The manner of payment for online transactions will determine whether you’ll still get your money back when problems are encountered.  Most buyers transact through the Internet either without really knowing the payment options available to them or having inaccurate information regarding the security features (if any) of each option.  Protection against fraud is strengthened when users know exactly how to pay safely for these online purchases.

Credit Cards

When purchasing online, a buyer has to apply the same rules used in buying from a store or over a telephone.  You should be satisfied as to the credibility and trustworthiness of the seller you’re dealing with before reaching for your wallet and taking out your credit card.  Any website that does not inspire confidence is not worth any of your time or money.

On a recently conducted consumer poll, it came out that one of the biggest fears of online buyers is the possibility of having their credit card numbers stolen.  In reality, credit cards are considered the safest way to pay online.  This is in part due to the limited liability of $50.00 shouldered by cardholders in case of fraudulent use.  Some credit card companies even have zero liability policies which completely frees the cardholder from any accountability for fraudulent purchases.

Cardholders have the obligation to notify the card issuer as soon as the fraud comes to his/her attention.  The issuer will then block the card’s use and issue a new one.  The cardholder should also initiate chargeback for retrieval of funds.

To ensure the safety of an online credit card transaction, the buyer should look for a Digital Authentic Certificate.  This certificate guarantees that the site being looked at is what it purports to be and not some deceptive website just out to get financial details of unsuspecting users.  This is done by clicking the key or padlock icon to view the certificate.  A secure website is one that is operating the Secure Sockets Layer (SSL) data encryption system.  This makes possible the transmittal of personal details through a secure format.

There is such a thing as perishable credit cards which assign a specific credit card number to each online purchase or merchant for a specific period of time.  Other credit card companies require card users to enter passwords for purchases made.  Merchants benefit from this service because they are absolutely free of any responsibility for fraudulent purchases once the password is authenticated.  Debit cards do not have the limited liability protection that a regular credit card does.  However, it is still far safer than cash or money order.

Escrow Services

This type of payment option is usually preferred for high priced transactions.  In this option, an escrow company will hold the buyer’s payment and forwards it to the seller once the buyer has received and approved the item by the agreed time. The fee can either be paid by the buyer or seller, depending on the agreement.  Payment shall be returned to the buyer upon request when items fail to be delivered or is received in an unsatisfactory condition.

There are many people who are not familiar with escrow services.  Escrow service is a highly reliable option because it can offer buyers up to 100% fraud coverage.  However, the proliferation of fake escrow services who steal the money put in trust is quite alarming.  Most sellers do not prefer escrow service as it is equivalent to a longer waiting time to receive payment.  In addition, sellers are given little coverage in cases of buyer fraud.

Third Party Payment Service

Third party payment service such as PayPal allows the buyers to fund an online account and make payments from that account without the need to reveal credit card or bank account information.  Through this type of service, money can be sent to anyone with an email account.  It has proven to be very useful to auction sites and online shopping enthusiasts.

Fraud protection coverage differs among service providers.  Disputing a purchase with PayPal would require a complaint to be filed within 30 days of the fraud.  A separate documentation can also be filed with the credit card used to fund the PayPal account.  A credit card’s fraud policies may or may not cover third party payment services, as some credit card companies hold the view that the purchase is the initial funding of the third party payment service account and not the purchase of the item in question.

Fraud coverage offered by this option is anywhere from zero to full coverage.  Recovery efforts of lost funds may or may not be successful even if fraud has been confirmed to have occurred.  Third party payment service functions like a bank but is not a bank, thus the standard banking laws do not apply.  PayPal for one makes its own rules.  It has been known to freeze accounts due to security or terms-of-use violation.

Cashier’s Checks, Cash and Money Order

This type of payment option should be avoided as much as possible for online purchases.  There is absolutely no protection in cases of fraud.  Although fraud cases should be reported to the proper law enforcement agencies, the chances for fund recovery are almost zero.  Unscrupulous sellers use fake addresses, addresses of other people and P.O. boxes so that they remain untraceable.  Filing of fraud report might at least help prevent others from being victimized.

Western Union

Western Union‘s own security page contains warning against the use of the service to send money to unknown people.  It has acknowledged the truth that “there are individuals throughout the world who will attempt to use any system to receive payments in connection with fraudulent sales or solicitations”.  Western Union does not offer any kind of purchase protection policy.

It is because of this reason that buyers should not use this type of payment option under any circumstances when buying online.  A review of fraud cases would reveal that Western Union is the most favored payment type of scammers.  This is due to fact that it will pay the receiver once a proper identification is presented.  As we all know,” proper identification” can now be easily faked.  The process of fraud becomes even easier for the perpetrators if they get hold of the money transfer number from the victim.  This means that anyone who knows the number can pick up the money at any Western Union branch worldwide and disappear forever.  Majority of online sellers who ONLY accept Western Union payment option are committing fraud.