Should I ask my bank if they will process my transaction?

When participating in online gambling within the United States, paranoia is understandable. When people are doing so, thoughts such as, “are the cops going to come?” and “will the bank even process the transaction?” are common questions. Well, asking the bank is a natural step to take, but should one do that? It’s honestly not the best route to take. If the bank is asked such questions, it’s clear that the account holder is attempting to or, at the very least, interested in engaging in illegal gambling.

This could potentially put the account on watch and may lead to an account freeze. In short, banks have made it very clear that they absolutely will not process transactions involving online gambling charges or winnings.

Though Nevada, Delaware, and New Jersey all got legal online gambling and other states  California, Pennsylvania, New York, and Illinois also on the line, the major financial institutions like American Express, Wells Fargo, and J.P. Morgan  refuse to process any money interactions on these sites, legal or not.

It is said that Americans are also spending more at traditional casinos: an estimated $37 billion in 2012.

As more legalize gambling states will come up banks will re-examine their policies and allow the transactions, which would give players the ability to easily fund accounts at online casinos. For now, most of the alternatives to fund gaming accounts are more cumbersome: sending in personal checks, bank transfers, and ACH withdrawals.

It is estimates that industry-wide, about 70 percent of Visa transactions and 25 percent of MasterCard transactions are declined. Although those numbers might sound high, because most customers own multiple cards, only about 15 percent to 20 percent of customers are unable to use cards at some casinos.

The growth of legal online gambling is coming about because of a new interpretation of federal law. For years, the Justice Department held that processing financial transactions for online betting sites violated the Wire Act of 1961 and the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). Although some of the wording is open to interpretation, the feds relied on those laws to prosecute online poker operators.

But then, in 2011, the Justice Department reversed course, ruling that federal law does not prohibit online gambling within states. That cleared the way for Nevada, New Jersey, and Delaware to start offering online gambling.

In each state, online gambling is limited to people in that state. In some cases, gamblers must fill out casino forms that show an address in the state; others rely on technology that shows where players are physically located.

But because the law, the technologies, and the regulations are still relatively new, some banks are reluctant to assume a leading role in processing gambling transactions.

According to Bank of America “Credit and debit cards can be used for in-person gaming purchases, but not currently for Internet gaming purchases.”  Wells Fargo spokeswoman said that to comply with the UIGEA, “we prohibit the use of consumer credit cards for Internet gambling. The networks (Visa, MasterCard, and American Express) monitor the merchant category codes and block charges that don’t comply with federal regulations. We also have controls in place as an issuer to monitor for regulatory compliance.”

At least some of the issues, it seems, stem from the Merchant Category Codes that banks assign to each merchant. For instance, MasterCard has traditionally assigned online gaming operators the code 7995, which also covers lottery tickets, casino chips, and racetrack wagers — categories for which banks routinely block transactions. But it also has a newer code — 9754 — that can be used for cash advances for legal gambling.

Some banks fear becoming complicit in bets that violate the regulations on, say, daily betting-account deposit limits or the requirement that bettors be located in the state where they are betting. But in times to come most banks will eventually remove their objections as online gaming becomes more established.

So what alternatives are there?

The fact of the matter is: just because there are laws and protocols in place to prevent U.S. citizens from playing online casino games or operating online betting parlors, that does not mean people are going to stop playing these electronic games of chance or betting on sporting events over the internet. So how can one get their winnings into their account or get money onto the casino’s website with no repercussions? Here’s how:

• There is one lone state where the banks will process online casino transactions, as the state has slightly different gambling laws: Nevada. If you live here, it’s all smooth sailing.
• Use one of the few-and-far-between electronic betting parlors that do accept credit card transactions from the U.S. These sites use discrete descriptions and false information to avoid the bank finding out that the business is an online casino.
• In New Jersey, regulators have approved digital wallet provider Skrill as an acceptable way to fund accounts at online casinos. Skrill, a mobile payments smartphone app, can be loaded with a credit or debit card or linked to a bank account.
• Read the FAQs on some online casinos that do accept U.S.-based customers; often they will have instructions on how to effectively and securely process the necessary transactions.
• Go to a local superstore, drugstore, or convenient-store and purchase a pre-paid VISA or MasterCard “debit card.” Once activated, this card can be used to deposit money onto the site.
• The difficulty with this method is that it is only one-way. For example, one cannot add winnings back onto the card.
• To get around this, however, one could get a card such as a temporary-employee pay card or blood drive payment card and transfer the funds to that card.
• Use an offshore banking account. Also known as a “Swiss Bank account.”
• Use an Indian “gaming” site that uses USD as its trade currency.

Banks are a no-go. What about credit unions?

There is a rumor of credit unions allowing internet gambling. This is not true. There are no recognized financial institutions that (openly) accept transactions from online casinos. Credit unions are required to take appropriate legal action when a member is guilty of processing restricted transactions.

This includes closing the offending account, restricting access to payment systems, and even blacklisting the member. Also, be aware that credit card companies determine whether or not they will accept the transaction, not the credit union. This means that, legal or not, a credit card company can deny or permit certain kinds of wagers.

If you are still thinking about using a credit card consider the following:

• Understand the fees.-If you fund an online account with a credit card, chances are your bank will hit you with a hefty cash-advance fee plus a high-interest rate.
• Know your limitations-Plan how much you’re willing to lose before you gamble. Don’t increase your bets if you keep losing — that’s a good way to lose even more.
• Don’t borrow money to gamble. Don’t bet what you don’t have.
• Set limits- Online casinos typically let you place limits on account deposits and wagering, and how much time you spend online. Some let you build in a “cooling off” period after extended losses.