Bitcoin Forum

Hi all,

doing an assignment for school and I would like to find information on if and if so why it is cheaper to pay with bitcoin instead of a debitcard or a creditcard when purchasing something online or with a debitcard even in a physical location. I would like to find numbers on the costs involved in these payments?

Thx a lot

This might be a good starting point --

http://youtu.be/WqzS0mNYUpY

it is not ideal for tiny micro payments (i.e. a few cents), but for larger payments it is extremely cheap. this is because the transfer cost is based on the size of data -- not a percentage of the amount transferred, like most/all electronic transfer methods. so, instead of getting charged a hefty flat fee and possibly a % on a wire transfer (depending on the type of business transacted), one could transfer the same amount of value instantly for only a matter or cents!

Unless you are sending the money out of an exchange that collects always the transaction fee, you really don't need to pay any fee. The transfer might be a little more slow, but usually I didn't notice any difference in speed. Speed will be much more related to the general conditions of the network than on the fee. So, basically, bitcoin transfers are free or subject to a voluntary donation.

Check information on bitcoin here https://en.bitcoin.it/wiki/FAQ

if you do not pay a fee and your coins are relatively new (less than a year since last spent), you risk your transaction taking days to confirm, but worse -- miners may not confirm your transaction at all. i always send the .0001 because -- why risk having to wait 3 days to have a transaction rejected? just my two cents...

There are serious advantages to merchants as well. No charge backs is a huge one as is the lack of fraud. 

Fast payment and no charge back for merchant.

For consumer, portable and lower transaction fee if his base currency is usd.

http://blockchain.info/stats (http://blockchain.info/stats) has the numbers you want. The cost per transaction at present is  about US$ 30 and the average transaction size in dollar terms is  about US$ 1,300, so as a percentage, the cost per transaction is just over 2%. This is somewhat less than the cost of credit card transactions, for which merchants pay ~ 3% or more, depending on the card.

Note that this is not the fee because it is not paid for by the people doing the transfer. Instead it is paid for by inflation (new bitcoins earned by the miners who process transactions), which means in effect that all holders of bitcoin are paying the cost of all transactions on the network in proportion to their bitcoin holdings. At present, the bitcoin rate of inflation is about 11% (ignore all the nonsense you read about bitcoin being a deflationary currency - it is nothing of the sort). So all things being equal, all holders of bitcoin will experience a devaluation of their holdings by 11% per year to pay for transactions made during that year.

At present direct transaction fees are minimal (a fraction of a percent) but this will have to change over time as bitcoin inflation falls (it halves every four years) so that miners will increasingly come to rely on transaction fees. Nobody knows what level transaction fees will be in the future or how they will be charged (this is a huge topic of research), but ultimately somebody has to pay for the costs of the network. There's no such thing as a free lunch (except maybe POS, but that's another story ....)

This is confusing and convoluted and does not address what the OP is asking about in any way whatsoever (with the minor exception of "at present direct transaction fees are minimal"). The weird monetary hypothesis being advanced here under the pretenses of talking about transaction fees has nothing to do with any of the economics directly surrounding merchant and customer adoption vs. credit cards.

Because the fee is related to the amount of data that makes up the transaction and not to the amount of Bitcoins being sent, the fee may seem extremely low (0.0005 BTC for a 1,000 BTC transfer) or unfairly high (0.004 BTC for a 0.02 BTC payment, or about 20%).
If you are receiving tiny amounts (e.g. as small payments from a mining pool) then fees when sending will be higher than if your activity follows the pattern of conventional consumer or business transactions.

Yes we all know "Bitcoin transfers are very low cost, they save merchants credit card fees blah blah blah". Any dullard can write a report stating the obvious. But the intelligent student will ask himself - is BTC really fee-free? Are there hidden costs? What are they? How will they work in future? That then takes the student into issues such as BTC inflation, transaction fees etc. But sure. If the OP just wants to get a C+/B- then he can take your approach.

One big advantage compared to payment companies like PayPal is the fact that you cannot have your account arbitrarily locked and your funds frozen/stolen from you by the company. PayPal is notorious for locking peoples accounts and not being receptive to customers who attempt to cooperate.

For country with blocked currency, it will be a lot cheaper for local to use bitcoin for business transaction.

I would add that it is also safer. Paying with a credit card or check requires handing over information about your account. Often all the information needed to access your money. With bitcoin I can pay without divulging anything that gives any access to additional money. Even if my account is hacked, the attacker can see my purchases but can't spend.   

Well, that's arguable I think. If you're 100% sure computer wise then bitcoin is safe as long as you don't make any big mistakes like losing your wallet or sending to the wrong address, but these things seem to happen to a lot of people right now.

