Can Bitcoin Replace Credit Cards?


For Bitcoin and other related crypto currencies to really take over the market and be a viable source of money for day to day trading, there is one thing that will need to happen: we will need some way to implement a line of credit. On top of this, we also need to add in some type of added security for the buyers. Through this article I will be looking at why this is so important and why Bitcoin, in its current state, can not take over as a fully viable method of making purchases from day to day in our society.

We Love Credit

For most people, living on the prospect of credit is important. We do it with everything, from normal purchases, to gifts for birthdays and holidays, to even bigger items like vehicles, houses and vacations. We rely on the ability to get things on credit because it allows us to spend money that we do not have on us right this second, with the promise that we will pay it back in the future. Many things would not be viable without something like this, either. Consider you get paid back in a week, but you need money right now for something. What do you do? You use a credit card. This lets you purchase what you need now, without having to worry about exactly how much money you have saved up at the time.

The problem here is that Bitcoin being implemented in to some form of credit would be difficult, for a couple of different reasons:

  • It acts much like an ATM charge or debit card in that the funds are withdrawn from your account immediately. While there could be an additional layer thrown on top of that we could use from banks, to allow you to borrow money, it would really not be the same thing as a credit card. It would be more like a flat out loan, but what if you do not need the money? Now you are paying interest on something you are not even using. Credit cards combat this by charging interest solely on what you have spent and have outstanding from month to month, so you are not paying anything if you are not borrowing. Bitcoins, on the other hand, would require you to pay regardless, since you would need the funds in your hand
  • The price is volatile. While we do sit somewhat equal from day to day (there are still fluctuations, but it is not nearly as bad as it could be), we do not know what the price of a Bitcoin will be later on. We know what it is this second, and if we check in an hour it could be very different. As a result, making loans based on potential income does not work, because the Bitcoin could go up in value significantly overnight, and someone who had the income to cover their borrowed funds may no longer be earning enough to do so. This adds a lot of additional risk to the lenders, in that it is even harder to judge who can and can not handle paying back what they borrow if things go downhill

Without the ability to utilize Bitcoins like credit cards we already use, going from month to month would be difficult. We, as a society, have become accustomed to being able to borrow as we need, so long as we keep paying it back on time and with interest.

Even for people that do not use credit cards on a regular basis, they give a sense of security in case something happens. Even if you have cash on you, you never know when you may need more. There are tons of natural disasters and other situations that can occur at any point and being prepared for every possible outcome is simply not possible. This is a big reason why I warn people that even if you do not want to get involved with credit cards because of the potential to accidentally start spending more than you have and lead in to a downward spiral, it is a good idea to have a couple stored somewhere in case you ever do hit that necessary rough patch. It is better to be safe than sorry, and proper planning can go a long way!

We Love Security When Purchasing

Honestly, this is the biggest thing for me. I love the security I have when using a credit card at the store or for paying for services. When I do so, I know ahead of time that if things end up not going as they were supposed to (whether it be through broken contracts, not fulfilling orders, etc.) I can just dispute it with the credit card company and it is dealt with on their end. This opens the doors for giving new companies and services a try, without having to constantly worry about being ripped off. I think this is also the big thing that leads to new online businesses being given a chance. If we were to lose everything we give to a company, we would only deal with the most reputable ones, and new ones would be left in the dust due to the lack of being able to trust them. In a sense, this is where we are at with Bitcoin right now (although not nearly as bad as it theoretically should be, and that is due to greed).

I do not want to call out any specific companies in this article, but what I will say is that there are some companies out there that are accepting money and people, for some reason, are throwing it at them constantly, despite not holding up their end of the deals they make. Even people that have been screwed over in the past are more than happy to throw more money their way, and the only reason I can think of is greed. As you might expect, I am talking about ASIC-based companies. There is the prospect of “getting rich quick” that people are jumping all over, and people are putting way more money than they should in to it and lose time and time again as a result. If these were all handled by credit card companies, none of this would ever happen; people would have just reversed their charges, the companies would be having to pay back everyone, plus their fees on top of that, and it would keep them from running such shady businesses. After all, if I am being charged for each time someone does a charge back on my business, it would make no sense for me to continue it if I was not planning to follow through; I would just be giving away my money.

The issue here is that with Bitcoin, there is no real authority. Everyone has to police their own actions and make their own judgments based on what has happened in the past. Once you have given someone money for some service or product, it is gone. If they do not follow through with their end of the deal, getting the money back is a big hassle, requiring the use of the court system (whether by suing or getting police involved). This, mixed with the fact that Bitcoin is pretty much anonymous if used correctly, makes things all the more difficult to police on our own, and it only serves to increase the amount of risk that is involved with making purchases and paying people via the Bitcoin network. Because of this, the number of scams we experience within the Bitcoin community is pretty large, and will likely continue to grow until there is some method put in place to put a stop to them.

