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Bitcoin vs. Credit Card Transactions: What’s the Difference?

With an increase in its popularity, Bitcoin has grown from being just an investment instrument to a virtual currency that can be traded for goods and services. Giant corporations like Ferarri, Etsy, AT&T, Virgin Galactic, and hundreds of others have already started accepting Bitcoin payments. Primarily because they are easily transferable, widely accessible, and cheaper to process when compared to credit card or bank transfers.

Even consumers nowadays prefer Bitcoin for their day-to-day transactions as it offers maximum privacy and is more convenient than credit/debit card payments.

Bitcoin and credit cards are both widely used as payment modes. However, there are several characteristics that set them apart. For instance, credit card companies like VISA and Mastercard thrive on their global network and flexible banking options. Bitcoin, on the other hand, is popular due to its transaction speed and low processing fees.

In this blog, we will not only compare credit cards and Bitcoin transactions but also understand how they work and which one is ideal for merchants. Let’s get going.

Bitcoin & credit card transactions in numbers

Bitcoin:

On Nov 19, 2023, the total number of Bitcoin transactions exceeded 710,579 — that’s the highest number of transactions recorded in a day since its inception. With new users joining the network every day, the transaction volume is gradually increasing.

Credit card:

Over one billion credit card transactions are processed every day. According to VISA, there are over 3.3 billion Visa cards worldwide. On average, the company processes over 2,000 transactions per second (tps). However, they claim that their network can be scaled to 65,000 tps. This means the network wouldn’t collapse catastrophically, even if everyone on the planet used Visa.

Bitcoin & credit card transactions: Key differences

While both Bitcoin and credit cards are used as payment modes these days, they are fundamentally different. As a merchant, you should know which payment method will align well with your business. To help you make an informed decision, here we have highlighted the key differences between Bitcoin and credit card transactions:

• Fully decentralized & reliable

Bitcoin network is fully decentralized. It transfers the control from a central entity (an individual, organization, or group) to a distributed network. This makes Bitcoin payments peer-to-peer and eliminates the need for any intermediaries to moderate or control the transactions.

Conversely, credit card companies like Mastercard or Visa are gateways to banks. Such giant financial institutions have central points of failure. This means if the bank goes down or is temporarily unavailable, the transaction will inevitably fail.

That’s not all. There are several intermediaries involved in a credit card transaction. If any of them are unable to verify your payment, it can be halted or canceled.

When it comes to Bitcoin, no one can halt or reverse any transaction once it’s confirmed. Payments made via Bitcoin can only fail if the global internet services are interrupted.

• Lower transaction fees

Credit card companies and banks levy several fees for each payment. On average, merchants end up paying anywhere from 1.5% to 3.5% for every credit card transaction.

If you transact via a payment gateway like PayPal, it can get even more expensive. For commercial transactions, PayPal charges 3.49% + a flat fee ranging from 0.09 USD to 0.49 USD. For international transactions, you may end up paying up to 8% fees. This means for a sale of $100, you will end up paying up to $8 or more in transaction fees. For any small to medium-sized business, this can be a significant expense.

Bitcoin fixes this. When you transact via Bitcoin, only a network fee is applicable to all your transactions — be it domestic or international. As of writing this, the average network fee for the Bitcoin network is $1.4, and it usually ranges between $1 to $5 — depending on the network congestion.

Whether you run a local coffee shop or a giant enterprise, transacting in Bitcoins will save you hundreds of millions of dollars every month. With Bitcoin, there are no set-up fees or recurring charges, which makes it a better alternative to credit card payments.

In January 2020, 1 billion dollars worth of Bitcoins were transferred to another wallet in a few minutes for a total fee of 0.00001%. That is just $100 for facilitating the entire transaction. If you were to collect 1 billion via credit card/banks, it would cost you at least 50 million dollars, not to mention the regulatory limitations, weeks of processing time, and other global factors influencing your transaction.

• No fraudulent chargebacks

Fraudulent chargebacks are becoming increasingly common. According to an estimate, chargebacks are increasing by over 20% every year. Merchants lose an average of $3.75 for every $1 lost to fraud. That’s due to additional fees, chargeback penalties, and increased overhead.

Chargebacks not only have monetary implications but can also adversely affect a merchant’s reputation. If a merchant receives consecutive chargebacks, the credit card company may ban their account permanently, after which they won’t be able to accept a particular credit card.

