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Can I Use My Credit Card for Online Gambling?

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A friend of mine got into the whole online poker thing back in 2001. He’s seen it all, and told me of his travails as Congress, credit cards and payment processors have all made it increasingly difficult to gamble online. The short answer to the question this article poses: “Sometimes, but actual ability to do so varies widely.”

Internet gambling law cuts game short

Prior to 2007, online gambling was facilitated by payment processors, primarily Neteller. Then, without warning, the federal government swooped in and effectively shut down Neteller. Poker players and other global gamers had their funds frozen. Much of this, and subsequent processing issues, were the result of the Unlawful Internet Gambling Enforcement Act of 2006. The UIGEA “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”

Many processors exited the U.S. market after this, and within a year, almost no processors would operate for players based in the U.S. Nevertheless, credit cards had been a viable alternative for many years and continued to be for some time. Eventually, however, credit card issuers followed suit and also caved to UIGEA rules.

Deal the credit card companies out

Since around 2009, my friend tells me that he vastly curtailed his online poker. He plays occasionally on those few sites that still accept U.S. players and will often fund an online sports betting account once or twice a year. In his experience, a credit card company will almost always decline a purchase when it knows it is being used for online gambling.

That’s why my friend tells me almost no gambling site will ever indicate that the charge is for gambling. Instead, charges appear on his credit card from what appears to be some kind of retail business in China.

Now, however, some states are legalizing online gambling. The UIGEA provides a safe harbor for jurisdictions where gambling is legal. Delaware, Nevada and New Jersey are the three states that permit online wagering. Despite this, some banks and payment processors still won’t permit the charges.

Government ups the ante

The problems facing the banks come during a period of unprecedented regulatory headaches for them. The DOJ’s Operation Choke Point has apparently terrified the banking industry. The federal program is designed to choke off access to financial services by industries considered to be at high-risk for fraudulent transactions. Online gaming, along with pornography, payday lending, and gun/ammo sales have been specifically targeted. Rather than engage in the possibility of generating revenue via gaming charges, the banks are too concerned with getting caught in the DOJ’s dragnet.

On top of this are concerns that the banks may be held liable both civilly and criminally if underage card users charge gaming purchases on the cards. In short, the potential downsides are simply too great for the banks to get involved at this time. If the regulatory environment changes, and more states permit onling gaming, that trend may reverse.

You can, sometimes, but should you?

Most of the time, the Nerds are in favor of using credit cards for nearly every purchase — as long as you aren’t spending money you otherwise wouldn’t. But the potential to get in over your head while gambling is real. If you have a high credit limit, you could find yourself paying back one night of gambling for a long time. We suggest you resist the urge to pay for gambling with a credit card. Instead, only gamble with real money that you can afford to lose.

Online gambling image via Shutterstock