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Is the Internet saving you money? Not necessarily

MoneyRates.com Senior Financial Analyst, CFA
November 21, 2013

Because it provides the means to compare prices instantly and complete purchases with a few clicks, the Internet is often touted as a tremendous resource for consumers. But a new poll conducted for MoneyRates.com by Op4G suggests that the Internet may actually be a mixed blessing for consumers who want to save money this holiday season.

The poll, which surveyed 2,000 U.S. adults, found that 23 percent now do their holiday shopping primarily online and 31 percent do it primarily in person, while 46 percent split holiday shopping evenly between the Internet and in-person shopping. A closer look at the habits of these groups provides some revealing insights on how the Internet impacts the time and money they spend around the holidays.

Here are several myths and truths on the effort to save money online, as revealed by the data in the poll and recent MoneyRates.com banking research:

Truth: Online shopping makes you less prone to impulse buying

Fifty percent of poll respondents said they are more likely to buy something on impulse when they shop in person, compared to 17 percent who said they are more likely to make an impulse purchase online. The remaining 33 percent said it was a toss-up.

The fact that people are almost three times as likely to make an impulse buy in person isn't surprising. After all, you may be exposed to many temptations when you shop in person. It might be something as simple as a candy bar at the checkout aisle, or as complex as an eye-catching new electronic gadget. You might succumb to the urgency of the limited-time-only sale that was just announced over the loudspeaker, or to the smell of chocolate chip cookies as you walk through the mall.

Still, even if people are more prone to impulse buying in person, you shouldn't get complacent when shopping online. Those "suggested for you" items that appear when you are looking at related merchandise, as well as the product ads that are shown based on your browser history, are designed to hit you where you are most vulnerable. Stay strong, consumers.

Myth: Shopping online will help you spend less

Because people buy less on impulse online, and because things are supposed to be cheaper online, you would expect online shoppers would spend less on their holiday shopping. However, the poll found otherwise.

People who shop primarily online expect to spend an average of $487.04 this holiday season, compared with the average of $436.53 that people who shop primarily in person expect to spend. The real eye-opener is that people who combine online and in-person shopping expect to spend the most of all, at an average of $533.08.

This suggests that people who combine online and in-person shopping are not tactically substituting one for the other depending on which offers the better deal. Instead, it seems that more shopping options simply translate into people buying more.

Truth: Online banking is cheaper

Bank branches are expensive to maintain, so having customers bank online allows institutions to save millions on everything from real estate to paper statements. The question is: Are online-based banks passing these savings along to their customers?

The latest MoneyRates.com Bank Fees Survey suggests that they are. Among checking accounts that charge a monthly maintenance fee, the average for these fees was $9.49 for accounts at online banks, compared to $12.48 for accounts at traditional branch-based banks. What's even more striking is that 79 percent of the online accounts surveyed were free of monthly maintenance fees, compared to just 28 percent of the branch-based accounts.

Myth: Shopping online will save you time

You would think not having to get in the car, drive to the mall and find a parking space would be a tremendous time saver, but apparently not. According to the poll results, people who shop online expect to spend more time shopping than those who shop in person.

Online shoppers expect to spend an average of 5.84 hours buying holiday gifts this year, compared with 5.24 hours for in-person shoppers. Here again, people who split online and in-person shopping equally end up spending the most, at an average of 6.71 hours. This supports the idea that these hybrid shoppers are using online shopping in addition to, instead of as a substitute for, some of their in-person shopping.

Truth: Your savings will earn more online

Whether people save more money shopping in person or online, their savings will typically earn more at an online bank. In its latest America's Best Rates survey, MoneyRates.com found that savings accounts at online banks pay roughly three times the average interest rate of savings accounts at branch-based institutions.

Overall, consumers appear to get mixed results from online shopping. After all, retailers are not investing millions in their shopping sites in order to help you save money. Their motive is to get you to spend more. However, if you use the Internet as a tool for careful price comparisons and disciplined shopping, you can come out ahead. Regardless of the experience of some consumers, savvy shoppers can make Internet savings more truth than myth.

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