Reducing My After-the-Fact Financial Risk

Minimizing your After-the-Fact financial risk depends heavily on keeping your financial information as hidden as possible. Of course, that effort runs counter to the fact that you have to make your financial information availabe to someone to be able to make an online purchase. Fortunately, there’s a way to keep your financial information mostly hidden while still being able to make purchases.

A Trusted Payer in the Middle

A technique I really like to use for making payments is what I’ll call a “trusted payer in the middle”. With this technique, I give my financial information to an organization I trust and then have that organization make payments on my behalf. Probably the best known such organization is PayPal™.

With PayPal you establish an account where you provide your credit card information and optionally your bank account information. Then if you make a purchase from a merchant who accepts PayPal payments, the merchant gets paid without ever seeing any of your financial information. PayPal deducts the payment from your account and transfers it to the merchant’s account.

So in this arrangement the only organization I have to trust with my financial information is PayPal. The great part is that, unlike a credit card, no one can get money from my account without my specific authorization (this assumes that no one has gotten ahold of my PayPal password).

For example, ClickBank, the provider of most of the products here at Unique Christmas Gifts, accepts PayPal (in addition to other forms of payment). When you use PayPal to purchase from ClickBank, ClickBank “sees” none of your financial information. PayPal handles the transfer of funds without revealing your financial information to ClickBank.

Although this arrangement cannot prevent you from losing money for a single, specific purchase, it does create a great deal of protection from After-the-Fact risk.

But what can I do about merchants that don’t accept payments through a payer in the middle?

When You Can’t Use a Payer in the Middle

Unfortunately, in those circumstances where I can’t use a payer in the middle, I then have to use a credit card or make some other arrangement — perhaps sending a check through the mail. Inevitably I take more risk with this type of arrangement, because I end up sharing my financial information with the actual merchant (or perhaps the merchant’s billing partner).

In this case you have to rely more on correctly assessing the reputation of the merchant than you do with the payer in the middle arrangment. But here you may still have a high degree of protection from improper use of your financial information, if you use a credit card. At least one major credit card provides fraud protection for online purchases (subject to certain limitations). You can see one example of this kind of protection here.

So if I can’t use a payer in the middle, then I make sure I use my credit card for online purchases. I also follow many of these tips for making safe purchases using my credit card.

If an online merchant does not allow me to use a payer in the middle or a credit card, I probably will not do business with that merchant. I am very reluctant to give out my checking account information. In the wrong hands, giving out checking account information is practically like giving out a blank check.

<< Shopping Online Safely - Steps I Take to Protect Myself (page 2)
                        Shopping Online Safely - Steps I Take to Protect Myself (page 4) >>