The Best Ways to Pay Online (Safely)
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.
To some degree, you can rely on technology to protect you. Your financial details typically are encrypted, but even when you do everything right, there’s a chance of a data breach or intercepted traffic.
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 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.
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.
Even if you're not liable for charges, credit card fraud can be a hassle. If you use your credit for everyday personal or business expenses, you'll need to pay another way while waiting for a new card with a new number to arrive. As well, you'll have to update account information for any recurring bills paid with the card.
Third-party payment services also are a good option for online shopping. PayPal is arguably one of the most popular services, but others such as Google Pay exist. 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.
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.
Some payment services also offer buyer protection features that reduce or eliminate your liability if your purchases never arrive or you get swindled. PayPal, for example, reimburses both the purchase price and shipping costs if the wrong items are received or if they arrive damaged, among other security features.
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.
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.
When opening a checking account, it's important to inquire with the bank or credit union about the security features and policies in place for debit cards.
One of the easiest ways for thieves to steal information is by hacking public Wi-Fi hotspots, so it's generally a good idea to avoid making any online payments from your local coffee shop. If you must using a public Wi-Fi connection, make sure the website you are visiting is fully encrypted. The easiest way to tell is to make sure every page on the site has a URL that begins with "https" as opposed to "http."
Also, avoid using mobile apps that are connected through public Wi-Fi hotspots because it's more difficult to be sure that they are secure.
U.S. Computer Emergency Readiness Team. "Shopping Safely Online." Accessed April 22, 2020.
Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards." Accessed April 22, 2020.
Discover. "Looking Out for You." Accessed April 22, 2020.
Capital One. "Explore Credit Card Benefits." Accessed April 22, 2020.
PayPal. "Security for Buyers." Accessed April 22, 2020.
Consumer Financial Protection Bureau. "How Do I Get My Money Back After I Discovered an Unauthorized Transaction or Money Missing From My Bank Account?" Accessed April 22, 2020.
Federal Trade Commission. "Tips for Using Public Wi-Fi Networks." Accessed April 22, 2020.