Customers rely less on credit cards when buying online

In spite of the recession, online purchases have held up remarkably well. According to a new study from Javelin Strategy & Research, Americans spent $205 billion online last year, a rise of 10.8% over 2008. What's interesting, though, is that we're relying less on credit cards to make those purchases.

While credit cards are still the most popular form of payment, debit card usage is on the rise. This reflects both our desire to better control our spending by avoiding "buy now, pay later" scenarios as well as the economic reality that's made credit tough to come by for many Americans, according to Beth Robertson, director of payments research for Javelin. Advances in technology to make online shopping faster, more flexible and more secure also helped the trend along, she added.

Javelin's research indicates that 63% of Americans are comfortable with shopping online, adds Robertson. "It really shows that consumers are continuing to get more and more comfortable purchasing online," Robertson told WalletPop in an interview. "Security features are helping consumers feel more confident." The convenience of online shopping is another big selling point, Robertson told us.

Despite a move toward other forms of payment, we're still using credit cards for bigger-ticket purchases. Javelin's research showed that the average credit card purchase online was $45.34, which was 22% higher than the average purchase price in the next category. Overall, debit cards were the second most popular method of online payment.

"One of the major factors is the control of spending and convenience of purchase," Robertson said. She added that Americans have gotten more comfortable using debit cards in general, especially since some issuers (including Visa) now don't make customers wait to sign a printed receipt for most purchases of $25 or less.

The use of online tools like Google Checkout or Paypal grew by 19% in 2009, and Robertson thinks this category has more room to grow in the future, especially as Paypal expands beyond its auction-payment roots and into other checkout categories.

For the future, Javelin predicts that both the dollar amount as well as the number as a percentage of all purchases (both on- and offline) will continue to grow. By 2014, the company predicts that online shopping will total $410 billion and make up 7.9% of all purchases.
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