The Best Ways to Pay Online (Safely)

hand holding credit card and wallet by laptop
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Any time you make a purchase, there’s a small risk that thieves can steal your payment information. If that happens, they can use your accounts to buy things, get cash, or pay themselves fraudulently. But you can reduce the risk of unauthorized charges (and time-consuming cleanup efforts) by using the best payment method for each situation.

Most people realize that hackers can steal information when you shop online. But the risk isn’t exclusive to online shopping—ID theft can and does happen at brick-and-mortar stores as well. Still, it’s exceptionally easy to put sensitive information in the wrong hands online.

To some degree, you can rely on technology to protect you. Your financial details are usually scrambled (or encrypted) into a hard-to-read format. But even when you do everything right—even at large, reputable websites—there’s a chance of a data breach or intercepted traffic. What’s more, the problem could be on your end: Something as simple as a keystroke logger on your device can grab your card number or PayPal password.

It’s obviously important to keep your device secure and up to date, but your method of payment can also help you avoid problems.

Payment Method Choices

You usually have a choice when it comes to paying: Will you use a credit card, debit card, a payment service like PayPal, or some other option? Depending on your concerns, one of those choices might be better than another. Let’s look at the pros and cons of each payment tool.

Credit Cards

The good: A credit card is often an excellent choice for shopping online. Fraud protection with credit cards is quite strong, and getting charges reversed is pretty simple. Whenever there’s a problem, report suspicious activity to your card issuer or let them know you never received goods that you paid for. Plus, when you spend with a credit card, the money doesn’t leave your bank account immediately. Instead, the card issuer sends funds, and you pay up later. As long as you act quickly, your liability can be limited to $50, and in many cases, you won’t pay anything for fraudulent charges or mistakes.

The bad: You might think of your credit card as a tool of everyday life. Perhaps you use it regularly for personal and business expenses, and you might pay automatic or recurring charges with a card. But if your card number gets stolen, you need a new card (and card number). Then you have to update billing information in numerous places, and you may have to live without your card for a while as you wait for a replacement.

Tips: Use your credit card only when you’re confident that it’s safe to do so, and when you want the most robust consumer protection available. For even better protection, ask your card issuer for a one-time-use (or “virtual”) credit card number for online purchases. A stolen virtual card number is less likely to cause headaches for you elsewhere. Finally, consider keeping a designated credit card that you only use online (or at sites you aren’t familiar with). 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

The good: Third-party payment services are also a good option for online shopping. PayPal is arguably one of the most popular services, but others such as Google Wallet exist. These services can provide a valuable extra layer of safety. Instead of providing your credit card number or bank account information to every website you shop with, you can keep that information in one central location (at PayPal, for example). If you shop at numerous sites or sites you’re unfamiliar with, it’s wise to reduce the number of places that hackers can find your information.

Some payment services also offer “buyer protection.” That makes them roughly as safe as credit cards when your purchases never arrive or you get swindled.

The bad: When things go badly (if you have a dispute with a seller), those accounts can get frozen while the company investigates. And if you make a habit of disputing charges unsuccessfully, your account might even get closed, and you could be banned from using the service. You can certainly live without a PayPal account—there are plenty of places to shop online with other payment methods—but PayPal is sometimes the easiest way to pay.

Tips: When you shop online, use a credit card as the funding source for purchases whenever possible. That way, if there’s a dispute and the payment service doesn’t decide in your favor, you can dispute the charges again with your credit card company where you might have better luck.

Debit Cards

The good: Debit cards are inexpensive payment cards that pull funds directly from your checking account. You don’t need to apply, get approved, pay annual fees, or risk racking up debt like you would with a credit card. Although it’s not required by law, debit card issuers frequently offer “zero liability” protection that rivals credit card protection.

The bad: A debit card is linked directly to your bank account. As a result, when somebody uses the card number without your permission (or an error occurs somewhere), funds come out of your checking account immediately. That’s a problem if you can’t pay your bills and expenses with a drained account. Yes, there are fraud protections in place, but it can take ten long days for the bank to return money to your account.

Tips: Avoid using debit cards for everyday purchases unless you’re extremely vigilant or you set up alerts on your checking account. It’s also wise to keep plenty of extra cash available as a cushion. 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 prepaid cards, you “load” funds onto the card, and there’s no immediate withdrawal from your checking account.