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Saturday, August 13, 2016

This is why even rational Bitcoin users might use credit cards

If you happen to live within your means and have an emergency savings fund, credit cards are excellent ways to get free money. Free $100 from the signup bonus to buy some Bitcoin with? Yes please!

Of course, those rewards only exist because there are enough people who are either unfortunate or foolish enough to owe interest on their balance. In addition to that, the debit/credit card companies stick vendors with the transaction processing fee, which is passed on to all of the vendor's customers.

If a Bitcoin user could write 5% off a gas purchase or grocery transaction from their credit card balance, then they're always going to spend their fiat because:

A) Gresham's law,

B) Credit card rewards lower the out-of-pocket cost to transact as a buyer, albeit artificially, that Bitcoin often cannot match in most cases.

Bitcoin only makes sense to use if it is the only option to transact with, or if it is cheaper for the user to perform the transaction with Bitcoin than any other alternative, or if the user holds off on spending their Bitcoin until they have a profitable margin as to 'lock in' profits.

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