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Can Bitcoin Replace Credit Cards?

By October 31, 2020May 9th, 20235 minute read

Cryptocurrency is slowly taking up an immutable and instant payment system that is increasingly being used in the retail payments industry. With recent developments in the crypto sector, Bitcoin can easily replace the normal credit card in the near future. The main argument in favor of Bitcoin is its significantly lower fees compared to traditional credit cards. This can serve as an important consideration for businesses operating on a slim profit margin where a lion’s share of the profit is eaten up by credit card companies. 

Credit cards offer users the pleasure of purchasing any product or availing of any service without having to make immediate payments. This makes it a favored option of people around the globe but various other factors are present which makes Bitcoin a potential successor to credit cards in days to come. Read on to know more about this ongoing debate of supremacy between Bitcoin and credit cards.

Which Is More User Friendly?

Credit cards are extremely easy to use while Bitcoin on the other hand requires users to put in some effort. Cryptocurrencies like Bitcoin have no means of ensuring that the payment is remitted to the intended party. This stands out as a potential disadvantage, especially while comparing with remaining payment solutions. Lack of any designated customer service department makes it difficult to fix the mistake on remittance to the wrong address. 

Certain sectors of our population are not very open to new technology. This especially comprises the elderly population and people residing in rural areas. They feel more comfortable using cash or credit cards while engaging in transactions. Such people are less likely to use Bitcoin or similar cryptos as a means of exchange. Highly volatile Bitcoin value further adds to its grey region and makes it difficult to gain the trust of people on this crypto as a deflationary currency.

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Credit Cards Encourage Spending

Bitcoin being a deflationary currency discourages spending. Even if people open up to this crypto, they will think twice before spending and this will cause the sales of business houses to decline considerably. Bitcoin has an upper limit of 21 million and this significantly influences the consumption patterns of different Bitcoin holders. 

Fees

While the above two arguments go against Bitcoin, let us still assume a hypothetical scenario where people keep on spending at equal levels even after adopting Bitcoin as a mode of exchange. We will now take a look at the transaction fee to find out the most advantageous mode of payment between Bitcoin and credit cards. According to different reports, credit card payment fees range between $2.5 USD to $3 USD for every $100 USD spent. This amounts to around 2-3% of the total transaction value. Bitcoin’s fee structure is influenced fully by the market trends and the speed at which people wish for their transactions to get processed. 

The Bitcoin rate in India today is 10,09,529 INR, and Bitcoin transaction fees are less than $1 USD for any transaction. Bitcoin transactions were fee-less when the coin was launched initially. However, the fee reached peak levels of $30 USD during December 2017 with the price of the crypto lingering around the $20000 USD mark. This sheer volatility makes it difficult for people to gauge if the future of Bitcoin’s transaction fees shall remain below the credit card fees in days to come. 

Credit card fees, on the other hand, are inclusive of the product prices. As a result, consumers rarely get to know about the excess amount payable as it almost stays invisible. Bitcoin fees are very evident and users stay aware of them. This, in turn, discourages spending as people tend to avoid transactions with a higher price range.  

Bitcoin Credit Card

Even with inherent lacunas, we simply can’t ignore the massive phenomenon bitcoins have become. Cryptocurrency is rapidly entering the payments industry. This has also led to the popularity of Bitcoin credit cards that can be used in a way similar to normal credit cards. These cards constitute funds that are loaned to the general public. The credit is given based on fiat value against the quantum of cryptocurrency you set as the collateral. Let us now take a look at the most popular Bitcoin credit cards of 2020:

  • A ratio between the amount of your loan and the market value of your collateral is a Loan-to-Value ratio (LTV). Nexo, a loan insurance company offers a bitcoin credit card which allows users to take LTV-based cryptocurrency loans. You just need to keep a certain amount of crypto as a deposit and within minutes of signing up a credit line is rewarded in fiat currency. There is no monthly minimum or monthly fees for using the Nexo cards which are pretty easy and flexible in its operation.
  • Another cryptocurrency credit card is offered by Monaco, which is popularised by the name of Crypto.com. This also follows an LTV-based model and facilitates the credit card internally by its proprietary cryptocurrency, Monaco. Specific credit limits on the Monaco credit cards are determined by the amount of crypto you deposit. A unique thing about Monaco cards is that you don’t need to undergo any form of credit checks. However, you should get your identity verified for availing of its benefits.
  • Next comes TenX which supports an LTV-based model for its credit cards. A flat fee of $15 monthly is levied on the card, which diminishes with increasing usage. 

Final Words

At the end of this article, you must have understood that it is a bit far-fetched to think of Bitcoin as a replacement for credit cards. However, greater acceptance of Bitcoin amongst the global population is bound to benefit the economy as a whole. Cryptocurrencies such as Bitcoins are a great alternative to traditional means of exchange which carry an inflationary trend and are controlled by the government. In the event of any economic meltdown like the one experienced in 2008-09, Bitcoin will become the preferred means of exchange compared to traditional tools such as credit cards.

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Frequently Asked Questions

What Is Bitcoin And How Does It Work?

Bitcoin is decentralized digital money that may be bought, sold, and exchanged without an intermediary such as a bank. Bitcoin is based on a blockchain that is considered to be a distributed digital ledger. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain

How To Convert Bitcoin To Cash?

There are many ways of converting Bitcoin to cash, such as crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, Peer to Peer Transactions. You can use cryptocurrency exchanges such as WazirX for this. Unlike typical ATMs, which allow you to withdraw money from your bank account, a Bitcoin ATM is a physical location where you may buy and sell Bitcoins using fiat currency. Several websites provide the option of selling Bitcoin in return for a prepaid debit card that may be used just like a standard debit card. You can sell Bitcoin for cash through a peer-to-peer platform in a faster and more anonymous manner.

Is Bitcoin A Good Investment For The Future?

Some investors are afraid of the risks or devastation, but others are very eager to pursue the possibility of profit from a Bitcoin investment. A Bitcoin investment is similar to stock investing, except it can be more volatile.

How To Invest In Bitcoin?

Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.

What Is Meant By Bitcoin?

Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.

How Does Bitcoin Technology Work?

The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.

Is Bitcoin Cash A Good Investment?

Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.

Is Bitcoin Trading Is Legal In India?

In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.

Is Bitcoin Legal In India?

In India, Bitcoin is not illegal. Because of cryptocurrency's rapid evolution, policymakers and regulators seemed to have recognized the chance to accept the new technology early. From the infamous 'RBI ban' in 2018 to reports of an impending bill banning cryptos in 2021 that has yet to develop, India has seen its fair share of ups and downs when it comes to Bitcoin regulation. Last year, the Supreme Court Of India approved the use of Bitcoin throughout the country. According to the Supreme Court, the existence of Bitcoin or any other cryptocurrency is unregulated but not unlawful.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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