With credit cards if someone uses your card fraudulently they company will refund the money as long as you sign some papers. I had my credit card number stolen before and it wasn't an issue getting it cleared up. But of course you're paying for this safety through fees and interest.

I'm certainly not saying credit cards are better than bitcoin but at this point it's not necessarily clear that bitcoin is safer for the average person.

The truth is that it is not cheaper to pay with bitcoin than with conventional methods and it is unlikely to ever be cheaper. It cost $ to go from fiat to BTC then there is market risk. You could lose 30 percent in a couple hours, then there is a fee to go back to from BTC to fiat.

Bitcoin actually adds significant cost and risk to transactions... If I want to send peer to peer paypal lets me do it for free.. yes free. It is hard to beat free.

It cant save $ on transaction fees/remittance cost.. That is the big lie around here and one of the many reason it wont enjoy widespread adoption, but it's great for drugs online so it lives on.

Anonymity is what it offers and from what I hear darkcoin does a better job of it.    

Anonymity isn't much use if nobody will take your money. Try spending a darkcoin.

although, bitcoin can be anonimous too, there are several bitcoin anonimizers.. i think that idea from darkcoin is good but not something really new.

I doubt there is much in it either way. Western Union to Kenya is 5%. Bitpesa is 3% (plus say 2% to get your coins).

Of course as adoption increases, the fiat to btc to fiat friction becomes less relevant.

I see your point about messing up and sending to the wrong address or something. But in the last few months I have had to replace my debit card due to the Target security breach. During this same period I gave my Overstock.com account info to some friends and asked them to try stealing from me. They found no money or card info to steal.
I didn't have to pay for a new card directly, but MasterCard is a business and MUST make a profit off me. They will get that money via fees and such. If done correctly, bitcoin is fundamentally more secure as a system.

It's fundamentally more secure overall, I agree with that. But as a consumer you don't get the same protections that you would with a credit card. If someone scams you, or you buy a product and it never ships and you don't get a refund you can request chargeback and get your money back from Mastercard or Visa.

On the other hand that's a huge downside for merchants. So bitcoins lack of chargebacks is a huge plus for them.

How would that happen? It is almost impossible to type in a valid but "wrong" address by accident. The transaction just won't go (like entering wrong details for a bank transfer)

The cost of the credit card system is 40% fraud. This means lower prices for the consumer and more protection for the businesses. The inability to charge back means that instead of relying on some credit card company to do our due diligence and protect us from our bad choices we must make smarter choices. 

If you hand over your credit card for a payment, stores can over charge you and you will have to initiate a long investigation to get a chargeback. Scammer stores can use your credit card details to duplicate your card and spend your money. This does not happen with bitcoin.

When you use your credit card overseas, their exchange rate a bit higher than the spot exchange rate. Does not matter if the amount is small. For larger amounts, the exchange rate difference is a concern.

Doing business with people over seas gets easier as well. No transfer fees and exchange rate to take multiple bites of the apple.

Big downside. Transactions are irreversible. Meaning, if you send bitcoin to the other side of the world, you better trust the receiving party does what you've agreed to. Otherwise, you have no recourse.

Bitcoin transaction cost is quicker and less expensive that the other payment mode.

We thinks world can economyze 120 milliards de $ with bitcoin in fees !!!  ;)

Yep, you have to do your own due diligence. Being responsible for your own wealth is something a lot of people don't seem willing to do. They would rather have banks and central planners do it for them.

The cost of swiping your debit card or credit card (or entering it on a secure website) is near zero, to you, the consumer, at the time of the transaction. The majority of the costs are associated and paid for by the merchant. In general the merchant will pay ~3% of the transaction for credit/debit cards, and if 75% of their transactions are in debit/credit cards then they will have to raise their prices by ~2.25% to pay for this fee. So with society using debit/credit cards at the rate that it does causes prices to be higher on average by 2.25% in this scenario.

Another cost of using a debit/credit card is the cost of maintaining your account with the bank. Most checking accounts have a monthly fee if you do not meet certain criteria, although you are generally exempt if you maintain ~$2,000 at the bank. This is just a generalization but $2,000 will usually allow you to avoid a monthly fee. On the credit card side you have the issue of annual fee and possible interest charges if you are unable to pay you balance in full every month.

I do not have specifics as to how much the above usually costs the consumer, however it affects lower income people much more dramatically then it affect higher income people, both in terms of dollars and in terms of percentage of income.

Not an invalid address, but this guy just sent 800 btc to the wrong address just a few days ago:

https://bitcointalk.org/index.php?topic=636126.0;all (https://bitcointalk.org/index.php?topic=636126.0;all)

That is still shocking. I get nervous and triple check everything when sending even .01 anywhere. 

Most people are not as careful with their money because of the consumer protections that other payment methods have. Bitcoin does not have these consumer protections and this is probably the greatest determent to bitcoin being widely accepted.