts just because they did a 'annual credit review'. They found one negative item which is less than 100 dollars, good enough to start closing all of her good standing accounts.

This happened to several of my friends too. I investigated the negative charge and we never had an account with that specific creditor, we did the dispute process and it was cleared. All those good standing accounts, we are now forced to pay them off because we cant use those accounts anymore.

Credit SUCKS...These credit bureaus did this behind our backs.... I was told to persue suit but ending up that there isnt anything you can do about it because of the 'annual credit review' "rights" of the creditors.

So... just keep a close eye on your credit records, man.. this really sucks.

Jun 1, 2011 9:50AM

Businesses, just like people, can do what they want to do whether you like it or not. I may not like that you waste (my opinion) on clothes/shoes and you may not like that I spend money on sporting events. It is my money and it is my right to do with it as I please. When you use a credit card, you are borrowing THEIR money (interest free if you are smart and pay in full every month)!!! Since it is THEIR money YOU are BORROWING, they should have the control of when they loan it to you or not. If you come to me and say hey I want to borrow some money for 30 days so I can go buy some medical marijuana, I'm going to tell you no. It is my money. It is my right to decide if I want to lend it to you or not. If you don't like it, use your own cash or a different credit card!!! You people that think you have a right to tell businesses or other people how to live their lives are destroying America. Go jump off a cliff.

May 31, 2011 5:47PM
As the bank bailout proved, the loans given out via credit card in this country are secured by the Federal Reserve. In other words, it is "our" money on the line, not "theirs". No wonder they give it out so freely. They have absolutely nothing to lose, and everything to gain. 

On a side note, throw every one of those bums in Washington out on their asses next election.
May 31, 2011 2:37PM

Yesterday I put two gallons of gas in my Harley used my debit card. Arco placed a $300.00 hold on my card??????????!!!!!!!!!!!!



May 31, 2011 4:57PM
American Express is a lazy unprofessional company. They will bully and exploit any loophole to screw over consumers. Especially if people have corporate cards which offer no consumer protections.
May 31, 2011 4:53PM

It is not ok with these companies forcing their moral values on us, however, it is their money and they can chose to borrow it to whomever they see fit.


Everyone else is just as wrong for feeling like they are entitled to do whatever they want in accordance with their values while complaining that somebody else is doing the same thing.  You would probably borrow your neighbor $20 if they were in a pinch and needed gas money, but if they asked you for $20 to buy some porno you would be far less likely to want to participate....some of you anyways.

Jun 1, 2011 11:59AM
Have people forgotten that the credit card companies are extending a convenience to them, not a God-given right?? They are private companies, are they not? They're granting you credit, of course they can place reasonable restrictions on what you buy with it. So quit whining and get the cash advance and then pay it right back, or run your card through the shredder.
May 31, 2011 3:19PM

@laus deo


Ouch, Dude!  That's like $150/gallon.  I say, Fack Urco!

May 31, 2011 4:35PM
I say Kudos to the credit card companies for disallowing those controversial products.  As consumers we are using their product in order to obtain goods.  We are financing the purchase of everything we buy.  Why not allow the credit card companies protect their investment in the consumer. support Banks being the final arbiter on what we can and can not buy?  Whats next, banning fatty foods because the banks are scared they will somehow be found liable?
May 31, 2011 5:06PM
        Really??? Where do you get you're information? You watch a sixty minutes setup on the subject and that's the authoritative stance on the subject?  Credit cards allow you to purchase gambling credits in the casinos. Whats the higher risk? The money used in a casino  is pretty much a gimme to  the casino. I mean come on,  you are going to tell teh cancer patient they can't have this in the last months? How about the glaucoma patient who will enjoy there sight longer? You would tell them what? Tough go blind sooner? Kind of a petty way of thinking, isn't it?

The credit card companies have an image to protect? What would that be, thief, con-man, bait and switch artist?  Discover tried to raise my interest rate because I didn't carry a monthly balance. The got their card back in pieces with a note that said  **** you very much, but, no thanks. Credit report took a ten point hit, but, better that than paying more for using my OWN money. These cards are tied to your bank account anyway. Don't think so, skip a payment and see if they don't debit that account and clip you for late payment fees. Moron.

May 31, 2011 5:55PM

i am a loan officer in a small community bail money for us....we pay taxes unlike credit bad home loans or houses to forclose on.  only good solid equity based loans.  on that note we do a small amount of unsecured lending to qualified borrowers/good customers...if someone came in requesting credit for medical marijuana they would get the same answer amex gave them....DENIED!!!  i control who i lend to and for what purpose and since amex is issuing credit i believe they have that right.  as far pulling cash for gambling and what not...consumers can do that but they are also being charge a significant transaction fee as well as a higher apr on those advances.  i'm hate credit cards but i use one habitually to earn points and pay it off every month....if they are going to let me use their money free of charge for almost two months that is my gain!

May 31, 2011 5:46PM

I support the fact that the credit card companies should have some authority over what you buy with their funds.  If my credit card company said I couldn't purchase fatty foods with the cards, though less controversial than the items listed in this article, then I would simply pay cash.

May 31, 2011 5:09PM
All you have to do is transfer money to a Pay Pal account. Most online sites will take Pay Pal. You can also transfer money to a prepaid card. They are accepted almost everwhere. There is always a way to beat the system.
May 31, 2011 6:47PM

"While cardholders can't charge gambling chips, they can use their cards to get a cash advance at a casino's ATM -- cash they might then use to buy chips."


Of course they allow this. The customer pays a huge transaction fee and cash withdrawal interest rates are the sometimes twice as high as a purchase rate. The card companies make big bucks off these transactions.

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