Crypto is going mainstream. As more people seek pro-crypto businesses to support, the benefits of accepting crypto payments are clear: More options may lead to more customers.
But, despite the growing demand for crypto payment options in eCommerce, business owners worry about fees and the overall sense of uncertainty.
We’ve created the following crypto vs. credit card pros and cons to help merchants understand what to expect when they add cryptocurrency payment options to their site.
The Case for Credit Cards
If you have access to the internet, you’re shopping online. And, if you’re shopping online, you probably have a credit card on file at your favorite online stores. Let’s look at the benefits of credit cards for merchants and customers.
Advantages of Accepting Credit Cards in eCommerce for Merchants
Accepting debit and credit cards means you don’t have to turn customers away—plain and simple. Most people use cards for online purchases; even customers who prefer an alternate form of payment will almost certainly have a credit card backup if there’s an issue with their preference.
If your online platform allows customers to create an account and store their card data for a streamlined checkout experience, it will be that much easier for them to return for future purchases.
Advantages of Using Credit Cards in eCommerce for Customers
Credit cards are convenient for customers. Many platforms let them store their cards on file, allowing them to make immediate payments without re-entering their information at checkout.
Customers often feel that cards provide an added layer of protection for refunds. Even if the online retailer has a customer-friendly refund policy, there could be issues if the customer’s reason for a return isn’t covered; disputing the purchase with the credit card provider often overrides that issue.
Card providers feature fraud protection in the event someone accesses a customer’s card number. And don’t forget the beloved points and rewards people earn on their cards.
Debit cards are especially beneficial to customers because they offer the convenience of a credit card, but since the money is drawn directly from their available bank balance, they don’t accrue debt.
Drawbacks for Merchants
When customers pay with their credit cards, the credit card issuer, payment processor, or financial institution that finances the card charges the merchant fees.
Credit card companies typically charge merchants anywhere from 2% to 3.5% of the total transaction price. International transactions can be as high as 8%. There’s also usually a flat fee of $0.20 to $0.30 per transaction.
Payment gateways like PayPal handle credit card, debit card, and account-balance payments from customers and charge around 3.49% plus a flat fee.
Merchants ultimately have to factor in the markup of these fees in their profit margin.
Debit cards typically charge merchants lower fees than credit cards and digital gateways like PayPal because they are backed by funds in the customer’s account, meaning the processor is at much lower risk.
Drawbacks for Customers
Credit cards have been the go-to payment option for decades and aren’t going away anytime soon. Despite their convenience, merchants aren’t the only ones paying for that convenience.
Customers pay an annual percentage rate (APR), which is interest on the outstanding balances remaining on their cards each month. The APR could be fixed to market rates or variable. Customers may be subject to penalties for failing to pay a monthly minimum and additional fees for cash advances.
Credit cards also come with the danger of hacks, breaches, and phishing scams that can lead to fraudulent charges, credit score damages, and a long, painful process of protecting personal data from other scams. Once you’re on a “list” for criminals to exploit your personal information, it’s very hard to end the nightmare of recurring scams.
The Case for Crypto
Now, let’s compare the advantages and disadvantages of cryptocurrency.
Advantages of Accepting Crypto for Merchants
The most obvious benefit for merchants is that accepting more forms of payment means turning away fewer customers. But, being a pro-crypto business also displays your willingness to explore cutting-edge technology and respond to customer demand.
Merchants have options when choosing their crypto payment gateway, processor, and conversion platform; some choices may cost less than credit card fees. They can also manage transactions directly into their own wallet by hiring a web developer to set this up for their site. In this case, there are zero fees associated with their customers’ crypto transactions.
Merchants are also protected from fraudulent chargebacks or refund attempts that go against their store policy. Crypto transactions are irreversible, giving sellers greater confidence in the finality of a sale. And, of course, it is just as easy to refund a customer with a separate crypto transaction if they have a legitimate claim.