They Can Not Be Relied Upon for Storage of Money

Bitcoins can not be used as a true monetary vehicle for making purchases. As of right now, the closest thing we can call it would be an investment vehicle, because of the nature of it increasing and decreasing in price. It is a lot like a stock in that it is also pretty volatile, so what you have today may be worth more or less tomorrow. When we deal with currencies, at least tied to the dollars we currently use, it is important for them to have an at least somewhat stable value. For example, when we go to buy some milk from the store, we can expect it to be the same price, or at least very close to it, from day to day. While there are differences in prices from time to time, they are very spread out, such that they change every few months and only by a little bit. Imagine going to buy a gallon of milk and it costing twice as much now as it did five minutes ago, and then a quarter of that in another five minutes. We could not live and pay for our day to day requirements if we had the deal with the fluctuations like this going on constantly. The only way to battle this would be to get the Bitcoins (or other crypto currencies) to a more stable price so that we can make more informed decisions on when to purchase and what to purchase. If this does not end up happening (which would be hard to do, considering how people view these currencies and because of most of their deflationary aspects), there is no way to utilize them as a sole source of both income and spending.

Discounts for Bitcoin

An area where Bitcoin actually comes ahead of credit cards is when it comes to benefits and discounts. Stores pay much less in fees when they accept Bitcoin instead of credit cards, and that can be passed off to consumers. If we also add on the fact that the store can not be scammed since the payments are not even reversible, that just adds even more benefit to it. This should theoretically end up leading us to decreased prices in stores that accept Bitcoin, although it is hard to tell at this point exactly how it is going to pan out. It is safe to say that while all stores that accept it will end up saving money and could pass that on to the consumers, not all of them are going to do it. Some are also going to do it in different ways. It could be a straight up discount for paying with Bitcoin, it could be a discount on future purchases, or even additions to whatever it is that is being bought. The possibilities when it comes to this are endless. All it takes is for businesses to start pushing to make it happen.

Foreign Transactions

This is another area where Bitcoin and other crypto currencies come ahead of credit cards. When you make a purchase online from a business that is in another country (and the payment is going to another country), you have to pay extra fees on that payment. I learned this when I brought a cable off eBay, and I was hit for an extra charge since the seller was in Asia. This was a big surprise, and there is another trick to it: when you get a refund, you still lose out on the fee; I have found that it usually is not returned. If the business has a local bank account it is different, but you do need to be aware of where the businesses you make purchases from are located. At least unless you are using crypto currencies.

When you use crypto currencies, it does not matter at all where the recipient lives or where their banks are. The only fees you will ever pay are those that are for the “mining” cost, which is negligible, and in a lot of cases free. The fee here is the same regardless of where you live or the store is located, and is even irrelevant of the amount of money being sent. It is all the same. This puts crypto currencies way ahead when it comes to dealing with foreign transactions, since there are no extra or hidden fees you have to deal with. Simply set up your payment and you are good to go!

Credit Building

This is an area where credit cards clearly have the benefit: credit building. When it comes to making big life choices, they often involve a home and a vehicle. These are needed to live in and to get to work and travel as needed, and both of them are usually done through loans of some form or another. You could buy both through cash and saving up, but in most cases we simply take out a car loan for our new vehicle and a mortgage for our home. Even if you are simply looking at something like apartments, credit is going to matter. And to take it a step further, credit even matters for getting utilities turned on, regardless as to where you are located. The simple fact is that credit building is pretty much a necessity when it comes to our lives and how we live today.

The problem here is that Bitcoin and other crypto currencies do not help build credit. In fact, if you end up relying solely on them, you are going to have no credit at all, despite having finances and having proven that you are financially responsible. The funny thing about credit is that those that do not build it by not needing it (and instead being self reliant enough to be able to buy everything with cash, rather than borrowing from others to make it happen) are hurting themselves since there is no credit being built. This is another thing that I learned the hard way. You need credit and you need to build it up. Because of this, having credit cards is important, since it is an easy way to prove that you are able to have people willing to lend you the money you want, but you are still responsible enough not to go off and waste it, followed by failing to pay it back.

If there was some way to tie crypto currencies with credit in some way to help people build better credit while using them I think it could go a long way towards helping promote more financial responsibility, but I do not see how that would be possible. It is a great idea in theory and I think it is something that we should definitely push towards (because if you look at the number of people in debt and the fact that it keeps rising because people spend irresponsibly), but I am not sure how to handle it. The fact is that we need a change, though.

