Protect yourself: The safest ways to pay online
Internet has made shopping online fun and easy. But like many things it also has a dark side, namely online fraud. You have to be vigilant against online fraud so as not to be ‘pick pocketed’ while sitting at home and shopping.
Some of the statistics for online fraud- The FTC`s Consumer Sentinel received more than 100,000 Internet related complaints amounting to over $122 million for the year 2002. The National Consumer`s League’s Internet Fraud Watch received complaints totaling almost $15 million in2002, an increase of $6 million from the year 2001.
Online auctions are where many frauds occur. Complaints for product purchases are also common, like when you don’t receive the product or they do not match their descriptions. One way to fight this fraud is to use different payment tools to keep the fraudsters away. That’s because these payments tools will determine your getting back the money if there is trouble.
Wrong Assumptions
In this case ‘ignorance is bliss’ does not apply, but ignorance hurts. Most people cannot identify the safe modes of payments unfortunately. In 2001 the National Consumer`s League poll found that 59% of respondents (wrongly) believed that checks and money orders were a safer mode of payment than credit cards. And 55% of the people sincerely thought that they had three working days to cancel online purchases under federal law.
This poll also revealed that online consumers believed that credit card numbers could be stolen easily. But contrary to the belief, payment by credit cards is the safest way to pay online. This is supported by the NCL. Paying by credit card your liability is limited to $50 under the Fair Credit Billing Act.
To add to that there are some credit card companies that carry $0 liability policies. This policy would mean you won’t be accountable for the fraudulent purchases. These policies do not carry unlimited liability. For example, MasterCard’s 0% liability policy is valid for only U.S. issued cards. Another fact being that you cannot have disputed more than one purchase in the last twelve months, and your credit card record should be good.
Your dispute has to be credible. You cannot return and refuse payment for an item just because you realized you didn`t like it. You can dispute purchases that didn`t tally with the advertised one or that they were made without your knowledge or illegally. Your credit card company when approached will guide you through the formal process to dispute a purchase. Usually a written complaint is required, which includes the transaction number, date amount, the merchant name and the cause for dispute.
Nothing is airtight or foolproof. Paying by credit card have had their share of fraud problems too. Credit card companies lose annually about $1 billion to credit card fraud, while merchants lose about $10 billion annually according to a credit card information site called CardWeb.
Credit Cards for a Specific Purpose
Different credit card companies have come out with types of perishable credit cards, which are used for a specific purpose.
These cards assign a specific credit card number to each online purchase or to each online merchant for a specific time period, which could be a few weeks or a few months.
American Express initiated the use of this technology in the fall of 2000. The other companies that followed suit were MBNA and Discover Card.
For the MBNA`s Shop Safe program, you have to download a software that will enable you to create a new account and dollar amount for each purchase. To save you the trouble of opening a new account every time you make a purchase, you can set the dollar account and time limits according to your requirements.
American Express’s Private Payments program also permits you to generate temporary account numbers for each purchase.
The Amex Blue Card has added smartcard technology that permits you to ‘lock’ access Private Payments on your computer. But this requires a smartcard reader . This can be bought at your local electronic store or your smartcard issuer. American Express offers three separate smartcard readers, depending on the setup of your computer , which are in the price range of $0 to $60.
Visa program called The Verified, launched in December 2001, requires the card user to enter a password instead of creating a new credit card number for every purchase. This program helps the Merchants, as once the password is authenticated they are not held liable for fraudulent purchases.
Third-party payment services
For shopping enthusiasts, eBay has become a part of their life and services like PayPal are a great source. PayPal service has been acquired by eBay, and helps you fund an online account and make payments from the account without revealing your actual credit card or bank account information.
This service can be used for more than just auction sites. You can send money to anyone with an e-mail account. These payment services have several fraud protection programs. When you dispute a fraud made with PayPal, you have to register the complaint within 30 days of the fraud. You can also file a complaint with your credit card company you have used to finance your PayPal account. Some card companies take the initial funding of the PayPal account as a purchase made on your card. Thus they may not have third party cover on your card`s fraud policies and another fraud protection policy will apply. So if PayPal cannot recover your money you will lose that amount.
Visa honors its general dispute policies on purchases made with third party services.
An additional downside of PayPal is that not all merchants accept it. For example, Amazon recognizes only Amazon Payments and not PayPal or other third party services.
MSN Wallet and Gator eWallet are digital wallets that are geared towards convenience. They store numerous account numbers and passwords and occupy fields automatically on web sites when you browse. These services have an additional feature of including encryption of your account data. These payment methods are not accepted everywhere and merchants have to sign up to offer the service.
Debit Cards Less Secure than Credit Cards
People see debit cards as a better option than credit cards as you do not end up with a huge bill at the end of the month. But when it comes to fraud, debit cards can make a big hole in your pocket. Your liability limit under Federal law increases the longer you wait to report any fraud on your debit card. If you report within two days, your maximum liability $50, but if takes longer than two days it zooms to$500. The Federal Trade Commission says that if you don’t report any illegal use of the debit card within 60 days, you’ll be liable for the full amount even if it exceeds $500.
Some credit card companies do not want to distinguish 2between credit card and debit card frauds and are changing their policies towards them. According to CardWeb, Visa and MasterCard are treating these frauds in the same manner. The law however bends more towards the credit card side. On a debit card fraud you have to pay the full amount of purchase until the refund comes through. This may pinch as it’s not your credit limit but your checking account that gets the punch.
Cash and money orders are the poorer options to make payments with, as you cannot get your money back. Debit cards are a better option than cash or money orders, but not as safe as credit cards.
