Spending and Saving Online
The convenience of managing the financial side of your life online is wonderful. You can buy things, deal with your banking chores, and even manage investments all from your home. But whenever your money is involved, whether offline or online, you should be cautious to avoid scams or theft.
Shopping Online
Online shopping is incredibly convenient because you can find the lowest prices and best deals for products and services. However, you need to learn that getting a great deal online involves considerably more than getting the lowest price. You should be sure that the product arrives on time, it is of the quality you expected, it includes a proper warranty, and that there is a way for you to return the product or get support with any questions or issues you have.
The fundamental safety consideration when shopping and performing transactions online is the same issue Internet users have to consider when sharing personal information: trust. Learning how to determine which companies, institutions, and individuals are worthy of your trust when it comes to your financial information is a critical life skill. Click this link to learn how to identify secure/trusted Web sites.
Before buying anything online consider these questions:
1. Do you know the store from the brick-and-mortar world? If the Web site is owned by a store you already do business with and where you can physically return any item, or you have experience with their level of service and trustworthiness, you are probably in good hands.
2. What is the site’s reputation? If you know others who have had consistently positive experiences with the online store, you can be reassured of the site’s quality. If you do not know others who have used the site, do your own background check by looking at sites dedicated to reviewing e-stores (for example, Epinions, BizRate, Better Business Bureau). Another Web site to consider is The National Fraud Information Center which watches out for shady Internet dealings and offers consumer tips on its Web site.
3. Is the Web site secure? Legitimate online merchants offer secure transactions. Look for two assurances to see if you are on a secure site. The URL should show Https: when you are making a purchase and there should be a lock symbol in the lower left corner of your screen.
4. Is the offer ‘too-good-to-be-true? Avoid buying from any e-store that promises too much at too low a price. If the price is low, you have to consider whether the merchant came by the items legally, whether you will ever receive the items, whether the items will work, if you will be able to return damaged goods, or if the merchant is also generating revenue by selling your financial information. Disreputable stores frequently run an absurdly low price offer and then, claiming the item is out of stock, try to sell you something else; this is a classic "bait and switch" technique.
5. Does the merchant collect more information than is necessary to complete the sale? You will need to provide some method of payment, address, and telephone number. If a merchant requests your bank account information, social security information, or driver’s license number, NEVER provide it. Some reputable companies ask additional questions about your interests. This should always be optional. Remember, your information is a commodity and you should feel you are getting appropriate value – and control – before providing your information.
6. Use a payment service or credit card for payment rather than a debit/ATM card, check, or cashiers check, wire transfer, or money order. Click here for more on payment services. Payment services (such as PayPal) allow you to register with them and then pay companies through them without ever exposing your credit card number.
Credit card purchases limit your liability to no more than $50 of unauthorized charges if your financial information is stolen. It is wise to have a dedicated e-mail account for online shopping and transactions, and to use one credit card exclusively for online purchasing and transactions. If that card gets compromised, you can quickly shut it down.
7. Review the company’s shipping methods. Understand what carriers they use, their shipping rates, and if they provide tracking and insurance.
How to stay safer when banking and paying bills
Banking and paying bills online is convenient and can be safer than banking and bill paying in the physical world where you have to worry about lost and stolen mail and having discarded statements stolen from your trash. Banks go to great lengths to protect your information when you perform transactions online, and there are protections in place to shield consumers in the event of banking fraud.
In most cases, the weakest link in online banking is the consumer. This is good news, because it means that you can control your online experience by educating yourself.
Follow these steps to stay safer when banking online:
1. Make sure your computer has up-to-date versions of anti-virus and anti-spyware software and install all updates.
2. If you open an account with a new bank, confirm that it is legitimate and your deposits are insured.
3. Keep personal information private and secure: don’t share pass codes, passwords, or ID’s with anyone.
4. Never conduct financial transactions from a public computer because you don’t know what tracking tools may be capturing information.
5. Create strong passwords for accessing your account.
6. Be alert to e-mail scams asking for your account number or password.
7. Ensure that you are actually dealing with your bank and not with a phishing site. NEVER believe an e-mail, no matter how convincing it looks, that notifies you that there is an issue with your account and asks you to click a link or call a number provided in the e-mail to fix the problem, re-authenticate your account, or provide your credentials.
8. Always type in your bank’s URL yourself; if you click a provided link, you may land on a site that looks legitimate, but isn’t. Store your bank’s URL in your online favorites in your browser so you can return to it quickly and with confidence.
9. Monitor your account activity to detect potential fraud by requesting online credit reports. You have the right to one FREE credit disclosure in a twelve-month period from EACH of the three national credit reporting companies—TransUnion, Experian, and Equifax. The easiest way to get these reports is through AnnualCreditReport.com, a service created by these three credit institutions specifically to help consumers get free annual reports. You can also pay for credit monitoring services to watch your credit for you.
