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.

• 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.