How Credit Card And Bitcoin Transactions Differ?

How Credit Card And Bitcoin Transactions Differ?

Most people have heard of credit cards and cryptocurrency, and either have a credit card, or are familiar with them and their uses. There is still a lot to learn about cryptocurrency, though, which is a relatively new tool in the world of financial exchange. Online purchases can take place with either a credit card or a cryptocurrency, but what similarities and differences exist between the two? Does one or the other show more benefit, or can they coexist? 

The Basics of Credit Cards 

In order to exchange funds between peers when using a credit card, there are several steps to execute. First, payment is received by the merchant’s financial institution, and the payment is processed there. When a credit card transaction receives authorization, the cardholder authorizes the credit card network to access a financial institution and charge a payment to an account. There are at least five or six different entities that have to work together in order for it to work, even if the process seems instantaneous. All of them have the chance to fail or be subject to security breach by hackers. 

Credit cards, on the other hand, have backing by insured financial institutions, so cardholders can dispute unauthorized transactions and get money back in some cases. With cryptocurrency, this is not always the case. In addition to the interest and fees that come with credit cards, the final cost of an item can actually be higher than it would otherwise be. 

The Basics of Cryptocurrency

Cryptocurrency is similar to cash in that we think of it and use it in the same way, but it is in digital format. Individuals exchange cryptocurrency directly between each other without using some sort of financial intermediary (peer-to-peer), and it is accepted by more and more merchants on a daily basis. Digital currency is also volatile, changing in value on a daily basis, and the value of your coin holdings might be one amount one day, and another amount the next day. 

You can see the current value of the most popular types of cryptocurrency by visiting this website regularly. Cryptocurrencies such as Bitcoin and Litecoin are stored in digital wallets that are owned and controlled by the person who holds the password. To initiate a payment, the sender types in the transfer information for the receiver’s own digital wallet, specifies how much of the digital coin to move, and submits the transfer, at which point the transaction appears in the receiver’s wallet when the blockchain receives its most recent update. 

Cryptocurrency transactions do not require personal identification information such as a name or address, which protects privacy, but can also hide illegal activities and transactions. In contrast, unlike credit card numbers, cryptocurrency is difficult to hack and steal. 

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Which is Better? 

Much will depend on the kind of transaction you are looking to make in determining which method is the best form of payment. Cryptocurrency has the benefit of secure, anonymous transactions made with private keys through mobile applications, but is not accepted by every retailer, and transactions are irreversible in the event a mistake is made. Sent funds with cryptocurrency are often gone once they clear, meaning there is no chance of recovering lost funds from a dishonest merchant. Credit cards enjoy acceptance worldwide and at nearly every merchant, but require you to hand over your card to a stranger who might be dishonest and keep your card information for themselves, and the fees can mean an additional 13% tacked on to the final price of an item. Credit cards are also easily hackable. On the other hand, a consumer can request a chargeback on a credit card transaction for a bad transaction, and some credit cards offer reward points, free roadside assistance, or other benefits for using them, which cryptocurrency does not. The one you choose to use depends upon whether your transaction needs ease of use and buyer protection, or fewer fees and anonymity.