Which online payment method is safest?

Online shopping surged during the Covid pandemic, with U.S. e-commerce sales reaching a massive 469 billion USD in 2021, up from 431 billion in 2020. 

Stalwarts like PayPal and credit or debit cards continued to be the preferred mode of payment for online transactions. But many sites also offer newer methods like Apple Pay and even Bitcoin.

When prompted to enter your payment information, you might be wondering: Which method is actually the safest?

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Online payment methods: Pros and cons

PayPal: Extremely safe

Pros: 

When you pay by credit card through PayPal, you are only sharing your credit card information with PayPal, not with the company you are buying from. This means you could be shopping online from 100 companies but would only need to share your credit card number with one—PayPal. In this sense, your risk is lowered. You’ll only have to worry about a data breach at PayPal, not all the companies you’re buying from.

Another benefit of using PayPal is the company has strong cybersecurity measures in place, like end-to-end encrypted transactions, whereas if you use a credit card, the security of your transaction comes down to that of the online shop.

PayPal also allows for semi-anonymous payments—at least insofar that you can register an account with a throwaway email address and prepaid or virtual debit card.

Cons:

While transferring money to friends and family is free, there is a fee for commercial transactions. Also, data breaches at PayPal are not unheard of. Further, if a dispute were ever to arise over a transaction, you may be locked out of your account for an inconvenient length of time until the issue is resolved.

Bottom line:

It’s a secure method that also prevents you from having to give your credit card number to every company you shop from.

Credit card: Most protected against fraud

Pros:

Other than convenience, the main benefit of using a credit card to pay is that the credit card company is expected to give you your money back and investigate reports of fraudulent transactions. So you get a certain degree of guarantee when you buy something online.

Cons:

As credit and debit cards are issued through banking institutions, it is essentially impossible to make anonymous transactions. That’s where prepaid debit cards come in handy. 

Giving a company your credit card information can also be risky. A bad actor within the company could steal your details, or the company could suffer a hack.

Bottom line:

Credit cards are one of the more reliable methods for online transactions as they are backed by banking institutions and are essentially universally accepted. They also do not directly take funds out of your account at the moment of purchase. It is also the payment method easiest to stop in the event of fraud. 

Debit card: Best for controlling spending

Pros:

The main benefit of using a debit card for online purchases is you can only spend how much is in your account already, which is one method of helping you control your spending. And if your card gets stolen, the thief will also be limited to that amount.

Cons:

Unlike with credit cards, the money is taken directly from your checking account when you buy something, so there is less recourse in case you buy from a dishonest seller. Some banks will also charge overdraft fees when you attempt to spend more than is in your account (instead of merely declining the transaction), which many card owners find annoying.

Bottom line:

It’s a relatively safe way to provide kids and others with spending money while not giving them access to a credit card.

Prepaid card: Most anonymous (though not totally online)

Pros:

A prepaid card works like a debit card, but you can buy one with cash at a brick-and-mortar store without providing any personal information. It’s convenient and anonymous, and you don’t need to have a bank account of any kind.

Cons:

You have to part with your money upfront, and there is no recourse in the event you buy from a dishonest seller. This option also requires physically visiting a store to purchase a card.

Bottom line:

This is an easy, anonymous way to buy things online with no risk of identity theft. But be aware that certain vendors may not accept prepaid debit cards.

Digital wallets: Most convenient

Digital wallets include Google Pay and Apple Pay, which allow for transactions to take place via the use of digital currencies or attached credit or debit cards.

Pros:

Digital wallets allow for online, in-app, and in-person contactless transactions. Your credit card information is stored on your device, allowing you to pay with it simply by authenticating your identity (such as with your fingerprint or face print). The merchant also does not see your credit card number—it only sees a transaction ID.

The convenience of paying by phone may be the biggest benefit of digital wallets. In many cities you can leave your physical wallet at home because nearly everything can be purchased with a tap of your phone. New Yorkers, for instance, can now use Apple or Google Pay on their phones to ride the subway instead of carrying a MetroCard and remembering to top up. Contactless payments are also more sanitary than swiping or inserting your card into a public machine, or passing it back and forth with a store clerk.  

Cons:

The main downside is not as many online shops take digital wallets as more traditional payment methods.

Bottom line:

Not only is it convenient, but it also lets you avoid giving your credit card number out to merchants.

Mobile payment apps: Best for paying friends and family

As financial apps add functionality, the line between “digital wallet” and “mobile payment app” becomes more and more blurred. But generally speaking, mobile payment apps—most notably Venmo, Cash App, and Zelle in the U.S.—are built around the ability to quickly pay family and friends.  

Pros:

Mobile payment apps are all slightly different, but they all offer a standalone mobile app that lets you quickly send payments to (and receive payments from) your social contacts.

Venmo and Cash App both allow you to maintain a balance in the app, while Zelle must be linked with a bank account

Venmo and Cash App also both offer physical debit cards that you can use in stores and ATMs, which is useful for people who have accumulated a larger balance. Both apps are also expanding into investing, including Bitcoin and other cryptocurrencies.

Cons:

Different apps have different fees for withdrawing to a bank, depending on when you need your funds. (Venmo and Cash App both charge a 1.5% fee for instant withdrawal, but nothing for a 1-3 day transfer). Zelle charges no fee as it must already be tied to a bank account.

Some users are turned off by the “social” aspect of Venmo: the ability to see descriptions of your friends’ payments to each other in a “feed”. Although you can make your own payments private, the public option is on by default and can make some users uncomfortable.

Bottom line:

An extremely popular option for paying friends and family that will likely prove even more useful as functionality expands.

Cryptocurrencies: Most anonymous (fully online) option

Cryptocurrencies are decentralized digital currency that exists as numbers in a distributed ledger called a blockchain. Crypto is, in fact, one of the best ways to conduct private and anonymous transactions online. Many online services and marketplaces now accept crypto as a form of payment, including ExpressVPN.

Pros:

Crypto transactions theoretically offer more security. Because they are decentralized, all transaction details are recorded on a ledger—especially helpful when it comes to verification of payment history. Paying with crypto also comes with the advantage of lower transaction fees. 

Cons:

Perhaps the biggest barrier to entry for general consumers is that crypto has quite a bit of a learning curve and comes with a level of volatility that other payment methods do not.

Although crypto transactions are generally safe and transparent, they are not immune from scammers and thieves. And because there is no central authority, if your crypto wallet is stolen you won’t have any recourse to reclaim your coins, so protecting your password is especially important.  

Bottom line:

If you know what you’re doing and have the time to get around the learning curve, sure! If not, we’d recommend waiting until this becomes a more user-friendly option.

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Read more: Safety tips for online and in-store shopping