[philrapo]

Shouldn't we be asking what the savings to the consumer are?

I use my credit card all the time for 2 reasons: 1) fraud protection and 2) reward points.

Interchange fees paid by the merchant are essentially being passed to the consumer via reward points. Why would people switch from credit cards to bitcoin en masse?

[davidrangel]

It's a good question and also needs to be answered. I'm the author of the post and have one coming on the consumer side.

[philrapo]

Nice, looking forward to reading your thoughts. I've been thinking about this myself recently.

I'd suggest using a higher estimate for the value of rewards points. (You used a 1%.) You can explicitly get >1% cash back on many cards, so I'd argue that's really the lower bound.[1]

Most reward points can be redeemed for ~2%, with conscious consumers getting even more than that. [2]

Consumers are very aware of the value they're getting, too. If you read AMEX company filings, the redemption rate on MR points is >90%. I found that shockingly high. It's tough to get consumers to switch to bitcoin when it's worse value and more risk.

[1] https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/... [2] http://boardingarea.com/onemileatatime/2012/05/25/my-updated...

[davidrangel]

Thanks. You make a good point about the rewards. I thought 1% could be a decent estimate given that not everyone pays attention, some points are never redeemed and rewards over 1% are usually only for specific purchase types (e.g., gas). But I may very well have underestimated this. And if people do redeem at a 90%+ rate, then they will definitely notice if there are no rewards on the Bitcoin side.

Very interesting.

[philrapo]

Here's a source for that stat from a Q3'12 AMEX earnings call transcript:

"As you know, our current ultimate redemption rate is 93%, a very high assumption for any consumer loyalty program."

[1] http://seekingalpha.com/article/931161-american-express-mana...

[bdlbdl]

I'd be very interested in hearing why a consumer would use bitcoins when a credit card option is available to them. The only reasons I can come up with are:

- The user is a bitcoin evangelist - The user bought/mined bitcoins early and wants to cash in without selling them which would incur an exchange fee and tax hit. - The user would prefer anonymity for that txn. Assumes no physical delivery (e.g. online porn) - The merchant offers a steep discount for btc. But why would a merchant offer a fee more than the 0.35% referenced in the article?