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A Consumer's Guide to
The Internet has taken its place beside the telephone and television
as an important part of people's lives. Consumers use the Internet to
shop, bank and invest online. Most consumers use credit or debit cards
to pay for online purchases, but other payment methods, like
"e-wallets," are becoming more common.
The Federal Trade Commission (FTC) wants you to know about these payment
technologies and how to make your transactions as safe and secure as
possible. Keep these tips in mind as other forms of electronic commerce,
like mobile and wireless transactions, become more available.
And How Would You Like To Pay?
Most online shoppers use credit cards to pay for their online purchases.
But debit cards - which authorize merchants to debit your bank account
electronically - are increasing in use. Your debit card may be an
automated teller machine (ATM) card that can be used for retail
purchases. To complete a debit card transaction, you may have to use a
personal identification number (PIN), some form of a signature or other
identification, or a combination of these identifiers. Some cards have
both credit and debit features: You select the payment option at the
point-of-sale. But remember, although a debit card may look like a
credit card, the money for debit purchases is transferred almost
immediately from your bank account to the merchant's account. In
addition, your liability limits for a lost or stolen debit card and
unauthorized use are different from your liability if your credit card
is lost, stolen or used without your authorization.
Other electronic payment systems - sometimes referred to as
"electronic money" or "e-money" - also are now
common. Their goal is to make purchasing simpler. For example,
"stored-value" cards let you transfer cash value to a card.
They're commonly used on public transportation, at colleges and
universities, at gas stations, and for prepaid telephone use. Many
retailers also sell stored-value cards in place of gift certificates.
Some stored-value cards work offline, say, to buy a candy bar at a
vending machine; others work online, for example, to buy an item from a
website; some have both offline and online features. Some cards can be
"reloaded" with additional value, at a cash machine; other
cards are "disposable" - you throw them away after you use all
their value. Some stored-value cards contain computer chips that make
them "smart" cards: These cards may act like a credit card as
well as a debit card, and also may contain stored value.
Some Internet-based payment systems allow value to be transmitted
through computers, sometimes called "e-wallets." You can use
"e-wallets" to make "micropayments" - very small
online or offline payments for things like a magazine or fast food. When
you buy something using your e-wallet, the balance on your online
account decreases by that amount. "E-wallets" may work by
using some form of stored value or by automatically accessing an account
you've set up through a computer system connected to your credit or
debit card account.
The FTC encourages you to take steps to make sure your transactions are
secure and your personal information is protected. Although you can't
control fraud or deception on the Internet, you can take action to
recognize it, avoid it and report it. Here's how.
- Use a secure browser - software that encrypts or scrambles
the purchase information you send over the Internet - to help guard
the security of your information as it is transmitted to a website.
Be sure your browser has the most up-to-date encryption capabilities
by using the latest version available from the manufacturer. You
also can download some browsers for free over the Internet. When
submitting your purchase information, look for the "lock"
icon on the browser's status bar, and the phrase "https"
in the URL address for a website, to be sure your information is
secure during transmission.
personal financial information to a website. In particular,
determine how the information will be used or shared with others.
Also check the site's statements about the security provided for
your information. Some websites' disclosures are easier to find than
others - look at the bottom of the home page, on order forms or in
the "About" or "FAQs" section of a site. If
you're not comfortable with the policy, consider doing business
- Read and understand the refund and shipping policies of a
website you visit, before you make your purchase. Look closely at
disclosures about the website's refund and shipping policies. Again,
search through the website for these disclosures.
- Keep your personal information private. Don't disclose your
personal information - your address, telephone number, Social
Security number, bank account number or e-mail address - unless you
know who's collecting the information, why they're collecting it and
how they'll use it.
- Give payment information only to businesses you know and trust,
and only when and where it is appropriate - like an order form.
Never give your password to anyone online, even your Internet
service provider. Do not download files sent to you by strangers or
click on hyperlinks from people you don't know. Opening a file could
expose your system to a computer virus or a program that could
hijack your modem.
- Keep records of your online transactions and check your e-mail
for contacts by merchants with whom you're doing business. Merchants
may send you important information about your purchases.
- Review your monthly credit card and bank statements for any
errors or unauthorized purchases promptly and thoroughly. Notify
your credit or debit card issuer immediately if your credit or debit
card or checkbook is lost or stolen, or if you suspect someone is
using your accounts without your permission.
Report Problems Immediately
The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act
(EFTA) establish protections against lost or stolen credit or debit
cards, and procedures for resolving errors on credit and bank account
statements that can include:
- credit charges or electronic fund transfers that you - or anyone
you've authorized to use your account - have not made;
- credit charges or electronic fund transfers that are incorrectly
identified or show the wrong amount or date;
- computation or similar errors;
- a failure to properly reflect payments or credits, or electronic
- not mailing or delivering credit billing statements to your
current address, as long as that address was received by the
creditor in writing at least 20 days before the billing period
- credit charges or electronic fund transfers for which you request
an explanation or documentation, because of a possible error.
