Minimizing Risks While Shopping Online

While some people now do the majority of their shopping online, others are still hesitant to trust the Internet with their financial information. My Dad would fall into the latter category, but he recently asked me about opening a credit account to shop online. I sent him a message that turned into a rather lengthy tutorial about safe shopping online. I have modified the text of that message and posted it here, in addition to links to the sites I mentioned. I have personally purchased items from the retailers listed, and would recommend them to others.

The easiest way to keep the majority of your income safe would probably be to open a checking account with your bank that you will use exclusively for online transactions. This is not absolute fraud protection, but it will mitigate the amount of damage incurred by things like credit card theft. Make sure that your bank does not automatically transfer money from another account if your balance reaches zero, but instead rejects the transaction (like a credit account would). If your bank does not allow this, then simply open the dedicated account with a different bank. Then all you need to do is set up a debit card for the account and transfer the money from your main account into the smaller account whenever you want to buy something (or just keep a given balance in the smaller account--either method works). Just about every website you would ever want to buy from will accept a debit card just like a credit card.

The other option I know of is to request a specific credit line, either from your bank or from a credit card company. The difficulty with this is that the credit card companies will always try to talk you into a higher maximum balance than what you want, so you need to be firm with them. Also, some companies may have a minimum on the line of credit they're willing to extend

Either a debit card or a credit card should come with some sort of "fraud prevention" plan. In some cases (e.g. with my Discover card), you may need to pay a couple dollars a month for the "theft or fraud insurance". If you are particularly concerned about someone hijacking your card number, the guarantee that any fraudulent charges will be reversed may help you sleep better.

I personally use the first method I described. I have a checking account with no minimum balance, so I'm not charged for keeping a small balance. More importantly, I have it set up so that money does not automatically transfer from my savings account when the checking account is empty. My bank also has a fairly vigilant Artificial Neural Network (something like an Artificial Intelligence) that monitors the account and triggers an alert if it notices any unusual purchases. While most of the alerts thus far have been false alarms, it does add some oversight to my account.

PayPal provides very reliable online banking services. If you want to open an account with them, you will still need to provide them with access to a checking account, which goes back to my original suggestion of a dedicated account. I do recommend you set up a PayPal account, however, as anything you pay for with them is covered under their guarantee. This means that if someone tries to rip you off, PayPal will give you a full refund. You can also open a Money Market account with PayPal, which is a nice side benefit. The one danger to watch for when using PayPal is that a lot of crooks like to try to steal peoples account information by sending them official looking emails. As a general rule (and PayPal will tell you this, too), never give out your account password or credit card number to anyone--ever. Also, never 'click' on a link to the PayPal website in an email message. Instead, open a web browser and enter the URL manually (i.e. enter "http://www.paypal.com" in your address bar). People have been known to set up "dummy" websites that look like the PayPal site in an attempt to get people's login information. One of them almost fooled me once, so they can be quite convincing. If you ever receive an email from PayPal notifying you that something in your account needs attention, just go to PayPal yourself. If you're not sure whether the email is legitimate, forward it to PayPal's fraud prevention services at spoof@paypal.com. As a rule, PayPal will never penalize you for being cautious about fraud.

Once you have the card and the PayPal account, there's a few more important guidelines to follow:

1. The first is to never, under any circumstances, email your credit card number to anyone. If you ever receive an email requesting your credit card number, then forward it to your ISP and delete it---even if it looks like it's from a reputable company, it is almost certainly fraudulent. The same goes for account passwords---don't trust anyone. Even if you receive an email from me requesting your password, do not send it. In fact, if you receive an email like that from me, please forward me the email so I can find out who's posing as me and send them a really nasty virus.
2. Only purchase something from a website you trust. This is a simple but easily-overlooked way to keep your credit information secure. I will give you a list of sites that you can trust at the end of this email. Sites like Google and Yahoo! offer an online shopping service that allows you to use their services to pay for purchases.
3. Keep track of your purchases. I do a really bad job at this, but I'm slowly getting better. This will not only help you detect any suspicious activity, but it will also keep you from going over your balance (a problem that I probably have more often than you do).
4. When in doubt, don't buy it from them. Unless it's something very specific, just about any product available online can be purchased from multiple sites. You can also ask someone else (e.g. me or Daron) to help you find a trustworthy site to buy a specific item from.
5. I know I'm repeating myself here, but never, under any circumstances, email your credit card number or account passwords to anyone. This includes the President, myself (or any other family member), your boss and God Himself. The first three of the four aforementioned people have no business asking for your account number online, and the fourth one doesn't really use the Internet to communicate, nor would He need you to email Him your credit card number if He wanted it.

Trustworthy Sites
As you begin buying things online, you will slowly develop a knack for identifying trustworthy stores. Here's a list of sites that I personally trust:

SiteDescription

Alibris
Queries multiple booksellers simultaneously, allowing you to quickly search for textbooks

Amazon
They sell much more than books these days. The only thing I can think of that they don't sell is livestock, produce and milk.

eBay
The Internet's version of a garage sale. You wouldn't believe the cool stuff you can find here. Only buy from sellers who accept payments via PayPal, though (see the section on PayPal above).

Newegg.com
Offers a pretty wide range of computer supplies, and usually at a lower price than the other stores.

Powells
Powells operates several excellent bookstores in Portland, OR

Staples
I purchase most of my office supplies from Staples. Delivery is usually within 1--2 business days, and free if you spend more than $50.00

Target
This is the same Target that you visit in the real world. They run their online sales through Amazon.

ThinkGeek.com
A great store with a wide variety of cool gadgets and toys.

See Also

• Better Business Bureau Online Shopping Tips
• U. S. Federal Trade Commission: Online Shopping
• Wikipedia article: Online Shopping