Investing Online
Online investing and investment tracking is fast, efficient, and often less expensive than using a personal broker. Still, you should do your research carefully.
The types of investment fraud seen online mirror the fraud perpetrated over the phone or through the mail. Hundreds of online investment newsletters offer seemingly unbiased information free of charge about featured companies or recommended "stock picks." While legitimate online newsletters can help investors gather valuable information, many online newsletters are tools for fraud. If an investment newsletter comes unsolicited to you, consider that it may be a scam.
Keep in mind that fraudsters may use a combination of Internet tools to spread false information, including bulletin boards, online newsletters, spam, or chat. They can build glitzy, sophisticated Web pages for very little money. They may reference several of these fraudulent sites and urge you to visit them as a way of verifying that you have checked several sources. However, these sources are phony.
To invest wisely and steer clear of frauds, you can get the facts from the U.S. Securities and Exchange Commission’s Web site.
Classified ads and auctions
Online auctions continue to increase in popularity as consumers participate from computers and mobile phones. These sites are a great way to pick up good deals and unusual items, but it is critical that you stay alert and cautious.
Auction fraud is the most reported form of online fraud. Auction schemes tempt victims to send money for promised items, but then deliver nothing or an item far less valuable than the item that was promised. Another ploy is for the criminal to purchase an item at an auction with a check for a larger amount than the item’s value and ask the seller to reimburse the difference. It is only after you’ve shipped the goods and refunded the ‘difference’ that you discover the check bounced and the criminal got away with your property AND your cash.
Be particularly careful with international sellers. If something goes wrong in one of these transactions there is very little that can be done to help you get your funds or goods back.
Classified ads are another useful tool for selling and purchasing items if you do so carefully. Before buying or selling anything on a classified site read the site’s Terms and Conditions, their abuse reporting procedures, and any safety tips the site provides.
When creating an account on a classified ad site, create a safe profile that does not include any identifying information. Use a separate e-mail account. Many sites provide one for you, but if the site you choose to use does not, create a new e-mail account for yourself for classified transactions. Don’t ever include a personal phone number in your profile or ad.
Safe tips for online classified site sellers
When selling an item through an online classified site, follow this safety advice:
- When describing the item for sale, limit the personal information you give. For example, don’t include in photos identifiers such as a house number, your child, other possessions, or identifying information that isn’t relevant to the item being sold.
- Only give a general location, not a specific address, in your ad.
- Only deal with local people who you can meet face to face. The further away a buyer or seller is, the higher your risk of fraud.
- Never accept payment in the form of a cashiers check, wire transfer, money order, money transfers, or through escrow services. You want cash at the time of the transaction or through a reputable payment service. Check out the safety and privacy of any payment service before you use it.
- If someone offers to pay more than the asking price, they are committing fraud. If someone asks for your checking account information so they can transfer funds, the transaction is not legitimate.
- Never send an item before it has been paid for.
- Scammers often use hard-luck stories to get you to give them the item for free. No matter how desperate the story sounds, it is likely to be a scam.
- Unless the item is too big to easily transport, always bring the item to a public place rather than delivering it to the buyer at your home. Do not invite trouble to your doorstep.
- Never meet buyers alone. Always have someone with you, even if you are meeting the buyer in a public place.
- If you are selling a device such as an iPod or PDA through a classified or auction site, consider what content is on the device. Strip off all personal information and make sure that it doesn’t contain copyrighted content that is not yours to sell.
Safe tips for online classified site buyers
Advice for buyers is similar to that for sellers, but from a buyer’s unique perspective:
- Only deal with local people who you can meet face to face. The further away a buyer or seller is, the higher your risk of fraud.
- Research the item carefully before purchasing and be wary if the asking price is unrealistically low.
- Check the item carefully before releasing payment. For example, if it’s electronic plug it in or turn it on to be sure it works.
- The best way to pay for items is with cash or with a secure payment service. If the seller asks you to pay more, and will offer to give you a check for the difference, say NO; it’s a scam. Do not pay with checks as they show your address, full name, and sometimes phone number along with your bank account information.
- Avoid going to someone’s house to view an item unless it is too large to transport. Ask to meet in a busy public place and always bring someone with you.
- Report any abuse to the classified service provider, and law enforcement if necessary.
- If you are the victim of a scam, report it though the Internet Crime Complaint Center.
Payment services: Moving towards cashless transactions
Payment services such as PayPal, eBay Payments, Amazon Payments, Yahoo!, or PayDirect offer buyers an increased level of protection from a fraudulent seller, but cannot guarantee that the buyer will not lose out. Proprietary payment systems may increase a buyer’s protection by providing another avenue for complaints and may also screen out fraudulent sellers because of the reduced anonymity of the transaction. However, the degree of protection for a defrauded buyer may be limited depending on the particular features of the payment system.