Credit cards or plastic money introduced us to digital money, and there are around 2.8 billion credit cards in the world out of which over 1 billion credit cards are used in the US alone. The next big thing in the making is a cryptocurrency, and it all started with the surge of the Bitcoin era that began in 2009. Since then, there has been a considerable increase in the number of Bitcoin users and investors. Both Bitcoin and credit cards operate digitally, so what’s the difference between the two? Let’s explore everything you need to understand about this crypto.
How is a Bitcoin transaction different from a credit card transaction?
Transactions Using Bitcoins: Bitcoin transactions are like cash transactions where two persons are involved and there is no financial mediator involved. In this case, payments are made using private computers, and all the transactions you make are encrypted cryptographically on a blockchain that is public. Bitcoin works on peer-to-peer interaction without third-party intervention. One’s identity remains anonymous while doing Bitcoin transactions.
Transactions Using Credit Cards: The transactions made using credit cards are different as compared to bitcoin transactions. Here, the seller has the authority to pull the payment from the buyer’s account. In credit card transactions, financial intermediaries are also involved during the payment process. Moreover, there are usage charges which are not there in the case of Bitcoin. For instance, four different parties are involved in a typical Visa transaction. The four parties are the acquirer, the merchant, the individual cardholder, and the issuer. This is not the case in bitcoin transactions.
What Is The Difference Between Credit Card And Bitcoin?
|Credit Card Transactions|
|Bitcoin gives you the leverage to store your cryptos in a digital wallet and keep the private key with you.
|You need to physically carry a credit card with you everywhere, so there is a probability of losing it.|
|One needs an alphanumeric address that is anonymous to make the bitcoin transactions. These alphanumeric addresses change after every transaction that you have made, and you also get a private key along with it.
|No such things exist in the case of credit cards.|
|Bitcoin transactions, you cannot cancel the transaction
|Credit card transactions can be cancelled if you do not want to make the payment|
|One cannot charge back to the merchant after they have made a transaction using Bitcoins
|You can demand a chargeback when the credit card owner has a disrupted or fraudulent transaction|
|The identity of the buyer and seller remains anonymous in this.
|You are aware of the buyer and seller in this.|
|It takes a very low cost to send and receive money using the Bitcoin payment options. You don’t have to pay transaction fees in case Bitcoin
|A processing fee is charged by the payment gateway service providers, which adds to the cost.|
|There is no interest in bitcoins of any sort.
|The credit card companies charge an interest fee.|
Benefits of Bitcoin Transactions
In this Bitcoin Era, merchants have an advantage for receiving payments in the form of bitcoins. They can save on processing fees. Since Bitcoin transactions are free from third-party intervention, there is minimal or no processing fee, which is otherwise charged in the case of the conventional transaction system. This also removes the chargeback risks which we learnt earlier. For the buyers, the process of paying using bitcoins is simple. There are no interruptions, user anonymity, and transaction fees are also low.
You will get amazing features if you are a credit card owner. These features include protection agents scams and fraud, and one can borrow money, wider acceptance, and reward points. A few retailers and restaurants have started to accept bitcoins as well. But in the case of credit cards, one has to go through late fee charges, interest charges, the fees for foreign transactions, and the adverse effects on the credit score.
There are fewer risks attached to bitcoins than a credit card, but it still has its demerits. It is upon the user to choose the method of payment they are comfortable with. These are some of the common differences between bitcoin and credit cards. Choose the method of payment that you prefer and that meets your needs.
Now that you know the difference between Bitcoin and credit card transactions, you can decide which option is better. There is going to be a considerable increase in the use of Bitcoin users in future. However, there is a need to stay informed and some sort of regulation to ensure that the transactions are safe and completely secure.
Interesting Related Article: “A Comparison between Bitcoin and Bitcoin Cash“