Payments
Online purchases carry the small risk of thieves stealing your payment information, but you can reduce the risk of unauthorized charges by using the best payment method for each situation.
Common payments choices online include credit cards, debit cards, or payment services like PayPal. Depending on your concerns, one of those choices might be better than another.
Credit Cards
Credit cards are among the best online payment options because the Fair Credit Billing Act limits your liability to $50 in the event of fraudulent charges or mistakes. You will have zero liability if you report a card lost or stolen before it is used fraudulently or if only the numbers and not the actual card are stolen.
Additionally, many credit cards offer fraud protection and other security features that wipe out the $50 of liability allowable under the FCBA. Discover, for example, allows cardholders to freeze their accounts immediately through a mobile app. Capital One offers virtual card numbers that can be used for online purchases, protecting your actual card number. When shopping for a new credit card, be sure to check out what types of security features are available.
Tip: Consider keeping a designated credit card that you use only online. You can keep a closer eye on that account, and you won’t suffer the inconvenience of updating your monthly billers if you have to ditch that card number.
Payment Services
Third-party payment services also are a good option for online shopping. PayPal is arguably one of the most popular services, but others are also growing in popularity such Apple Pay, Google Pay, Amazon Pay, Venmo, Payoneer, and more. These services can provide an extra layer of safety. Instead of providing your credit card number or bank account information to every website where you shop, you provide it only to the payment service, which you use for online purchases. If you shop at numerous sites or sites you’re unfamiliar with, it’s wise to reduce the number of places where hackers can find your information.
Tip: Use a credit card to fund payment services whenever possible. That way, if there is a dispute and the payment service doesn’t decide in your favor, you also can dispute the charges with your credit card company where you might have better luck.
Debit Cards
Debit cards offer the convenience of credit cards and sometimes have comparable liability protections, but they pull funds directly from your checking account—and that makes a big difference. Even if your bank reimburses you for every dollar lost due to fraud, it's still your own money that is being stolen as opposed to having a credit card maxed out by thieves.
This can lead to a domino effect of problems including checks bouncing and an inability to make simple purchases during the time it takes for the money to be reimbursed.
Tip: If you simply can’t use a credit card or a payment service, a prepaid card can help insulate your checking account from any problems. With these, you load funds onto the card, and there’s no immediate withdrawal from your checking account.
In terms of the law, the Electronic Fund Transfer Act offers debit card users protection similar to what the FCBA offers credit card users. However, it's not quite as robust. There is no liability if a card is reported lost or stolen before any charges are made, but liability can be as high as $500 if a user does not report the card lost or stolen within two days of learning about the loss or theft and as much as the entire amount taken from your accounts if not reported within 60 days of receiving a statement.