Xapo comes under fire for unexpected fees, Circle refunds $50 for cash advance fee

Xapo, which recently secured a record total of $40 million in venture funding, faces more scrutiny as customers signing up

Xapo, which recently secured a record total of $40 million in venture funding, faces more scrutiny as customers signing up to its much-anticipated bitcoin debit card offering were greeted with an unexpected surprise: a monthly fee.

The one-time card shipping fee of $15 was public knowledge, and most had no qualms with this. Xapo had reportedly advertised that there will be no other standard fees during the months leading up to the card launch. After the cards were finally shipped after some delay, their FAQ’s have been quietly updated with a new fee schedule. Cardholders are charged a £3.95 ($4.95) monthly service fee. There are other fees for ATM usage, declined transactions, foreign currency conversion and even changing your PIN or balance inquiries.

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A client who brought his grievance to reddit was understandably irate. The card’s main objective was for frictionless, low-cost transactions. It turns out that it carries a higher cost than most typical fiat-based bank credit/debit card services. Other commenters said they cancelled their card.

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The business models of some of the latest bitcoin bank-like services continue to remain somewhat murky. With millions in venture funding secured, there is mounting pressure to see profits rolling in sooner or later. Yet, with so much of the bitcoin transaction universe basing itself on a low-cost or fee-free model, something has to give. And a monthly fee is the easiest way of securing a recurring revenue- assuming customers go for it.

Some more faithful commenters have actually sympathized with the fees, arguing that not everything can be free. Others point to the proliferation of fee-free fiat banking services available, which make money off of interest on client capital. Some even pass on a sizeable portion of these earnings back to account holders.

Meanwhile, Circle recently had to find a workaround of its own when it realized that some of its pilot customers testing out its new solution may be charged a cash advance fee. Circle told these customers in an email that they’ve been sent $50 in bitcoins “for any inconvenience”. The incident suggests that some credit card transactions are being processed like cash instead of goods.

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