December 31, 2011, 12:00 AM

Credit cards make a comeback in online shopping

More online shoppers will pay with credit cards in coming years as banks dial back debt, Javelin predicts.

Consumers are shopping online more frequently, and in coming years will increasingly use a familiar payment method, the credit card, according to the Ò4th Annual Retail Payments Forecast 2011-2016Ó from Javelin Strategy & Research. Debit cards will represent a smaller share of online purchases in coming years, Javelin predicts, because banks are responding to new limits on debit card fees by discouraging use of those cards. Among alternative ways to pay, the invoicing service Bill Me Later has grown sharply over the past two years since its October 2008 acquisition by eBay Inc., rising from 1% of online consumers having tried it in 2010 to 14% in 2011; 91% of shoppers who used alternative payment systems have tried PayPal, Javelin says. As for what payment strategies encourage more online spending, the most effective are increased protection from fraud and payment-related rewards or loyalty programs.

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