Digital currencies like Bitcoin can be a fast way to pay online, however, paying via digital currencies comes with risk.
The FTC has received hundreds of complaints involving Bitcoins and other digital currencies. The two most common problems are the following: online merchants who don’t deliver the product on time or at all and merchants who give refunds in store credit, rather than currency.
As we all know, the Bitcoin value goes up and down — sometimes sharply — depending on demand. Besides, payments made with virtual currencies aren’t reversible and don’t have the same legal protections as some traditional payment methods.
The FTC recommends to always check out the seller’s reputation, his location and how to contact him in case of problems. Besides, a customer should find out whether the payment will go directly to the seller, or through a payment processor, which may offer additional protections.
The only way to get a refund is through the seller or payment processor, so it’s important to choose companies you trust. That is why a customer should preliminary find out all the information possible on the refund and return policies. The value of Bitcoin changes constantly so the seller should tell a customer before the purchase what exchange rate will be used for refunds. To refund a credit card purchase, the merchant usually credits the account. However, since customers can change their digital wallet accounts, a seller can’t always send Bitcoins back to the wallet it came from.
However, not only online customers may encounter problems with digital currencies, but online merchants as well.
For instance, Overstock’s latest earnings report showed that the company’s digital currency investments declined significantly during the first quarter of 2015. The losses added up to $117,000, which is a disappointing performance for investors.
Seems that the losses are due to the fact that the company is still holding some of its assets in Bitcoin, and that the digital currency’s volatile nature brought down the company’s value. However, if this is the case, the company may see a major increase in future reports.
According to Overstock, its losses appeared from investment in Altcoins, which performed poorly. Those investments have all been shuffled with the company’s Bitcoin holdings and are said to be much of the reason for the decline.
For your information, Overstock has been a major proponent for digital currencies. Last year the company’s CEO Patrick Byrne said that the company had brought in $1.6 million in Bitcoin sales. The online merchant was also one of the first major companies to begin accepting Bitcoin payments back in 2014 when markets were still very apprehensive about the digital currency.