Pay the best way

Know the pros and cons of all your options

High-profile thefts of data in recent years have made lots of us wary of handing over our credit card to any old Web site. In fact, roughly three out of five shoppers have changed their shopping habits for fear of having personal data stolen, according to a survey by Gartner, a research and advisory firm. Many are reluctant to provide financial and personal information, and some are simply shopping less for that reason.

But there are steps you can take to minimize worry. First, check out the Web site to make sure it's reputable (see tips). Before you type in any financial info, see whether the site offers secure checkout. Two clues: The Web address begins with "https," and it has a lock-and-key icon in the bar at the bottom of the page. Paying by credit card offers protections such as a refund if you're ripped off, and some even give you extended warranties. You can also request a one-time credit-card number. Just call customer service to see whether your card offers the service.

Another option is to pay with one of the newer payment systems such as PayPal or Google Checkout. Alternative payment methods like those are getting more popular, though they're still a fraction of the online-payment market. A study from Javelin Strategy & Research shows that only about 18 percent of online payments were predicted to be made through alternate services last year. Javelin forecasts that will jump to one-third by 2013. Some of the new payment methods have nice perks, like PayPal's expanded buyer-protection program. Formerly, if the item didn't arrive or was significantly different than described, refunds were limited to $200 ($2,000 for items purchased from eBay Power Sellers). Now the entire price is eligible for a refund. Also, PayPal and other services act as a middleman and hold your personal info so that you don't have to give it to unfamiliar sellers. And you have the option to pay without piling more debt on your credit cards.

 

eBillme

How it works

You provide an e-mail address. The service then sends you an ebill, which you pay online from your bank account. Once payment is received, the item is shipped.

Pros For shoppers who don't have a credit card or don't want to rack up more charges, it's an easy way to pay.

Cons If you're unhappy with your purchase, getting your money back could be difficult. The service promises refunds up to 90 days after the purchase date but only for items under $500. And if an item arrives damaged or doesn't work, you might be out of luck, at least according to the policy we saw on eBillme's Web site. CEO Marwan Forzley assured us that "as long you show proof it arrived in not-working condition, we will cover it for you," but he admitted that claims would be evaluated "on a case-by-case basis."

Mobile phone app? No.

Bottom line

Best for shoppers who prefer to pay cash. But if there's a chance you might want to return the product, use a credit card, which offers additional protections.

PayPal

How it works

PayPal pulls from your balance with them if you have one, and then from a bank account number or a credit card.

Pros You don't share financial information with sellers. Also, PayPal is by far the largest alternative payment method, accepted by more sites than any other.

Cons If there's a dispute with a merchant over a return and you have linked your PayPal account to your checking account, you must go through PayPal's dispute process. If the decision isn't in your favor, there's little recourse. But linking to a credit card allows you to go through your card issuer to get a refund.

Mobile phone app? Yes; go to paypal.com/mobile for details.

Bottom line

This is useful especially if you're buying on eBay, where some smaller sellers don't accept credit cards. But link to your credit card, not a bank account.

Bill Me Later

How it works

You provide your date of birth and the last four numbers of your Social Security number. Bill Me Later will run a credit check. If you qualify, the service will pay the seller and send you a bill for the purchase price. Depending on the merchant, you have 25 or 90 days to pay before accruing interest (typically a hefty 19.99 percent).

Pros You can buy now and pay later, as with a credit card.

Cons The credit check the service does could ding your credit report if you have had a lot of other credit inquiries lately so you might not want to use this service if you plan to apply for a loan in the near future. Also, you must pay online from your checking or savings account. Bill Me Later does not accept credit cards.

Mobile phone app? No.

Bottom line

This is a convenient way to get free financing for a limited time. But make sure you pay the bill when it's due or you'll face stiff interest.

Google Checkout

How it works

Similar to PayPal, but you can't link to a checking account (you can link to a debit card).

Pros Unlike PayPal, Google Checkout doesn't impose its own returns policy. Instead, you abide by the seller's policy. If you're not happy, sign on to Google Checkout, send the seller an e-mail, and then wait for the seller to authorize the refund.

Cons Accepted by far fewer sellers than PayPal.

Mobile phone app? Yes; go to checkout.google.com and click on "help" and "checkout for mobile."

Bottom line

This is a good choice to save time at checkout with the merchants who do accept it, since once all the info is entered the first time, it's on record.

Twitpay

How it works

Log in to your Twitter account, post a user message including the word "twitpay," the recipient's user name, and the amount. Twitpay alerts the recipient by sending a message with instructions for completing the transaction, which happens via PayPal.

Pros It's as fast and easy as any tweet, and you have the security of PayPal.

Cons Twitpay charges 5 cents for each twitpay over $1, and recipients have to pay PayPal's user fee of 2.9 percent plus 30 cents.

Mobile phone app? Yes.

Bottom line

As long as both parties are hooked up, Twitpay is an easy option.

This article appeared in Consumer Reports Shopsmart Magazine.