How Do Bitcoin Transactions Work?
Bitcoin transactions are processed directly on Bitcoin’s network of computers. This decentralized process prioritizes batches of transactions as they arrive in the queue. When a customer pays you from their crypto wallet, their fee determines how expedited the transaction is in the queue. If they aren’t in a rush, they can pay a minimal fee and wait longer for it to get processed; if the need is urgent, they can choose to pay more.
Transaction fees are included with the customer’s payment and paid in the native cryptocurrency sent to the recipient.
Once a payment is in the queue to be processed, it is validated by multiple confirmations from anonymous computers in the decentralized Bitcoin network. Once multiple confirmations have been completed, the payment will automatically appear in the recipient’s wallet.
Both the customer and the payment recipient can verify the payment directly on the Bitcoin blockchain and view the progress of the entire transaction. Want to see? Here’s an example of a blockchain explorer that lets you view recent Bitcoin transactions as they enter the pool of transactions.
Merchants can use crypto profits to pay for business expenses (like shipping packages using Bitcoin Postage). Because crypto transactions are flat fees and not based on the transaction value, business owners can even pay large expenses or buy supplies in bulk and pay very little in fees.
Advantages of Using Crypto for Customers
Many of the advantages of using crypto are similar to other forms of payment. For instance, with a debit card, there are no late fees or interest (although you could spend your way toward an overdraft fee, which won’t happen with crypto).
Crypto transactions are fast and affordable. And, because crypto transactions aren’t based on a percentage of the item(s) purchased, that flat fee is the same even for extremely large purchases. Some cryptocurrencies have much lower transaction fees than others. For instance, whereas Bitcoin transaction fees cost $1–$5, the same transaction on Litecoin might be less than $0.05.
The greatest benefits for customers using crypto are privacy and security. Even if a customer has an account with an online merchant for convenience, that account doesn’t associate any details about the customer’s crypto wallet that a third party could hack.
When the customer pays, no personally identifiable information about their finances can be intercepted, and the merchant never sees any private data about the customer. The transaction is handled and settled “on-chain,” or directly on that cryptocurrency’s network, which provides absolute proof of the payment that can be verified with the customer and merchant but does not connect any data about that transaction to the customer that could lead to theft of funds or personal data.
Drawbacks for Merchants
The drawbacks for merchants accepting crypto can all fall under the umbrella of uncertainty. While it is perfectly legal to accept crypto payments and to use that crypto to pay for business expenses, crypto regulations are always in a state of change, and it is important to stay abreast of changes that could impact your business.
There’s also the fear of the unknown:
- How do I set this up?
- What do I even need?
- What taxes do I owe?
Finally, the volatility of crypto markets is a huge fear factor for merchants since they could take payment for an item when Bitcoin is worth $60,000, only to see that cryptocurrency fall to $50,000 the next day. This gives merchants the impression that it’s nearly impossible to gauge profit and loss if the value of their earnings can drop well below the cost of goods.
Drawbacks for Customers
Crypto transactions are generally less expensive than credit card fees, but it is the customer’s responsibility to pay those fees, whereas credit card fees for transactions are charged to merchants.
Crypto transaction fees can also vary. In most cases, transaction fees are based on how busy that cryptocurrency’s network is. At higher traffic times, fees will go up; when there is less activity, they go down.
Network traffic is solely based on short-term interest. For instance, if the price of Bitcoin is going up and up, a lot of people will try to buy some under the assumption it will keep rising, and those who already own some will sell it in large volume for a profit.
Accept Crypto and Put It to Work Using Bitcoin Postage
Accepting crypto payments is affordable for your business and your customers. As an added bonus, your pro-crypto business can turn around and use your crypto for everyday expenses.
Discover how easy it is to pay for shipping through Bitcoin Postage with crypto. It’s safe, fast, and secure—and doesn’t cost any more than paying for shipping elsewhere.