It’s finally happened. Your blogger has given away his 12-year old, two-foot thick television (no, not to a museum), and bought a shiny new, wafer-thin HD set, alongside a Blu-ray player. And did he get into his car and drive the 20 miles to his nearest discount electrical outlet? No chance. He bought them online using a credit card.

Credit card use up?

Yesterday’s Financial Times suggests that he wasn’t alone. It quoted figures from MasterCard Advisors’ SpendingPulse monthly “macroeconomic indicator”, which say that online spending by consumers in the US reached $13.8 billion in April, up 19.2 percent on the same month last year.

Meanwhile, The FT says that Amazon’s results for US sales in the last quarter were up 45 percent on the same period in 2010, and ebay’s up 10 percent. Even Wal-Mart Stores Inc. last month began a pilot program that, if successful, could see customers ordering groceries online and having them delivered to their homes. Clearly, something seriously significant is happening to online shopping in this country.

Credit card trends online

SpendingPulse says that it “reports on national retail and services sales and is based on aggregate sales activity in the MasterCard payments network, coupled with survey-based estimates for certain other payment forms, such as cash and check.” And that means that it’s not possible to break out credit card use from all online spending.

But if online credit card trends weren’t matching online shopping trends, that would be a tragedy for consumers. On Monday, this blog (Outfox white-collar criminals with the credit cards in your wallet) explored the inherent superiority of credit cards over other payment methods when making purchases both over the web and elsewhere.

The fact is, a credit card offers significantly more legally enforceable protections against loss than either a debit card or a prepaid card. And nowhere are those protections more valuable than in cyberspace.

Credit cards vs. debit cards–round 2

Many consumers seem to be favoring debit cards over credit cards because they’re scared of high credit card rates. That’s just crazy for two reasons:

1. If you use your credit card in the same responsible, debt-free way that you use your debit card, then you’ll never pay any interest. So why care about credit card rates? Better yet, you get an interest-free loan between a transaction date and your next monthly card settlement date.
2. If things go awry with your debit card, and you end up with an overdraft, that can be just as costly as making late payments or exceeding your limit on your credit card. Last week, the Pew Health Group published a report that revealed just how expensive overdrafts can be. It said, “If overdraft were treated like a short-term loan with a repayment period of seven days, then the annual percentage rate, or APR, on the typical overdraft would be over 5,000 percent.”

In fact, you could be much better off going to a payday lender or even a loan shark than getting overdrawn. But your best bet may be to use credit cards–as long as you do so responsibly.

Published 05/05/11 (Modified 01/30/24)