Online Payment Methods: Guide to Protect Yourself

Online shopping differs from in-person shopping in many ways. Instead of a point-of-sale register, you pay on a checkout screen. But the different payment processes can seriously affect your finances and privacy.

Technology, security concerns, and consumer behavior all change rapidly. In turn, online payment options evolve with them. You may wonder which option is the best payment method for your purchase.

This article covers the legal and practical issues of online payments. Before your next purchase, learn more about your options and the laws governing e-commerce transactions.

Start With Digital Security

When you pay for goods online, you must share sensitive information, including your billing address and payment information. Hackers and scammers try to access these details, enabling identity theft and other fraud.

That’s why checking whether your connection is secure before entering any payment information is safest. Secure connections add a layer of encryption to prevent digital eavesdropping. If you do not have a secure connection, a third party may intercept the information you sent the seller.

You can also check whether the seller is legitimate. Before proceeding, learn more about protecting your information and online shopping tips.

Are Debit Cards Safe for Online Payments?

No, typing your debit card information at checkout is usually a high-risk action. Debit card purchases allow the online seller to take the cost directly from your bank account. Merchants who accept debit and credit cards must follow rigid security standards. But they aren’t always effective.

Debit card payments carry comparatively weak fraud and theft safeguards. Anyone using your debit card could withdraw funds from your checking account. They may continue to do so until you contact the bank to lock your card — or until your account runs out of money.

Fortunately, debit cards aren’t your only option for online transactions. Other payment methods may offer higher security and legal protection against fraud.

Addressing Debit Card Fraud Can Be Difficult

Federal law sets baseline rules around debit card theft. The Electronic Fund Transfer Act puts you on a clock to detect theft and notify your bank as fast as possible. For example, you might only lose up to $50 in stolen money if you act within two days. But if you take three or more days to alert the bank, you’ll be liable for as much as $500. After 60 days, you’ll likely lose all the money the thieves stole.

Banks may offer zero-liability debit cards, further protecting some funds according to the bank’s terms. Yet, unlike credit card companies, most banks typically don’t help you with theft disputes.

Why Credit Cards Are a Safer Payment Method

Credit card payments are popular because consumer protection laws will give you better remedies for fraud. Some of the most common credit card issuers include American Express, Visa, and Mastercard.

Credit and debit card transactions look similar from a customer’s point of view. But, they involve different payment processes on the back end. This difference offers a buffer between you and thieves.

With a credit card purchase, the seller charges the credit card company instead of your personal bank account. Then, the credit card company sends you a bill plus any applicable interest and fees. The seller does not get access to your bank account.

Credit Card Fraud Protections

If thieves steal your credit card details, they can’t take cash from your bank account. They may rack up charges, but consumer credit laws shield you from paying most of those bills.

Under the Truth in Lending Act, you are only liable for fraudulent credit card charges up to $50. You are not responsible for paying any of the thieves’ debts after reporting they stole your credit card information.

Credit cards also protect you against sellers who fail to deliver merchandise. Credit card companies often help with chargebacks against fraudulent merchants.

Third-Party Online Payment Options

Some banks and third-party payment providers let you pay bills online. They advertise how their encryption and authentication procedures can help restrict unauthorized access to your account.

Online stores often accept payments through third-party providers and digital wallets, such as:

• PayPal
• Square
• Apple Pay
• Google Pay

There are a few other types of third parties, too. Some businesses offer prepaid shopping services. Other payment systems let you aggregate your online purchases into a monthly bill.

Some third parties let you pay through automated clearing house (ACH) network transfers. An ACH transaction securely moves money from your bank account to the seller’s bank account. For example, a seller may use Stripe to manage its ACH transactions to keep both parties’ accounts private.

Third-Party Fraud Protection Varies

Third-party payment providers each have unique fraud protection policies. These policies determine what happens if you suspect fraud on your account.

Read the terms of the policies before creating accounts with online payment services. For example, the policy might set a liability limit, which is the amount of fraudulent charges you’re responsible for paying. Using the provider means you agree to those terms. Some services may better protect you against liability for fraudulent charges than others.

Use caution when paying through peer-to-peer payment apps like Venmo. They serve a different purpose from commercial payment systems. Their fraud policies might not give buyers as much protection as other options. Online shopping scams sometimes use peer-to-peer services to hide information from consumers.

Which Type of Payment Method Is Safest?

The best online payment option depends on your card issuer’s specific policies and security measures and each third-party payment service. Because these things change over time, the safest option may change, too.

Ask yourself which option would give you the most recovery support if your data falls into the wrong hands. Consider which payment services have the highest reputation for encrypting customer data.

Often, combining tactics can give you the most security to prevent theft. You might combine a credit card with a reliable third-party payment service. For example, you might set up a PayPal account and connect your Visa card. Then, you could use PayPal at checkout if the store’s website is secure.

Realistically, you can only use the methods the online store accepts. Sellers choose which payment options to offer customers based on many factors, such as smooth customer experience and integrations with their other third-party technology. But if you believe the seller doesn’t provide a safe payment option, you might not want to complete your purchase.

Are Online Signatures for Purchases Valid?

Yes, even though the process differs from handwriting your signature on a check or contract. Several laws regulate signatures in the digital age.

For example, the Electronic Signatures in Global and National Commerce (ESIGN) Act sets many requirements for the validity of an online signature. Typing your name in a form field during checkout is one form of an enforceable digital signature. Yet, the signature prompt must be clear so customers can knowingly consent to the agreement.

Because electronic signatures hold as much legal weight as signing in ink, think carefully before you agree to the terms of a purchase. You typically can’t argue later that your signature should be invalid — except in a fraud case.

Review the Checkout Screen

Before placing an order online, check for the following information to ensure you fully understand the purchase:

• Pricing of each product in your cart
• Transaction fees, including any currency exchange fees for international orders
• Taxes
• Shipping fees, including any extra charges for expedited shipping
• Estimated shipping date
• Applied discounts
• Final sale or other return policy disclaimers
• Any recurring fees, such as for subscription services

Customers often complete transactions in seconds. Once you authorize a payment, you are subject to the retailer’s policies and prices. Slowing down to read all the information about your purchase may prevent a dispute with the seller.

Storing Your Financial Information

Your web browser, mobile device, or the retailer’s website may prompt you to save your payment information. The benefit is that future web or mobile payments may be faster because you can skip manually filling out the checkout form. You wouldn’t need your physical card with you. The program storing your information will automatically fill it out for you.

Unfortunately, saving your credit card details or other information can also create risk. If someone steals your device or accesses your account, they may shop online with your money. Programs typically require you to confirm your card verification value (CVV) number to “unlock” your stored data. Yet, this safeguard might not stop all theft attempts.

Legal Help for Online Payment Trouble

Paying online is convenient, but you should understand its inherent risks. You might encounter shady business practices or a security breach.

Consider your legal options when you can’t find a solution with the seller, financial institution, or payment company. Talk to a consumer protection lawyer for legal advice on a payment-related issue. An attorney can explore the problem and explain what you can do next to resolve it.