Finding the Middle Ground

Some people have been pushing towards a middle ground between credit cards and Bitcoin. One, for example, offers up a “Bitcoin credit card” that is supposed to allow people to spend their funds anywhere a major credit card (like Mastercard) is accepted. The issue here is that it is acting more like a debit card, in that people can only spend what they have in their account at the time. There is no way to borrow money with the card, and therefore it is not truly a credit card, despite claiming to be. Regardless, I do think that it is a great step and it might somehow be able to be moved over to a true credit card. All it would need is a company that is willing to back it. With the fluctuating prices of Bitcoin, though, I think this is a long way coming, as there is a lot of risk in both buying and selling when it comes to the mass scale, being that the prices can jump up or tank at any point.

Limited Transaction Throughput

As of lately, the stress on the Bitcoin network has been very apparent. Many attempts have been made to essentially DDoS the network through a flood of transactions, and they have all been largely successful. Even from the point of view of normal transaction volume, it has been shown lately that the network as a whole is extremely limited on how many transactions it can push through. This can be seen easily by watching how long your transactions take to go through (which, as of lately, can take hours), by looking at the average fees being paid towards miners (which has been going up considerably), or even by looking at the block sizes themselves in relation to the current cap (which are almost always filled all the way to the brim). All in all, you can see for your very own eyes that the system is at its cap right now. I will be doing a separate article entirely on mining fees and the theory behind them, but for now I will do a pretty shortened version. Essentially, mining fees are not designed to be static. This idea that rising fees is a bad thing is completely false. They are made to be increased as needed in order to keep creating incentive for the miners to push new blocks through. Mining BTC costs money, and anyone who has tried has learned that (some learned the hard way). If you expect someone to continue working on something like this, as well as spending their money to do so, it requires being subsidized. That is a simple fact behind it. If the miners are not making enough to cover their costs, they will not continue mining. If they are not making a profit, a lot will stop as well. So the goal has to always be to create enough value to both pay them back for their costs and add a little on top. In the past, this was pretty easy because the block rewards are high enough to account for it. A lot of infrastructure was built by miners, boosting up the difficulty, and making it even more costly to continue mining. But this comes at a great benefit, which is that the network is much more protected when there is more hashing going on. So really, one of two things needs to happen: either the amount that the miners is earning has to always go up or there needs to be a median found, which is going to be nearly impossible due to the ASIC manufacturers and their low costs, not to mention the quick progression we are currently seeing in regards to computing power in general. Due to the block halving of BTC, then, this means that fees have to continually go up. There is just no way around it. Now, the issue becomes… what if we do have high enough fees to keep everyone mining? Now we have the system extremely secure, we are helping pay miners to continue pushing new blocks, but what is happening with the transactions themselves? They are limited. It is hard to put an exact count on how many can be processed at a time but based on various statistics that have been shared in the past, it looks like the network can handle about 7 transactions per second. Now, let that sink in: 7 per second. Does it seem like a lot? Maybe. In reality, it is almost nothing. In fact, MasterCard processes tens to hundreds of thousands per second. Fees help give you a higher priority in the line, but they do nothing to help make the overall trend go faster. So let us create a scenario to help better illustrate the issue that is going on here. Let us say that you are at the store and you want to make a purchase. You get to the checkout line and you swipe your credit card. What happens? Within a couple seconds (usually) the system either comes back and says that the transaction was accepted or declined. We are ignoring the signing portion right now and just looking at the transaction itself. This is a near instant process, which makes our lives easier and allows us to quickly continue going on about our lives. In fact, it is a large reason why a lot of people use credit cards – on top of things like rewards points, being able to borrow money, and getting security with your purchases, you can move through a lot faster than with counting out cash, giving it to the cashier, and getting back change. As such, credit cards are largely a convenience factor. So let us turn this around and act like our credit card was on the same network as Bitcoin. I go to the store, get everything I need to purchase, and head to the cash register to pay. When I get there, the first thing they do is ring up all of the items. Next, they ask how I want to pay, and I say “Bitcoin.” Okay, so far so good – it’s just like the credit cards. But now is where things start to change. At this point, the question becomes “how much do you want to pay in fees?” You look at the minimum and realize that it could take 6 hours or more to get confirmed. Do you really want to stand there waiting for that? Probably not. So you have to consult a chart that tells you how much is the average needed. You decide you will go ahead and spend the increased money so you can move on, and the cashier starts trying to push the transaction. Uh oh… it fails. Why? Because only 7 can go through per second and there are people all over the world trying to transact. So now that you have locked down on the average fee, you are fighting with everyone else to attempt to get your transaction through. The cashier tries over and over for 20 minutes before finally getting it to go through. Yay, you can finally move on. This system is simply unsustainable. Even with twice the block size, that is only 14 transactions per second. Bitcoin has been really getting into the spotlight lately, and the more people jump on board the network, the harder it is going to be to get your transactions to actually process. It needs changes that allow it to process thousands per second, if not more, in order to be usable in our day to day lives. And as of right now, the developers and community do not seem to be landing on any viable solution for making this happen.

