Using a credit card, rather than a debit card, affords a few additional protections when paying bills online. Under federal law, fraudulent credit card usage can be disputed with the card issuer and payment can be legally withheld until it is resolved [source: Barrett]. The downside is that credit cards aren't linked to your bank account. Unlike a debit card, which automatically deducts transactions from your checking account, a credit card can result in unpaid balances and pending interest charges -- unless you are disciplined to pay the balance each month.
If worries about identity theft and financial fraud are keeping you from paying bills online, consider a disposable transaction number. Debuted by American Express in 2000, this single-use number can be assigned to a credit card customer and used to make a transaction online [source: Lindsey]. Bank of America, City Bank and Discover offer similar services [source: Goldwasser].
If your card issuer doesn't offer disposable numbers, consider an alternative payment service like Bill Me Later or eBillMe. For example, eBillMe requires only an e-mail address to activate and allows shoppers to peruse more than 800 stores linked through the company's shopping portal. Users select the eBillMe option during checkout, then log on to their personal bank account to complete payment. The service offers protections similar to those of credit card issuers [source: Huddleston].
Known as "online wallets," PayPal or Google Checkout allow you to make payments or purchases online without revealing credit card or bank account information. Neither offers a full range of online banking services, but both are relatively easy to set up and use. Google Checkout and PayPal both have limited safeguards, but include the ability to dispute a questionable charge. A comparable service from Amazon.com, known as the Amazon Flexible Payment System, is in its final stages.
While fears about fraud and theft are a reality for many, a few precautions can make paying bills online a convenient and organized way to keep personal finances on track.
For more information on online bill payment and other personal finance topics, visit the links on the following page.
Related HowStuffWorks Articles
- Barrett, Jennifer. "Credit and Debit Cards: What You Need to Know." New York Times. January 6, 2009. http://www.nytimes.com/2009/01/06/your-money/credit-and-debit-cards/primercards.html
- Bell, Claes. "Five Ways Fear of the Web Costs You." Bankrate.com. August 2009. http://www.bankrate.com/finance/personal-finance/5-ways-fear-of-the-web-costs-you-1.aspx
- "Benefits of Electronic Payment." ElectronicPayments.org. http://www.electronicpayments.org/individuals/in.direct-payment.benefits.php
- Goldwasser, Joan. "7 Steps to Worry-Free Online Shopping." Kiplinger's Personal Finance. November 14, 2008. http://www.kiplinger.com/features/archives/2008/11/safe_online_shopping.html
- Federal Reserve System. "The 2007 Federal Reserve Payments Study." December 2007.
- Huddleston, Cameron. "Shop Online…With Cash." Kiplinger Personal Finance. September 16, 2009. http://www.kiplinger.com/columns/kiptips/archives/shop_online_with_cash.html
- Huddleston, Cameron. "Stay Safe, E-Pay." Kiplinger Personal Finance. December 3, 2003. http://www.kiplinger.com/features/archives/2003/12/epay.html
- "How Can I Tell if a Web Page is Secure?" SSL.com. http://info.ssl.com/article.aspx?id=10068
- Lindsey, Rebecca. "Disposable Credit Card Numbers." CardRatings.com. February 1, 2001. http://www.cardratings.com/feb01new.html
- Pay It Green Alliance. "Get The Facts." http://www.payitgreen.org/consumer/getTheFacts.aspx
- "Safest Way to Pay." American Bar Association/SafeShopping.org. http://www.safeshopping.org/payment.shtml