Costados KnowledgeBase: A Guide to E-Payment Services

The Internet has taken its place beside the telephone and television as an important part of people's lives. Consumers use the Internet to shop, bank and invest online. Most consumers use credit or debit cards to pay for online purchases, but other payment methods, like "e-wallets," are becoming more common.

Here is some information about these new payment technologies and how to make your transactions as safe and secure as possible. Keep these tips in mind as other forms of electronic commerce, like mobile and wireless transactions, become more available.

Most online shoppers use credit cards to pay for their online purchases. But debit cards, are increasing in use. Your debit card can be easily used for retail purchases. To complete a debit card transaction, you use a personal identification number (PIN). But remember, although a debit card may look like a credit card, the money for debit purchases is transferred almost immediately from your bank account to the merchant's account. In addition, your liability limits for a lost or stolen debit card and unauthorized use are different from your liability if your credit card is lost, stolen, or used without your authorization.

New electronic payment options, sometimes referred to as "electronic money" or "e-money," are now here. Their goal is to make purchasing simpler. For example, "stored-value" cards let you transfer cash value to a card. They're commonly used on public transportation services, at colleges and universities, and at gas stations. Many retailers also sell stored value cards as gift certificates. Some stored-value cards work offline, say, to buy a candy bar at a vending machine; others work online, for example, to buy an item from a website; some have both offline and online features. Some cards can be "reloaded" with additional value, at a cash machine; other cards are "disposable" as you throw them away after you use them. Some stored-value cards contain computer chips that make them "smart" cards: These cards can act like a credit card as well as a debit card, and can contain a stored value.

Some new Internet-based payment systems allow a value to be transmitted through computers, sometimes called "e-wallets." You can use "e-wallets" to make "micropayments" very small online or offline payments for things like a magazine or fast food. When you buy something using your e-wallet, the balance on your online account decreases by that amount. "E-wallets" may work by using some form of stored value or by automatically accessing an account you've set up through a computer system connected to your credit or debit card account.

How To "Pay Smart" with Online Payment Services:

Online payment services are too useful to give up. If you're going to use one, follow these basic tips:

• Always read the fine print. If you see a privacy or service term you don't like or understand (a demand for your Social Insurance Number, or email-only customer service), reconsider signing up.
  
• Protect your passwords. Use different passwords for multiple accounts, make them tough to guess, change them often, and never share them. Discovered passwords lead to the most fraud.
  
• See what others are saying about the service you choose. Check an auction site's message board, or visit AuctionWatch or the Online Traders Web Alliance for user opinions. AuctionBytes also has payment service reviews at its site.
  
• Don't use debit card accounts. Also avoid giving the service your checking account information. Using a credit card keeps your exposure low, and you can contest fraudulent charges if they occur.
  
• Don't keep large sums of money in your e-wallet account. This way if the service freezes your account, you are not out the cash while the problem is being resolved.
  
• Read your e-mails from your payment service. It could be your only warning that something is going wrong.