Bitcoin as a Store of Wealth

I think that what people need to start focusing on is less on using Bitcoin as a currency for transacting and more as a store of wealth. Think about it as being like gold. Gold has value – everyone knows this. It is something that you can buy at any time and can sell at any time, whether from and to individuals, banks, etc. It will always have value, and it is finite in nature. A lot like Bitcoin, you can not simply ‘make’ more. You are mining it and bringing up reserves that are still essentially hidden, but past that, there is no new creation. A lot of people are confused about what this really means, though, treating Bitcoin as if it is gold. Basically, while gold has its value and can be converted into money, you can not use it for normal transacting. You usually can not pay rent in gold, for example. You are not able to just take it to the grocery store to pay for groceries. It has value in the form of money, but it can not be used as money on its own. Instead, you have to convert it first. The same is true with Bitcoin. It is a great store of wealth, in that it is finite and is the original cryptocurrency, but in terms of using it to buy things like groceries, it simply does not work that well right now. If you want to transfer wealth to another person, waiting 6 hours, a day, or whatever is not that big of an issue – you can be patient and let it do its thing. This is just like gold, where you may want to transfer it to another person through the mail system. It will take time to get to them, but that is fine because it is a store of wealth, rather than a currency in and of itself. I really believe that it should be considered as a cryptostore, rather than a cryptocurrency. I think that the majority of Bitcoin users are already using it in the right manner, and just do not realize it yet. While there are some that use it to buy things online, most use it to save up, a lot like they would with gold. Since its value goes up and down, it is hard to see it as an actual currency, because you will never know what it is going to be worth next week, much less in the next year. But just like gold, the play should be more long-term, rather than over a short period of time. And it should be focused less on trying to increase your holdings (such as treating it as an investment) and more about keeping your current value. Fiat value is always going down, so if you hold cash in the bank, you are constantly losing money. Bitcoin, if it can hold a single value and go up with inflation, would be the perfect hedge – just like gold is used for.

What About Alt Coins?

This is a discussion that has gone on for a very long time now. Alt coins have been growing in both number and popularity over the years, with some of them bringing new features and outlooks on how they can be best utilized for the economy. Some, like 42 Coin, were created to help make a coin scarce (thereby hopefully giving it more value). Others, like Litecoin, were designed around giving the same experience as Bitcoin, but with faster block times (4x faster, so essentially it can process up to 4x as many payments over the same period of time) for usability in more scenarios. And as of lately, new coins have popped up that bring a lot of other new features, each one designed to make using cryptos easier and feasible. Of course, while there are a lot of new alt coins that bring great new ideas and features, there are also a lot of them that are straight up scams. It is becoming more and more difficult to wade through the scams to find which ones are real and which ones are not, and it has become pretty problematic for cryptos in general. As a result, most people stay out of them except for those that are going after more speculative plays in the hopes of making a quick dollar, but as they become more concrete and prove that they will do what they claim, there is definitely room for growth. A couple of somewhat recent examples of this are ETH and SYS, though there are many others. And a great secondary benefit of all of these coins is that they are all open source, which means they can be improved upon. If a user comes up with a great idea and wants to try and put it into motion, they can quickly and easily get up and running, just by altering the source of a coin that has the basis they want to build from. While this is what has been fostering a lot of the scams that are going around as of lately, it is also what has pushed people to keep shooting for the stars, doing what they can to come up with the next great idea that will help take cryptos to the next level. Of course, though, there is a lot of value in what Bitcoin has brought to the table, and I think far too many people take it for granted. While a lot feel that it may be getting phased out due to its limitations, I think that the institutional investors behind it and the huge mining farmers are enough to keep it going and ensure it stays at the top. Some will question whether or not it is possible for another coin to decouple itself from BTC, and that is a whole other discussion in and of itself.


I think that both Bitcoin and credit cards are here to stay. A lot of people keep pushing for the idea that we need one or the other, and that Bitcoin is set to completely kill credit cards. This could not be further from the truth, and while it would be awesome to be able to utilize Bitcoins absolutely anywhere, I see it working along side the cards we use today. There are just too many benefits to them for consumers (while it hurts the service and good merchants) for them to completely disappear, and while Bitcoin and other crypto currencies are a great idea, we need the credit cards to continue our current way of living. Taking them away completely could be devastating, and I just do not see it happening unless there was a major overhaul of how the entire financial system works.


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