Making online payments is second nature to most people, and with so many things able to be bought and paid for over the Internet it is easy to become complacent with your choices of payment method, and neglect the decision-making processes you would normally go through to determine the feasibility, security and ease of use. Therefore take a minute to consider the pros and cons of both PayPal and credit card payments for paying online.
Online PayPal Payments
The PayPal payment system is probably most famous for its use in conjunction with the online auction site eBay however PayPal can be used to send and receive large or small amounts to friends, family, clients or creditors to and from anywhere in the world in any currency. Other things you should consider when using PayPal to make online payments include:
- The international exchange rate is not always as competitive. If you are making a payment in foreign currency you may not get as good as the deal on the exchange rate as you would get if you went through a bank or used your credit card. PayPal typically use a higher exchange rate which can cost you more when you make your conversions.
- Higher fees. Every PayPal transaction you make will be charged a percentage of the amount and is tiered on the amount you transact each month. This means that making payments using PayPal can be very expensive.
- Transfer delays. Because PayPal is not actually your own bank account there is more time lost in processing your payment and it can take between 3 to 5 business days for a PayPal payment to be made.
- You never have to give out your bank account details. PayPal acts as an intermediary between your bank account and the account of the person you are making a payment to. This means your creditor never has to see your bank account details and where normally your payment details would appear on their statement only your PayPal account number appears and this is not directly linked to any of your own accounts but is simply a stopping place for money coming in or going out of your accounts.
- Anyone can have a PayPal account. You don’t have to apply and be approved for a PayPal account as you simply need an e-mail address to open the account and start using it in conjunction with your bank account.
- You’re spending your own money. A PayPal account has as much or as little funds as you put in from your own account, so when you are shopping online you are only using your own money so you are not tempted to go into debt for an online bargain.
Online Credit Card Payments
Making an online payment using a credit card is just so easy, so what else did you need to consider before using your credit card to buy or pay bills online? Consider the following pros and cons of making online payments using your credit card:
- Your credit card and personal details can be stolen. While you know all of the security features to look for when you are entering your credit card details online, you may become complacent or there may be a credit card scam out there mimicking a secure payment site which you haven’t heard about yet. If you become a victim and have your credit card details stolen, from those credit card details and payment details your identity can also be stolen and used. This puts you at risk of having your credit history ruined because with your personal details a fraudster can go on to apply for new credit cards in your name, racking up more debt which you may not even know about until it comes time to apply for a loan for example.
- You can’t always buy in another currency. If you have found yourself in an international store and want to make a purchase you may not be able to use a non-native credit card to pay. Also if you are able, foreign currency transactions can attract high fees on a credit card.
- Double security verification. Visa and MasterCard have both introduced another layer of security when you use your card for online payments. The Verified by Visa and MasterCard SecureCode systems require you to register a second password when you activate your credit card. Then when you use your card at participating online stores you will be asked for this additional password before your transaction is processed and the store will then verify your password or check the security of your code before processing the payment and this is just another level of personal information a fraudster would need to have to successfully steal your identity.
- Credit card payments are instant. If you need to pay a bill or transfer money instantly to secure a purchase online then you can be sure that your credit card payment will be received shortly after you make it.
- You don’t need to set up another account to use your credit card online. If you already have a credit card then you can start making online payments whenever you choose and you don’t need to set up another account with another password and new account numbers.
Choosing an online payment method is a matter of personal choice and it is important to make a decision based on what you feel most comfortable with because protecting your bank account balances and your identity should be your main priorities, before considering which payment method it is that will help you secure that rare collectible only available online.
Alban is a personal finance writer. He provides tips to help people manage their finances and compare the best home loans online
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