In a world where convenience seems to be valued more than ever, it’s safe to say that online shopping has become the norm. After all, why spend time commuting somewhere to purchase products when they can be delivered? Americans spent nearly $250 billion on e-commerce in the first quarter of 2022, according to preliminary data from the U.S. Department of Commerce. That’s up 6.6% from the same period the year before.
Online sales surged during the COVID-19 pandemic due to lockdowns and other factors, according to the U.S. Census Bureau, and this trend will continue as more companies enhance their online shopping offerings.
Although online shopping promotes itself to be a safe, no contact option, it does pose risks. In 2024, Americans reported losing over **$12.5 billion** to fraud overall, with losses from online shopping fraud alone reaching $434.4 million according to the Federal Trade Commission (FTC). Remaining diligent, especially around billing and payment methods, is crucial.
When proceeding to checkout from an online store, there’s typically multiple payment options. It’s important to educate yourself on these to determine which is the most secure. Wicked Reports examined consumer protection laws and other security measures to find how safe popular e-commerce payment methods are and how the risks compare.
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Consumers using a debit card for an online payment should become familiar with the Electronic Fund Transfer Act, which protects consumers from unauthorized/incorrect electronic fund transfers, incorrect receipts, and/or any bookkeeping errors in such transactions. If you report your debit card as lost or stolen within two days, the consumer liability is limited to $50. This liability grows to $500 if reported within 60 days.
There may also be an investigation that lasts anywhere from 10 to 45 days, according to the Consumer Financial Protection Bureau. The Federal Reserve’s “Regulation E” caps a consumer’s liability for fraudulent or unauthorized debit card purchases at $50, as long as the customer reports the theft to their bank within two days.
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While the EFTA protects debit card transactions, credit cards fall under the purview of the Fair Credit Billing Act. Also known as the Truth in Lending Act, the FCBA limits the liability for unauthorized credit card transactions at $50. It’s meant to protect consumers from poor practices of the credit industry.
Unlike Regulation E, no liability may be imposed when a physical card is not involved, such as purchases made online or over the phone. With a fraudulent debit card transaction, the consumer is affected immediately and must fight to get the charge reversed, whereas fraudulent credit card transactions are more secure because the card issuer is on the hook—not the consumer.
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PayPal is one of the most popular online payment systems around, and it follows specific measures to keep users secure. Security keys remain optional but are recommended, as they are a two-step authentication with a different PIN for each login. Additionally, confirmation emails are always sent upon each transaction.
Transactions are sent with end-to-end encryption, meaning sellers can’t see buyers’ financial information. PayPal also offers full reimbursements if products are different from their descriptions or never arrive. Plus, users are not responsible for unauthorized purchases reported within 60 days.
With the rise of financial technology, also known as “fintech,” people can use their phones for payment. Digital wallets and mobile payments—such as Apple Pay, Google Pay, and Samsung Pay—act as a fairly safe, convenient payment method. The mobile wallet user simply authorizes their debit or credit card for use on their smartphone when shopping online or at a point-of-sale.
Digital wallets provide two-factor authentication, encryption, and one-time-use PINs to keep payments safe. However, users should be sure to implement screen locks with strong passwords or biometric authentication on their phone. They should also disable their device as soon as it’s lost or stolen. These preventative measures will reduce the risk of hackers getting personal information.
Ever since the pandemic began, buy now, pay later programs—such as AfterPay, Affirm, and Klarna—have risen in popularity. Most of these require buyers to put down 25% of the total payment, and pay the rest in three installments over the course of six weeks. Best of all, there are no fees or interest charges.
However, federal oversight has recently increased. The Consumer Financial Protection Bureau (CFPB) has issued guidance clarifying that many BNPL providers are considered creditors subject to existing consumer protection laws, including aspects of the Truth in Lending Act/Fair Credit Billing Act. This means that consumers generally now have the right to dispute charges and seek refunds directly from the BNPL provider (not just the retailer) and have payments paused while a dispute is investigated, bringing these services more in line with traditional credit card protections.
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FAQ
A credit card is generally safer for online purchases. With credit cards, your maximum liability for unauthorized transactions is capped at $50 by law (Fair Credit Billing Act), and most issuers offer $0 fraud liability. Debit card fraud (governed by the Electronic Fund Transfer Act) directly accesses your checking account, and your liability can be up to $500 or even the full amount, depending on how quickly you report the loss.
Answer: PayPal adds a layer of security because it acts as an intermediary, meaning the merchant never sees your sensitive financial information (credit card number or bank details). Transactions use end-to-end encryption, and PayPal offers its own Buyer Protection Policy which covers full reimbursements if products are not as described or never arrive.
Answer: Recent guidance from the Consumer Financial Protection Bureau (CFPB) has classified many BNPL providers as creditors subject to key provisions of the Truth in Lending Act/Fair Credit Billing Act (TILA/FCBA). This update gives consumers the right to formally dispute charges and seek refunds directly from the BNPL provider, aligning their protections more closely with those offered by traditional credit cards.