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Paying for Online Purchases |
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Articles, How-To's and Interviews -
Personal Finances
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Written by Jacquelyn Lynn
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Author of Online Shopper's Survival Guide
The best way to pay for online purchases is with a credit card. Period. And it's a great idea to get a credit card that you use exclusively for online shopping so that you can quickly and easily review the charges each month and be sure they match what you actually bought.
Paying by credit card online is fast and safe. Yes, safe. Credit card companies are working hard to protect their customers from fraud. Most cardholder agreements limit your liability for fraudulent charges to $50 -- and, most credit card companies don't charge you that even though they can. Recently, I got a call from the security department at Discover questioning some online purchases on my account. The charges had been made on Sunday evening; the call came in first thing Monday morning. As it happened, I had made a couple of online catalog purchases on Sunday afternoon, but there were two charges -- one to an online auction site I never use and another to an online porn site -- that weren't mine (or my husband's, and he has been teased mercilessly by our friends about the porn site charge). Discover immediately closed the account and issued us new cards. It was mildly inconvenient, because we had to take the time to notify the companies that use that account for automatic payments, but we didn't lose any cash.
Another advantage of paying by credit card is that you have additional
security because you can dispute the charge if there's a problem, such
as if the merchandise doesn't arrive, doesn't work, isn't what you
expected, or you returned it and didn't get your refund.
Virtually all online retailers accept credit cards, either as a direct
merchant or through an online payment service such as PayPal (more
about that shortly). It's a good idea to check to see what payment
method the merchant accepts before you spend too much time shopping.
Most accept Visa and MasterCard. American Express and Discover charge
merchants higher fees than Visa and MasterCard, so some online
retailers don't take those cards.
Smaller retailers may not accept credit cards directly but may accept
them through online payment services. PayPal, owned by eBay, is
probably the best known and most popular online payment service, but
there are others, such as BidPay.
Here's how online payment services work: You set up an account with
details on how you want to pay (credit card, bank transfer, whatever).
When you want to make a payment to a seller that accepts that
particular payment service, you just tell the service who to pay. The
amount is charged to your credit card or withdrawn from your account
and immediately transferred to the seller. If the payment cannot be
made electronically, some services will issue a check or money order --
this is most commonly used when buying items from individuals overseas.
You could also pay by mailing a check or money order, but there are
some drawbacks. First is the convenience factor, especially if you have
to go somewhere to purchase the money order. Second is the time it will
take to get your merchandise. Many sellers who accept checks and money
orders will delay shipping your purchase until your check has cleared
or they have been able to confirm the money order is legitimate. Third,
and perhaps most important, is that you have no extra layer of consumer
protection with checks and money orders as you do when you pay with
credit cards. Banks and money order issuers can't do a charge back the
way a bankcard merchant account provider can. And finally, while this
is not a particularly common issue, the potential for fraud with check
payments is higher than with credit cards. Check amounts can be
altered, or the seller (or the seller's payment processing staffers)
can use the information on your check (your name, address, phone
number, and bank account number) to steal from you later.
Most online merchants do not accept cash -- and you shouldn't pay with
cash anyway. Cash is easily lost or stolen, and you have no way of
proving how much you sent if the total doesn't arrive. Reserve paying
cash for face-to-face transactions.
Another online payment option that is more commonly used with
high-dollar purchases is an escrow service. This is where you deposit
the funds with an independent third party. The merchant ships when it
receives confirmation that the funds have been deposited. When you
receive the merchandise and advise the escrow company that you are
satisfied, the funds are released to the seller. If you are not
satisfied or you don't receive the goods, the funds are held while you
resolve the problem with the merchant.
Don't use a debit card for online purchases. While most online payments
are processed without a problem, if yours happens to be the exception,
using a debit card could give a hacker or scammer access to your entire
bank account. While debit cards do offer some security and fraud
reimbursement programs, most debit cards do not offer the same level of
protection that is available with a credit card.
Reprinted from Online Shopper's Survival Guide by Jacquelyn Lynn.
Published by Entrepreneur Press. Copyright © 2006 Entrepreneur Media
Inc. August 2006; $19.95US; 1-59918-024-3.
Jacquelyn Lynn is a widely published business writer and highly
experienced online shopper. She is the co-author of Make Big Profits on
eBay as well as numerous titles in Entrepreneur's Startup Series.
For more information, please visit www.jacquelynlynn.com
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