5 advantages of Bitcoin over credit cards

Bitcoin is quickly becoming an accepted way of transacting.

For many businesses, accepting bitcoin payments means reducing wait times for transactions, reducing chargeback fraud, and paying lower processing fees. For buyers, Bitcoin offers a secure, private, fast, and easy way to pay for products and services. The growing adoption of bitcoin, however, pits the major cryptocurrency against credit cards which are very popular for retail transactions in countries like South Africa.

However, bitcoin has several advantages that make it a better means of payment.

Here are 5 of the main advantages of Bitcoin over credit cards:

Security

The downside of relying on multiple parties, as credit card payments do, is that it increases the risk of a malicious attack. When you enter your credit card details on an e-commerce site, you authorize it to take money from your account. That’s fine if the company is trustworthy, but what happens when an unscrupulous hacker steals that information?

Major companies, including Equifax, Neiman Marcus, Target and Marriott Hotels, have fallen victim to targeted attacks designed to steal customers’ credit card information. These thefts often put customers at risk, as hackers can use stolen card details to make unauthorized purchases.

The security risks of credit card details also extend to physical purchases. Card skimmers have been known to steal credit card information from point-of-sale devices, like self-service gas pumps or retail store checkouts. They can empty your accounts in minutes with this information.

Except for the amount and the recipient’s address, Bitcoin does not require any other information to process a payment. All you need to do is authorize the transaction with a private key – stored securely in your wallet – and that’s it.

A hacker would need to compromise your device or use social engineering techniques, such as phishing, to steal your keys and initiate a Bitcoin payment. However, these issues can be easily avoided by noticing fake websites, storing keys securely or using a multisig wallet.

Business owners can also benefit from Bitcoin’s secure network. Irreversible Nature of Bitcoin Payments Prevents Chargeback Fraud, where buyers receive the goods and cancel payment later. Companies will not be responsible for protecting sensitive credit card information, eliminating the need for costly compliance measures for the payment card industry.

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SEE ALSO: 82% of small businesses plan to accept digital payments in 2022, of which 25% plan to accept Bitcoin, says VISA

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The rapidity

When comparing Bitcoin to credit cards, critics often point out the disparities in the processing speeds of the two systems. For example, Visa runs 24,000 transactions per second (TPS), compared to 5-7 TPS for Bitcoin.

However, such comparisons miss many crucial details. Swiping your credit card does not automatically deposit money into the merchant’s account. Instead, credit card companies take several days to authorize and clear the payment.

Bitcoin is designed as a standalone banking and payment network. You only have to move coins from one address on the blockchain to another if you are paying with bitcoins. This process is completed in 10 minutes or less and ensures finality of the transaction, unlike your credit card payment.

Also, Layer 2 solutions such as the Lightning Network can scale Bitcoin at speeds that rival the fastest payment systems. Lightning Network offloads transactions from the main chain, reducing transaction confirmation times and increasing network throughput.

Although Lightning Network adoption continues to grow, it could potentially disrupt this world’s ViSA and MasterCards in the future.

Reduced transaction fees

Credit card providers charge fees for processing payments, which may be up to 3% of the initial purchase. Since some merchants have low profit margins, they often have no choice but to pass these costs on to buyers.

Bitcoin is not cheap either. Transaction fees can escalate, but Layer 2 solutions like the Lightning Network can solve this problem.

The median fee for processing a transaction on the Lightning Network is one satoshi, which equals 0.00000001 BTC or $0.0004.

With such low fees, it’s easy to see why companies are keen to incorporate Lightning-powered Bitcoin payments into their revenue model.

Cheap transaction fees benefit both businesses and buyers. Business owners wouldn’t have fees that would eat away at their profit margins, while customers could pay for products without incurring additional costs. If that sounds like a win-win solution, then you’re starting to see Bitcoin’s true value.

Reduced paperwork

You can’t just walk into a bank and say “Hey, can I get a credit card?” and expect one of them to magically appear.

No.

Every bank you visit will take you through a lengthy registration process before issuing a card. The process is the same, if not longer, for merchants looking to set up POS systems with a credit card provider.

With Bitcoin, all you have to do is set up a wallet and generate your keys to start receiving and sending payments. There are many free bitcoin wallets you can use, whether as mobile apps, desktop software, or web apps. And the signup process is usually pretty straightforward, even for the less technical people.

The benefits of Bitcoin’s simplicity may not seem obvious, especially if you live in a Western country with well-ordered banking systems. In developing countries, where things like setting up a bank account or getting a credit card are nearly impossible for most people, Bitcoin’s peer-to-peer cash system is a godsend. .

Bitcoin can improve commerce by allowing unbanked people to pay for products provided they have a mobile device connected to the internet. It could also make it easier for small businesses to set up payment channels without the usual red tape.

Confidentiality and anonymity

By design, Bitcoin transactions are pseudonymous – the blockchain only records the parties’ public addresses and the amount exchanged.

No one can find out who you are or what you paid by looking up a transaction on the blockchain.

Many people associate anonymous Bitcoin transactions with right-wing extremists, terrorists, or other criminals who need to circumvent traditional banks. However, even ordinary people who buy legal goods may not want their identity tied to purchases for different reasons.

For example, someone buying an adult toy online would prefer a more discreet method of purchase than a credit card. Also, payment providers have been known to block purchases of products like marijuana while they are legal.

Even if you are not involved in transactions that should be kept confidential, you should think twice before buying goods online. It’s an open secret that credit card companies sell user data to advertisers and fuel ad targeting campaigns.

Every time you pay online with your credit card, someone uses that data to target you with ads. Did you order a Dyson vacuum last night? You can expect some “Best vacuum cleaner for your home!” ads start appearing every time you open a page.

The companies don’t store your information when you pay with bitcoins, so you can shop with peace of mind.

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RECOMMENDED READING: Both Mastercard and Visa now use $USDC to settle payments

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