PayPal versus credit cards

Online shopping is certainly proving itself as the retail store of the future as many Australians flock to the web for bargains. But for many the idea of posting your credit card details online for payment is still a troubling prospect, given the prevalence of credit card fraud.

Some savvy online shoppers are looking to credit card alternatives, such as payment processing businesses such as the eBay-owned PayPal. Using PayPal, a shopper must establish a secure account to which they transfer funds electronically from their bank account. The payee receives the transferred money, which is deposited into their own PayPal deposit account, eliminating the need for credit card details to be posted online.

Many online shoppers would be familiar with PayPal if you have shopped with sites such as eBay, but some may not be aware of the volume of businesses signing up to the secure payment platform. In 2011, PayPal held funds in 23 currencies worldwide and manages over 153 million accounts, according to PayPal data.

One account holder is Singapore Airlines, which allows travellers to book airfares online without the use of your credit card. Many of its competitors are also offering credit-card free booking and reaping the rewards, with happy customers.

One of the main drawcards to PayPal is that payments can easily be traced, unlike many other online payment methods. Credit card details are not held on the site either, so your confidential information is not exposed to any third party.

As more businesses accept payments through e-commerce companies such as PayPal, the credit card market's monopoly over online shopping is being tested. But there is little doubt that PayPal will replace credit cards entirely, at least in the short-term.

Evidently, not all of Singapore Airlines' services can be paid for using PayPal; credit card details are required to purchase preferred seats, insurance and Singapore stop-over holidays, if buying online.

Credit card providers are finding new ways to attract shoppers back to plastic too, with many credit card rewards programs helping to compete for business. Card holders accumulate points by using the rewards card, which you can exchange for goods and services such as flights, electrical items and cash.

Rewards vary between cards and many have high interest rates and charge fees, so it's important to compare credit cards online to ensure you understand all of the conditions and get the best deal for your situation.

RateCity compares over 200 Australian credit cards ranging from low interest rates, rewards and platinum cards.

Carry out a credit card comparison to find the best credit card for you.

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