When it comes to Bitcoin transactions, no one can reverse a transaction once it’s confirmed. Thus, if the customer is not satisfied with the product/service, they will need to get in touch with you to resolve their concern. They cannot directly file any chargebacks or reverse the transaction once it’s through.

From a security standpoint, too, Bitcoin transactions are more secure. Primarily because it is easier to gain access to someone’s credit card information or steal their identity and make unauthorized purchases (which will eventually lead to more chargebacks). However, no one can retrieve your Bitcoin private key; without that, one cannot initiate any transactions.

• Widely accessible

Over 1.4 billion citizens worldwide lack access to banking services like electronic payments, debit/credit cards, mortgages, etc. These people have no way of purchasing goods or services online, which leaves them out of the global economy.

Bitcoins, on the other hand, are widely accessible. All you need is access to the internet and a Bitcoin wallet to send or receive payments. As of today, there are over 200 million Bitcoin users worldwide. This number is steadily growing as new users start using Bitcoins.

Thus, by accepting Bitcoins, you open gates to global trade opportunities. Anyone around the world can purchase from you instantly with little transaction fee.

• Free & easy setup

Onboarding a Bitcoin payment processor is easier and doesn’t require you to go through strenuous verification processes. For instance, Speed allows its users to sign up for free with just a valid email address. No need to submit any identity proof to start accepting Bitcoin payments. Merchants can use all our features, from dynamic QRs to payment links and the mPOS app, to accept payments as soon as they sign up.

On the contrary, if you want to start accepting credit card payments, you must submit a valid identity proof and may have to go through several KYC processes to start accepting payments.

Bitcoin payment gateways not only allow easy onboarding but also offer maximum privacy and anonymity.

Sign up with Speed today to start accepting Bitcoins in just a few clicks.

The trilemma: Secure. Scalable. Decentralized. Pick any two.

Bank-grade security and scalability are the building blocks of any robust financial system. With their giant networks, credit card companies have offered their customers the flexibility to transact from anywhere around the world securely.

What credit card companies cannot offer is privacy and control. When you receive a payment via credit card, the transactions are instantly authorized but not settled. It may take days or weeks until you receive the payment in your bank account. And even after that, the credit card company has the right to reverse the transaction in case a customer files a chargeback.

Bitcoin, on the other hand, is a network that’s highly secure and completely decentralized. This means you will have full control over your funds. No one can ever reverse a transaction once it’s confirmed. However, the Bitcoin network is not as scalable as credit card giants like Visa and Mastercard. It can process 5-7 transactions per second by default.

If this were 2017, you would be forced to pick any two. Your payment network can either be decentralized and secure (like Bitcoin transactions) or big and secure (like credit cards). But it cannot be all three (i.e., big, decentralized, and secure).

Enters Bitcoin Lightning Network

In 2018, the Lightning Network was introduced to overcome the limitations of Blockchain. It is a second layer built on the underlying technology of the Blockchain. It uses smart contract functionality to enable instant payments across a network of participants. It solves three major problems: scalability, micropayments, and transaction speed. Let’s look at them:

Scalability: The Lightning Network can process billions of transactions per second. That is the highest number of transactions any payment system can handle.

Transaction Speed: The Lightning Network boosts the speed of Bitcoin transactions and cuts the payment time from 5 to 10 minutes to milliseconds.

Micropayments: You can send or receive payments that are as small as 0.00000001 bitcoin (≈$0.00029) via the Lightning Network.

If The Lightning Network makes the Blockchain bigger, faster, and better, wouldn’t it be costlier, too? No. In fact, it also brings down the transaction cost significantly by settling payments off-blockchain.

Final words

Credit card or Bitcoins? We have an obvious winner. But which payment method you prefer boils down to your preferences. While Bitcoin offers you privacy, security, and full control over your funds, credit card companies have a large user base.

But the definition of money is changing rapidly. According to the latest report by Blockware Solutions, Bitcoin adoption will hit 10% in 2030, and after that, the growth will be parabolic, eventually reaching 80% of the population by 2050.

Bitcoin might as well be the future of payments. Are you ready for the paradigm shift? If not, now is the time to get started. Sign up with a Bitcoin payment processor today to start accepting Bitcoins across your online and offline touch points.

Speed Bitcoin Lightning Wallet

Unlock the full potential of your Bitcoin and seamlessly make payments on the move. Enjoy the lightning speed transactions with Bitcoin – the future of effortless payments.

Speed Team

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