Online Payment: Should you Use Your Credit Card or PayPal?

This is a guest post by Alban Smith

Shopping and making bills payments online is so fast and easy you’ll wonder why you ever waited in line at the post office. However, not all online payment methods were created equal, and each has their own pros and cons, which you need to consider before you go putting your payment and account details out on the internet.

When it comes to PayPal and credit card online payments for example, how do you choose between the ease and acceptance of credit cards, and the security and anonymity of PayPal. Use these pros and cons to help you decide on the best online payment method for your needs.

PayPal Online Payments

PayPal is an online system where you can link your credit cards and savings accounts together for easy access when shopping online, and all of your details remain password protected. Benefits of using PayPal for online payments include:

•  You don’t need a credit card to shop online. Many people use credit card for online payments because they feel more secure than giving out their bank details, and many online payment systems don’t accept EFTPOS cards. However, with a credit card comes fees and interest charges, but with a PayPal account you use a Secure Card which is like a virtual credit card. Plus, if you do have a credit card, you can make online payments from your real credit card, and you have the same protection from paying for unauthorised charges to your account too.

• Secure bank details. When you sign up for your Pay Pal account, you enter the details of the credit cards and bank accounts you want to be able to use for online payments. Once you’ve entered these details you never have to share your financial details online again when you make payments. This means you never have to worry that a hacker could access your details by hacking an online merchant you have shopped with.

• Easy transaction approval. It is not only frustrating, but embarrassing to have your credit card declined, but when you use PayPal for online payments you don’t have to worry about approvals because you are able to access multiple bank accounts and credit cards, so you’ll always have funds available.

• A PayPal account is free. Unlike a credit card, a PayPal account is free as there are no application fees, membership fees, processing fees or service charges so you can enjoy all of the benefits of shopping online without any of the usual credit card costs.

Before you apply for a PayPal account, make sure you consider the drawbacks, and whether they will be an issue in your situation:

• Poor protection. PayPal can be very vulnerable to fraud and you could end up having your account frozen, or losing your money. For example is someone is using an email address which seems suspicious to PayPal then PayPal may deny protection. There is also often very little you can do about this as PayPal have a poor complaints process too.

• Time consuming verification. When you enter your bank and credit card details into PayPal to set up your account you need to wait for account verification. This means that once you have entered your details you may need to wait up to five days for a trail deposit which includes a code which you need to enter into PayPal to activate your account. Plus, if you don’t access your bank statements using online banking, you can be waiting weeks to receive a statement in the mail with your deposit code.

Credit Card Online Payments

There is no doubt that credit cards can make payments in person easier, faster and more secure than carrying around cash and fishing out the right change. Therefore, consider the following benefits of using your credit card for online payments:

• Dispute fraudulent charges. Most credit card issuers will have a zero liability policy which states that if your card is used fraudulently and you follow the provider’s reporting procedures, you are not liable for the cost of the transactions. This means that you can feel safe in using your card online, because you won’t have to pay for a security breach.

• Secure BPAY payments. BPAY works with over 150 financial institutions to provide a safe and centralised payment system. This means you don’t need to send in cheque payments – which can easily get lost in the mail and not applied to your bill – nor do you have to go into a bank branch to make a payment, instead you can make a BPAY payment from your credit card account. BPAY remains a secure payment system because the only information which passes through the system is the biller code, the customer reference number, the amount of the bill you are paying, the date of the payment, the type of account you are using, the name of your bank and whether you are paying by phone or internet. This means no personal details are sent through the BPAY system, and your payment is processed using your bank’s secure system.

• Easy payment tracking. When you receive a receipt number for your online credit card transaction you have your proof of purchase, and you can easily track your purchases on your credit card statements and in online banking.

• Wide acceptance. Credit card payments are the preferred method of online payment for many eStores and while some will accept PayPal, you don’t have to hope and guess that your payment will be accepted when you are paying with credit.

To keep yourself safe and make sure your online payments are processed smoothly, be aware of the drawbacks of using a credit card to pay online, which include:

• Insecure networks. While you are able to get back the costs of any fraudulent transactions, a lot of damage can be done to your credit rating by fraudsters using your identity and your credit card details. That is why you need to make sure you are always using only secure websites for online credit card payments. You can check a website is secure by looking for ‘https’ in the address bar and the secure lock padlock logo.

• Fraudulent transactions. In most cases your credit card provider will only refund you the cost of a fraudulent transaction if you report it to them before your next statement arrives. This means you have to be vigilant in regularly checking your transactions, and remembering everywhere you’ve made an online credit card payment.

• Virtual spending. Numerous studies have shown that we spend more when we are paying with a card, than with cash, because we don’t feel as though we are physically parting with as much money. When you are spending online you don’t even have to hand your credit card over to anyone to make a purchase, and the item you’ve bought usually appears in the mail before the charge appears on your monthly statement, and it can be easy to lose track of the reality of your spending and your budget.

• Credit card fees and interest. When you use your credit card to buy online, you may be getting a great deal by shopping at an online store, but the transaction will be costing you in credit card fees and interest down the track.