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Online Payment System

Learn more about the types and benefits of online payment systems.

Online payment systems make bill paying easier. [© Jupiter Images, 2009]
© Jupiter Images, 2009
Online payment systems make bill paying easier.

For optimal security when making purchases online, consumers should use an online payment system or an online bill payment system that offers buyer protection and other benefits that will safeguard the consumer's financial information. While most Internet commerce sties claim to be secure, consumers should know what to look for to make sure a site is secure. When used correctly, transactions through online payment systems can be more secure than in-store transactions.

Types of Online Payment Systems

Among the most well-known online payment systems is PayPal. Owned by eBay, PayPal prides itself on maintaining high standards of safety online. PayPal has received more than 20 awards for Internet excellence, such as the Webby Award for Best Financial Service Site in 2006.

Bill Me Later is another option, especially for consumers who do not want to use personal credit cards online. When checking out at an online store, consumers simply click the "Bill Me Later" icon, enter their date of birth and last four digits of their social security number and the transaction is complete. Account holders receive a monthly statement from Bill Me Later for all of their transactions and pay that statement with a bank account or by mailing in a money order.

Consumer Reports recommends that consumers only use a credit card for online purchases, even if payment is made through an online payment service. Consumers who stick to credit cards have more reliable protection if the card is misused or the seller of the product is not legitimate. While the payment service may offer buyer protection, the government limits consumers' liability on unauthorized credit card purchases to $50. PayPal will cover up to $1,000 of funds from a bank account if the buyer and seller cannot reach a resolution.

Online Bill Payment System Security

In order to maintain optimal security for online purchases, consumers should choose an online payment system that provides the following services:

• Transaction encryption to keep details from being accessible
• Partnership with Secure Socket Layer (SSL) technologies, such as VeriSign or TrustE
• Automatic e-mail confirmations of all transactions
• Continual transaction monitoring
• Ability for consumer to dispute transactions quickly and effectively
• Buyer protection and complaint policies for all transactions

Consumers should choose a password for their online payment system account that only they would know and that is not easy for other individuals to figure out. The Computer Technology Documentation Project provides useful information to help individuals choose a secure password that can be easily remembered. It's also a good idea for consumers to read the privacy policy and/or return policy of a Web site before submitting financial information. If the Web site doesn't have a return policy, an individual would be wise to refrain from doing business with the company.

Preventing Fraud and Identity Theft

In addition to signing up for an online payment system that provides the best security options, consumers need to take their own precautions in order to help prevent fraud and identity theft through online purchases. One preventative measure consumers can take is to sign up for additional protection programs provided by their credit card companies. Verified by Visa and MasterCard SecureCode are a couple of examples of this service. The cardholder establishes an additional password that must be entered for all online credit card transactions as another deterrent for fraudulent use of the card.

Consumers should only enter credit card information on a home computer or laptop rather than a computer provided at a public location, such as a library. Additionally, credit card information should only be entered on a secure Web site. A secure Web site is indicated by the URL (Web address) starting as "https" rather than simply "http," and by a padlock icon appearing at the bottom of the Web browser window frame (not on the Web page). By double-clicking on the padlock, consumers can verify that the Web page is still validly secure.

Consumers should also keep their antivirus and anti-spyware software updated regularly to catch problems that may send personal information to unauthorized individuals who hack online payment systems and Internet stores.

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