For credit: The FCBA generally applies to "open end"
credit accounts - that is, credit cards and revolving charge accounts,
like department store accounts. It does not apply to loans or credit
sales that are paid according to a fixed schedule until the entire
amount is paid back, like an automobile loan.
Lost or stolen credit cards: Under the FCBA, your liability for
lost or stolen credit cards is limited to $50. If the loss involves only
your credit card number (not the card itself), you have no liability for
unauthorized use. It's best to notify your card issuer promptly upon
discovering the loss. Many companies have toll-free numbers and 24-hour
service to deal with such emergencies. Always follow up with a letter
and keep a copy for your records.
Billing errors: The FCBA's settlement procedures apply to
disputes about "billing errors" for open-end accounts,
including unauthorized charges (you cannot be liable for more than $50
for unauthorized credit charges); charges for goods or services you
didn't accept or weren't delivered as agreed; charges that are
incorrectly identified or show the wrong amount or date; math errors; a
failure to properly reflect payments or credits; not mailing or
delivering credit billing statements to your current address, if the
address was received by the creditor in writing at least 20 days before
the billing period ended; and charges for which you request an
explanation or documentation, because of a possible error.
To take advantage of the FCBA's consumer protections for errors on your
account, write to the creditor at the address given for "billing
inquiries," not the address for sending your payments. Include your
name, address, account number and a description of the billing error.
Send your letter so that it reaches the creditor within 60 days after
the first bill containing the error was mailed to you. And if you send
your letter by certified mail, return receipt requested, you'll have
proof that the creditor received it. Include copies (not originals) of
sales slips or other documents that support your position. Keep a copy
of your dispute letter.
The creditor must acknowledge your dispute in writing within 30 days
after it is received, unless the problem is resolved within that period.
The creditor must con-duct an investigation and either correct the
mistake or explain why the bill is believed to be correct, within two
billing cycles (but not more than 90 days), unless the creditor provides
a permanent credit instead. You may withhold payment of the amount in
dispute and any related finance charges and the creditor may not take
any action to collect that amount during the dispute.
For debit: The EFTA applies to electronic fund transfers -
transactions involving automated teller machines (ATMs), debit cards and
other point-of-sale debit transactions, and other electronic banking
transactions that can result in the withdrawal of cash from your bank
Lost or stolen debit cards: If someone uses your debit card, or
makes other electronic fund transfers, without your permission, you can
lose from $50 to $500 or more, depending on when you report the loss or
theft. If you report the loss within two business days after you
discover the problem, you will not be responsible for more than $50 for
unauthorized use. However, if you do not report the loss within two
business days after you realize the card is missing, but you do report
its loss within 60 days after your statement is mailed to you, you could
lose as much as $500 because of an unauthorized withdrawal. And, if you
do not report an unauthorized transfer or withdrawal within 60 days
after your statement is mailed to you, you risk unlimited loss. That
means you could lose all the money in your account and the unused
portion of your maximum line of credit established for overdrafts.
Some financial institutions may voluntarily cap your liability at $50
for certain types of transactions, regardless of when you report the
loss or theft; because this is voluntary, their policies could change at
any time. Ask your financial institution about its liability limits.
EFT errors: The EFTA's error procedures apply to certain
problems. This can include:
- electronic fund transfers that you - or anyone you've authorized
to use your account - have not made;
- incorrect electronic fund transfers;
- omitted electronic fund transfers;
- a failure to properly reflect electronic fund transfers; and
- electronic fund transfers for which you request an explanation or
documentation, because of a possible error.
To take advantage of the EFTA's error resolution procedures, you must
notify your financial institution of the problem not later than 60 days
after the statement containing the problem or error was sent. Although
most financial institutions have a toll-free number to report the
problem, you should follow-up in writing. For retail purchases, your
financial institution has up to 10 business days to investigate after
receiving your notice of the error. The financial institution must tell
you the results of its investigation within three business days of
completing its investigation. The error must be corrected within one
business day after determining the error has occurred. If the
institution needs more time, it may take up to 90 days, in many
situations, to complete the investigation - but only if it returns the
money in dispute to your account within 10 business days after receiving
notice of the error, while it reviews your concerns.
For stored-value: The FCBA and the EFTA may not cover
stored-value cards or transactions involving them, so you may not be
covered for loss or misuse of the card. However, stored-value cards
still might be useful for micropayments and other small purchases online
because they can be convenient and - in some cases - offer anonymity.
Before you buy a stored-value card or other form of e-money, ask the
issuer for written information about the product's features. Find out
the card's dollar limit, whether it is reloadable or disposable, if
there's an expiration date, and any fees to use, reload or redeem
(return it for a refund) the product. At the same time, ask about your
rights and responsibilities. For example, does the issuer offer any
protection in the case of a lost, stolen, misused, or malfunctioning
card, and who do you call if you have a question or problem with the
For More Information
Your financial institution, local consumer protection agency and law
enforcement agencies like the Federal Trade Commission or your state
Attorney General are among the many organizations working to help
consumers understand electronic commerce and new online payment options.