There are thousands of payment methods being offered online. Some are country-specific (like Ideal in the Netherlands and Boleto in Brazil), others are offered worldwide (like the big credit card schemes and Paypal). But which payment methods are safe to use for consumers? In the article below we do not focus on ease of use or level of privacy but only on if the payment method protects your consumer rights. As you will see the chance to get your money back differs strongly per payment type.
Relatively Safe Payment Methods
We cannot say that any payment method is safe as there is never a 100% guarantee you get your money back in case you did not receive the service, the wrong product was delivered, or the package was stolen/broken during transport. However, we consider these payment methods the most secure for you as a consumer:
- Credit cards: Mastercard, Visa, American Express all offer consumers the possibility to start a so-called "chargeback procedure". This allows you to request your money back. However, be careful: the level of support differs strongly per credit card company. Some offer a "nearly no questions asked" protection, others force you to go through lengthy procedures.
- Paypal: This payment solution is actually a "wallet" which we discuss below. We list it separately because Paypal is by far the most popular payment method worldwide. It is fast, easy to use and it offers its users some level of protection against fraud. However, the company does not guarantee that you get your money back. Just like with credit cards you have to prove you were scammed and the procedures are not always easy.
- After Delivery: Especially in developing countries, Cash on Delivery is popular. There are several payment methods that offer the same service online. They only transfer the money after you have received the goods. Examples are Alipay, Afterpay, and Klarna. These payment methods are relatively safe as the money remains in a third party account till you have confirmed that you have received the goods or service to your satisfaction. The disadvantage: not all merchants offer this kind of payment method as the risk now lies with them and they are often expensive for the online store to use.
Less Safe Payment Methods
- Online SEPA/Debit cards/Banking: In this instance, the level of protection differs strongly per method. In this case, the money is directly removed from your account, which is not the case with most credit cards where you actually lend the money from the credit card company. In many cases, the money is immediately transferred to the bank of the online store. If they run with your money, the debit card or banking company is unlikely to be willing to pay it back to you. usually, the only reason why they give back your money is if you can prove your debit card or bank account was misused/hacked and it was not your fault.
- Digital or e-Wallets: There are hundreds of offered by companies big and small. Examples are wallets of Apple, Baidu, Paypal, Google and Skrill. Wallets have as benefit that you cannot take more money out of them then you put in (unless you connected them to your credit card or bank account). The level of consumer protection of the different wallets differs strongly. Compared to credit cards and Paypay our experience is that getting your money back is much more difficult.
Not Recommended Ways to Pay Online
- Cryptocurrencies: Bitcoin, Ethereum, Litecoin are just a few of the thousands of different digital currencies being offered online. While these payment methods offer a high level of privacy there is also often no way to get your money back. We understand that you may prefer to pay with these kinds of payment methods using an adult, dating or gambling service but there is no reason you should be forced to use this kind of payment method if you do not require privacy (e.g. in case of physical products they do need your address anyway).
- Manual Wire- & bank transfer: In this case, you actively transfer money from your bank account to that of another. Few banks will pay back your money if things go wrong and you actively have to prove that the bank should have known that the receiving bank account was not legit (e.g. being used for money laundering or part of a crime syndicate).
- Moneygram/Western Union: The same applies to these payment methods as for wire- and bank-transfer but even worse. In this case, the receiving party can just walk up to a local Moneygram or Western Union store and take the money. These organizations are unlikely to pay you back.
- Other Online Money Transfers Methods: There are many other parties offering ways to transfer money from bank accounts, credit cards and wallets to receiving parties. They are mainly meant for business transactions and all offer few if any consumer protection guarantees.
In short: our recommendation is to use one of the major credit card companies, Paypal or one of the after payment delivery methods.
If you need to get your money back, please check our "How to get your money back" article. Tips or feedback? Just contact us!
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