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Credit Card Buying Online...Risky or Not?



Posted December 27, 2001
Even in today’s technologically advanced world, a startling number of people remain fearful of using a credit card on the Internet. However, most people don’t know that if someone steals your credit card number and runs up your bill, you are out $50 at most. That is a federal law. Most credit cards protect cardholders even further with most of them allowing $0 maximums in credit card fraud purchases (Debit cards are subject to different rules and are much riskier).

Even with these laws above, 94.5% of consumers express some concern about credit card security online, up from 91.2% of users in 2000. Even though consumers are nervous, it is actually merchants who should worry. When fraudulent credit card charges occur in cyberspace, merchants eat the losses.

Yet the fact that ordinary shoppers remain scared is still worth noting. It shows how mistrustful people tend to be about technology where security and privacy are at stake. This proves that merchants, banks and software companies need to do a better job of making the Internet feel less scary.

Visa, a leading credit card company, just announced a new program called Verified by Visa to boost consumer confidence. "Create a password that protects you when you buy online," Visa’s Web site tells cardholders. "You get added safety, and the reassurance that only you can use your Visa card online." This technology is similar to PIN numbers with ATM cards and prompts online buyers for a password when attempting a purchase online. The site will not see this password. Instead, it will be beamed to the credit card bank, which will then give the retailer an all clear on the transaction.

If this catches on it could prove valuable in cutting down online fraud, which helps online merchants. A typical online sale is considered a "card-not-present" transaction (as opposed to card-present-sales at brick and mortar stores). When a consumer challenges a card-not-present charge, the merchant is liable for the loss. The password is intended to serve as a receipt and cut down merchant liability.

Reducing fraud helps all in the online purchase chain. Even though consumers don’t have to pay for unauthorized charges, they wind up paying indirectly when retailers raise prices to cover fraud related costs.

Also, the reliability factor with computers crashing and virus-infected emails help attribute to the fear of consumers. If retailers and banks really want to ease consumers’ online doubts, they need to begin holding technology companies to higher standards.

Meanwhile, consumers can practice a few strategies to minimize the credit card problems online. One is to shop at trusted merchants, which doesn’t only mean the well-known stores, however it does suggest checking a merchant out before buying. Also, make sure those Web pages where you’re asked to enter personal information use encryption (signified by a gold padlock icon in the lower right corner of an Internet Explorer window). Avoid using debit cards instead of credit cards and most of all challenge any irregularities.

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