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Consumers making smart choice when using credit cards for online payments

by Peter Andrew

Smart consumers are favoring credit cards over other payment methods when purchasing online, a new study shows. A report from Javelin Strategy & Research, published in March, identifies the choices people are making when buying on the Web:

  • Major credit cards: 41 percent
  • Debit cards: 32 percent
  • Prepaid/gift cards: 6 percent
  • Store-branded credit cards: 5 percent
  • Alternative online payment methods: 15 percent

That "alternative methods" group includes services such as Amazon Payments, Google Wallet and PayPal.

Why credit cards are a smart choice

Online payments in the U.S. topped $351.9 billion in 2013, according to Javelin, so safeguarding consumers when they're spending on the Web is a big and growing issue. And credit cards provide unrivaled statutory protection against fraud whatever the purchasing environment: online, in brick-and-mortar outlets, and when used for mail and telephone ordering. By law, your liability is capped at $50, and, in reality, many credit card companies waive even that.

It's true that some providers of other payment services -- most notably debit cards and those "alternative" methods -- voluntarily offer similar protections, but those lack the force of federal law. And there's an even bigger factor in play.


Under the Fair Credit Billing Act, you're entitled to withhold payment to your credit card issuer (you must, however, have first tried to resolve the problem directly with the merchant) if goods or services you've purchased anywhere turn out to damaged or of poor quality -- or if they simply aren't delivered.

So it's the credit card company's money that's on the line. With other forms of payment it's yours: the balance of your account has been reduced by the amount paid. Even if your bank, prepaid card issuer or provider of "alternative" services takes up your case, and ultimately resolves the complaint, it's unlikely to be as motivated as it would be if it were its own cash at stake -- and it could take a very long time for you to get your money back.

Extra protection

One more crucial difference: Some credit cards (though not all, so check your agreements) offer additional consumer protections, including:

  1. Purchase protection, which could see your new goods replaced or repaired if they're lost, stolen or damaged within a fixed period after you bought them.
  2. Extended warranties, which can increase the length of manufacturers' warranties.
  3. Price protection, which can reimburse the difference between the price you've paid and a lower one advertised elsewhere.

Providing you don't roll forward balances, it really is smart to use your credit cards (and especially your rewards credit cards, which can also give you miles, points or cash back) for many purchases, both online and elsewhere.

Published 04/16/14

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