Bitcoin is fighting an uphill battle against the current financial ecosystem, and that ecosystem is fighting tooth and nail to keep its dominant position over alternative payment methods. Whereas financial institutions can offer customers a cash-back service for every purchase, Bitcoin users can not enjoy a similar service at this time.
The Blessing and Curse of Debit Card Cashback
It is important to keep in mind that cash-back services only work with debit cards, and not with credit cards. There is a vast distinction between both cards, as credit card transactions are subject to transactions fee based on a percentage, whereas debit cards fees are tied to a fixed amount. This makes a huge difference for a merchant who accepts both types of card transactions.
Debit cards are issued by banks and other financial institutions and are not related to interest-free credit funding like credit cards. However, debit cards are not all that popular in every country. The United States, Belgium, France, United Kingdom, Canada, and Australia are a few countries where debit cards are being used on a semi-regular basis.
The way a cashback works is as follows: an amount is added to the total purchase price of a transaction paid by debit card. That customer will then receive this added amount in cash upon completion of the purchase. Most retailers will use this feature in order to reduce the amount of cash stored in the cashier’s till, saving the retailer money in deposit fees at the bank.
Cashback Rewards For Credit Card Holders
Even though cashbacks are officially impossible with credit cards, a similar service called “cashback rewards” was created many years ago. These incentive programs are usually operated by credit card companies, and virtually promise customers to pay back a small amount of money for every purchase made. Sometimes, these rates can be expressed in percentages, but some countries will express the value in fiat currency as well.
Both percentages and flat cash-back values sound great, and will allow customers to earn a bit of money while spending. But one of the biggest downsides to this problems is that people will go out and spend money just to get their cash-back bonus, and not spend money because they actually need certain goods or services.
Some credit card issuers will offer cash-back rewards in the form of air miles, or points, encouraging credit card holders to use their card more and more for all types of purchases. However, monetary returns are most preferable, which are paid out on an annual basis — either credited to the credit card account or paid out to the cardholder separately.
Last but not least, it is important to keep in mind that cashback rewards are more beneficial to certain people compared to others. Cardholders who pay their credit card bills on a monthly basis benefit more from these rewards, as they will not invoke interest fees if a monthly amount is not paid off in full within a certain time frame.
Bitcoin can Offer Neither, but Discounts are Possible
Every time you make a Bitcoin purchase, there is no cash-back option. Asking a merchant to add a specific amount of money to the transaction and receiving it in cash is simply impossible. Getting some sort of cash-back off the purchase amount itself — either in money or otherwise — is not something you’ll see in the world of digital currency.
In fact, you could go as far as saying that cashback systems — both for debit cards and credit cards — are nothing but a convenient tool to keep customers tied to a financial ecosystem tightly controlled by banks and governments. If there is one thing consumers love, it is convenience, even if it trumps security, financial freedom, and the simple principle of having choices.
But there is one advantage Bitcoin can give that neither credit cards nor debit cards can, and that is discounts at the time of purchase. Because merchants can save a ton of costs by accepting Bitcoin, compared to credit and debit cards, they have an incentive to offer a small discount to customers paying with BTC. However, these discounts are vary rarely given at this time, and we can only hope that situation will change soon.
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