Online purchases can be risky. Using a credit card is one sure way to mitigate the risks of making purchases online. Contrary to popular belief credit cards can be a consumer’s best friend when it comes to protecting themselves from dishonest or downright incompetent merchants, online or otherwise.
I’ve found that credit cards are your best insurance when it comes to purchases. While more than 99% of my purchases have been problem free, many online purchases haven’t gone so well for one reason or another.
Merchant Errors/Failure to Deliver
Consider this scenario, you sign up for an unlimited music subscription with a major online company. The registration goes through; they charge your credit card. Everything appears fine. A few days pass and you discover a problem with the service. You try your best to resolve the issue. You contact tech support. You do everything they tell you. The problem persists. You contact their billing department and ask for a refund as the product doesn’t work as advertised. They advise you that their policy is not to give refunds. What do you do now?
Since you paid with a credit card there is a good chance your credit card company will simply refund your money. They do a procedure called a charge back. This means they charge the money back to the merchant. Most credit card companies have a very liberal charge back policy especially when it comes to internet purchases.
I’ve personally used this option several times. For instance I’ve purchased a lot of web hosting services over the years. Unfortunately, I’ve run into more than one problem with billing and/or termination of services. For instance, I may desire to discontinue their service, which their agreement states that I can do anytime. Again, getting that done is sometimes easier said than done. It’s surprising how many web based companies have “broken” cancellation forms. For one reason or another you can’t cancel your account through their website.
So, rather than fighting with the merchant, I contact my credit card company and advise them of the situation. They’ve always refunded my money right away. So credit cards provide a great deal of protection from merchant errors which happen way more often than you might think. If you make a lot of purchases online, either for your business or personally, you will definitely want to use a credit card whenever possible.
I recommend a credit card over PayPal also. PayPal is just not as good or as well regulated as the credit card companies are when it comes to consumer protection. You just don’t have the charge back rights and options that you do with a credit card. I use PayPal when it’s the only option, and it works well most of the time. Just keep in mind that you are forfeiting all of your credit card protections when you use PayPal.
Fraud
Not only do you have charge back options with merchants but you are also protected from fraud due to lost or stolen credit cards. Visa and MasterCard go out of their make sure consumers feel safe when using their cards for transactions. While credit card information is constantly being stolen both physically and online, credit card issuers have taken steps to ensure consumers are safe online. Visa’s security program guarantees zero liability for its users. MasterCard has a similar liability program.
Federal law states that the maximum liability for a lost or stolen card is $50. If your credit card number is stolen you have zero liability. The Federal Trade Commission (FTC) site has a page outlining your liabilities for lost or stolen credit cards and credit card numbers. State laws may offer additional protection.
Other Benefits
I have a Visa Signature card which has a few nice benefits. Like a platinum card it offers extra warranty protection, travel accident insurance, extra rental car insurance, and an extended warranty service along with additional perks. I don’t want to sound like a commercial, but considering I don’t have to do (or pay) anything extra for these benefits, I’m quite pleased with this card.
I also signed up for the cash back program. It costs $19 a year but I’ve gotten at least $1800 back from my card at this point. You can do the math.
Conclusion
Credit cards are an easy target for criticism. Some of it is well deserved. However, we often overlook the incredible advantage credit cards give consumers. Consumers get protection against shoddy products, fraud and merchant errors. Without credit cards, online commerce would have never taken off.
Use a credit card whenever you can. The protection and piece of mind is worth it. If you pay off your balance each month there is no charge, so you’re essentially getting this protection for free. That’s a deal that’s hard to pass up.
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Comments
6 Comments so far
[...] Protect Yourself with Credit Cards [...]
Maybe this is the reason why my clients chose to use credit cards in paying their bills.
You don't really think it's your bank that is protecting you do you?
Tell you what, call your bank, ask them when you make an online purchase what exactly do they verify or confirm before they issue an approval for that purchase. If they're honest, you'll likely be shocked.
Reputable merchants do far more to protect you from fraud than the bank that issued your card.
I have serious reasons to believe that Discover Credit card http://www.discovercard.com/ violates the Fair Credit Billing Act and takes the merchants' side in billing disputes.
1st case
I made a purchase with a Discover card -$ 490, I returned the merchandise to the merchant , I provided Discover with overwhelming proof that the merchandise was returned-I faxed all the documents, still they say that the charge is valid and they refuse to charge back the merchant.
So I have no merchandise , since it was returned , and the $ 490 is gone.
Discover wants on the tracking page the full address on the merchant (including street number)
The full address (including street number- is written on the post office receipt; when you track something on line, it shows the date , time, city and zip code, not the street address printed. They have excessive criteria-impossible to meet for the buyer, for proof of delivery( I said "will you give me in writing what kind of proof of delivery you expect from me?"-they refused!)
I even went to the post office and got the signature of the merchant and the street number in the merchant's handwriting , scanned by USPS, proving delivery of returned merchandise.
GUESS WHAT? IS NOT ENOUG PROOF OF RETURN FOR DISCOVER!!
So I lost $ 490 and $ 80 I paid to send the item back -it was a heavy item
2nd case.
I purchased some Infinity speakers for $ 690, they arrived broken down and non functional (tweeters were blown), I filled a billing dispute with Discover Credit card, explaining the situation and the refusal of the merchant to take the speakers back.
The answer: we cannot force the merchant to take them back , you deal with the merchant , as far as we are concerned , the charge is valid.
So I am stuck with paying $ 690 for goods not delivered as promised
Ovi,
Sorry to read about your problem.
I don't have any experience with Discover. I don't personally use Discover Card for a variety of reasons.
Credit Cards aren't a perfect defense. There are some bad merchants out there.
Have you tried contacting the Attorney General's Office in your state? This sounds like fraud.
I think that you are right… Using credit cards does give you good protection as a consumer.
People should check their card statements carefully however, especially if they use the cards online… I know people that don't!