Monday, November 17, 2008
as Holiday Shopping Season Approaches
SAN FRANCISCO, CA – Consumers shopping online this holiday season should be aware that not all payment options offer the same level of protection when it comes to unauthorized charges and other disputes with retailers. Consumers Union offered online shoppers some advice today to ensure they pick the right way to pay.
“Most shoppers assume they enjoy the same consumer protections no matter how they pay, but that’s not the case,” said Michelle Jun, Staff Attorney with Consumers Union. “Before you click and purchase this holiday season, make sure you know the benefits and risks that go along with how you pay for the gifts on your shopping list.”
If shoppers plan to pay off their balance at the end of the month, the best way to pay for online purchases is to use a credit card. Credit cards offer the most protection when it comes to unauthorized transactions and getting charges reversed for goods that arrive broken or not on time. However, shoppers who routinely carry a balance will end up paying more by using their credit cards. Here’s how credit cards stack up with other commonly used forms of online payment and some other issues to consider:
Credit Cards
• Limited liability for unauthorized transactions: Under federal law, you are only on the hook for up to the first $50 in unauthorized charges once you notify your bank.
• Right to dispute a charge: You have the right to dispute a charge if you return an item to a store and the retailer fails to credit your account
• Right to withhold payment: You do not have to make any payments while a disputed charge is under review.
Debit Cards
• Limited liability for unauthorized transactions: If your card is lost or stolen, your liability depends on when you report it to your bank. If you report the unauthorized transaction within two business days, your liability is limited to $50. However, if you don’t report it within this time frame, you can be liable for up to $500. If your card was not lost or stolen, you must report unauthorized charges within 60 days to avoid losing any money.
• No right to dispute a charge
• No right to stop payment for the purchase
• If you decide to use a debit card for online purchases, you should link it to a separate account to protect yourself from a temporary loss of all your money and better protect yourself from identity theft.
If you’re concerned about using your credit card number online, several services, including PayPal, Google Checkout, and Bill Me Later, let you avoid entering your credit-card information directly on merchant sites. Before signing up for any of the services, keep this advice in mind:
PayPal
If you’re planning on using PayPal, you should link it to a credit card without a balance on that card, and then pay off your balance each month to avoid interest charges on your purchases. Linking your PayPal account to your credit card will ensure that you enjoy all the same protections afforded to credit card purchases. If your PayPal account is linked to your debit card, you’ll have more limited debit card protections.
Google Checkout
Same as PayPal. Link your Google Checkout account to your credit card, and pay off the balance every month, to maximize the protections you’ll get with your online purchases.
Bill Me Later
The large draw to sign up for Bill Me Later may be the 10 percent discount offered by some online shopping sites. But be aware that if you sign up for the ten percent discount, you are actually opening a new credit account, which will result in a hard inquiry on your credit file. Too many hard inquiries may negatively impact your overall credit score, which can affect the interest rates and terms on more important purchases like a car or home.
Bill Me Later’s protections are similar to certain credit card protections. You are not on the hook for unauthorized charges. For billing errors, you need to submit a written notice to Bill Me Later within 60 days of discovering the error. The consumer does not have to pay the amount in question, but finance charges will continue to accrue and must be paid if the investigation does not result in your favor.
Bill Me Later advertises “No payment for 90 days,” but there’s a catch. In order to take advantage of this well-advertised promotion without paying much more than the purchase amount, you need to make the minimum payment on time (which can be due as early as 25 days after the transaction date), and pay off the balance in full by the due date. If you don’t pay off your balance when it’s due, you’ll be hit up with a 19.99% interest rate, which is applied from the purchase date.
One Last Holiday Shopping Tip: Think twice before buying gift cards. A number of retailers have filed for bankruptcy and shuttered their doors since last holiday season. Unfortunately, there is no guarantee that you’ll be able to redeem the full value of your gift cards from struggling or bankrupt retailers.
Michelle Jun or Michael McCauley: 415-431-6747