Tips for Buying Online

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We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Tuesday, July 7th, 2009

It’s no secret that consumers today are spending money with more care, looking for bargains and buying only necessities. It’s good that consumers are being more cautious about their spending habits. But, more consumers are also choosing debit or alternative payment methods for online shopping—which may be cause for concern.

Debit purchases just don’t have the same protections that credit card purchases do.
The big ones: you won’t have right to dispute a charge or to withhold a payment—for example, if you end up with an older iPod instead of the latest iPod you thought you were purchasing, you’re likely stuck with it. Or if you never received the iPod even if the store said it’s been shipped and you received it, you’re likely stuck with paying for the iPod you wish you had.

And the protections for alternative payment methods are all over the map, largely due to what type of payment is linked i.e. credit, debit, bank account or up to the companies policies.

We have some tips on using alternative payments methods like PayPal and Bill Me Later, or mobile applications to better protect your hard earned cash and the purchases you make.

Linked to a Credit Card?
If you link the payment to a credit card, you will have the most consumer protections.

* 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
* Chargeback right: If the item you bought isn’t the item you ordered, you have the right to reverse the charge if the store won’t resolve the issue with you.

*But, this is only recommended if are able to pay off the entire balance. Otherwise, the benefits of purchasing by credit card and carrying a balance becomes greatly outweighed by quickly growing debt.

Linked to a Debit Card or Bank Account?
* 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 as long as you notify your bank with 60 days. If you fail to notify your bank within 60 days after receiving a statement showing the unauthorized charge, you can be liable for the entire amount. 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.

Linked to a Prepaid or Phone Bill?
You’re likely at the mercy of the companies’ policies.

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