Online purchases skyrocketed during the covid pandemic, reaching astronomical numbers. If we take the United States as a reference, the volume reached 469,000 million USD, compared to 431,000 million in 2020.
The more traditional methods, such as PayPal and credit or debit cards are still the preferred payment method for online transactions. But many websites also offer new methods, such as Apple Pay and even Bitcoin.
When asked to enter your payment information, you may be wondering: which method is the most secure?
Online payment methods: advantages and disadvantages
PayPal: extremely secure
When you pay by credit card through PayPal, you are only giving your credit card information to PayPal, not to the company you are buying from. Thus, you may be buying online from 100 companies, but you will only have to disclose your credit card information to one of them: PayPal. In this sense, your risk is lower. Your only concern would be if a data breach occurs at PayPal, but not at every company you buy from.
Another benefit of using PayPal is that the company has strong cybersecurity measures in place, such as end-to-end encrypted transactions. Instead, when using a credit card, the security of your transaction depends on the security of the online store.
PayPal also allows partially anonymous payments, in the sense that it is possible to sign up with a disposable email account and a prepaid or virtual debit card.
While transferring money to your friends and family is free, commercial transactions are charged a fee. On the other hand, PayPal has had data breaches in the past. Also, if there is a dispute regarding a given transaction, you may be locked out of your account for a relatively long time until the issue is resolved.
It is a secure method that also prevents you from having to give your credit card number to each and every one of the companies you buy from.
Credit card: the best protection against fraud
Aside from convenience, the main benefit of using a credit card to pay is that the credit card company must pay you back and investigate reports of fraudulent transactions if they occur. In this way, you have a certain guarantee when you buy something online.
Since credit and debit cards are issued by banking institutions, it is practically impossible to make anonymous transactions. This is where prepaid debit cards come in handy.
Giving your credit card information to a company can also be risky. A malicious actor within the company could steal your information, or it could also be that someone hacks into the company.
Credit cards are one of the most reliable methods of making transactions online, because they are backed by banking institutions and are almost universally accepted. Also, they do not draw funds directly from your account at the time of purchase. They are also the easiest payment method to block in case of fraud.
Debit card: the best to control spending
The main benefit of using a debit card for online purchases is that you can only spend what you have in your account, which is an effective method of controlling your spending. And if your card is lost or stolen, the person who has it will also be limited to that amount.
Unlike credit cards, money is withdrawn directly from your checking account when you buy something, so you’ll have fewer arguments to make if you buy from a seller who turns out to be dishonest. Some banks also charge overdraft fees if you try to spend more than you have in the account (rather than simply rejecting the transaction), which many users don’t like.
It’s a relatively safe way to provide money to children and others without having to give them access to a credit card.
Prepaid card: the most anonymous (but not fully online)
Prepaid cards work like a debit card, but can be purchased with cash at a physical store without providing any personal information. They are convenient to use and anonymous, and you do not need to have bank accounts of any kind.
They must be paid for immediately, and there are no arguments to make if you buy from a seller who turns out to be dishonest. This option also requires you to visit a physical store to purchase a card.
This is a simple and anonymous way to buy things online without the risk of identity theft. But keep in mind that certain providers do not accept prepaid debit cards.
Digital wallets or “Wallets”: the most comfortable
Digital wallets, or “wallets” include Google Pay and Apple Pay, which allow transactions to be made using digital currencies or attached credit or debit cards.
Wallets allow for contactless transactions online, within the app, and in person. Your credit card information is stored on your device, allowing you to pay by identifying yourself with your biometric data (for example, your fingerprint or face image). Also, the seller does not need to see your credit card number, they only see the transaction ID.
The convenience of paying by phone is the biggest benefit of wallets. In many cities you can leave your physical wallet at home, because practically everything can be bought with your cell phone. For example, New Yorkers can now use Apple or Google Pay on their cell phones to pay for their subway tickets, instead of having to carry a MetroCard and remember to reload it. Contactless payments are also much safer from a health point of view than swiping or inserting your card through a public machine reader, or physically handing it to a store clerk.
The main downside is that there aren’t as many online stores that allow you to pay with digital wallets compared to traditional methods.
Not only is it convenient, but it means you don’t have to give your credit card number to vendors.
Mobile payment apps: the best for paying friends and family
As financial apps add more and more features, the line between “wallet” and “mobile payment app” becomes increasingly blurred. But in general, mobile payment apps—the best known in the US are Venmo, Cash App, and Zelle—are specifically designed to enable quick payments to family and friends.
Mobile payment apps differ slightly from one another, but they all offer a mobile app that lets you quickly send (and also receive) payments to your social contacts.
Venmo and Cash App allow you to have a balance in the app, while Zelle must be linked to a bank account
Venmo and Cash App offer physical debit cards that you can use at stores and ATMs, which is very useful for people who have accumulated a large balance. Both apps are also expanding into financial investments, including bitcoin and other cryptocurrencies.
Each app has its own fees for withdrawals to a bank account, depending on when you need the money. (Both Venmo and Cash App charge a 1.5% fee for withdrawals, but do not charge for transfers effective between 1 and 3 days.) Zelle does not have any fees, because it must be linked to a bank account.
Some users don’t really like the “social” aspect of Venmo: the ability to see descriptions of payments your friends make to each other from a “channel” (or “feed”). While you can keep your own payments private, the public option is turned on by default and may make some users uncomfortable.
It’s an extremely popular option for paying friends and family, which will become even more useful as its functionality expands.
Cryptocurrencies: the most anonymous option (completely online)
Cryptocurrencies are decentralized digital currencies that exist as numbers on a distributed ledger known as a “blockchain.” In fact, cryptocurrencies are one of the best ways to conduct private and anonymous transactions online. Many online services and marketplaces accept cryptocurrency as a form of payment, including ExpressVPN.
Transactions in cryptocurrencies theoretically offer more security. As they are decentralized, all transaction details are recorded in a ledger (very useful for verification) of payment history. Paying with cryptocurrency also has the advantage of lower transaction fees.
Perhaps the biggest barrier to entry for consumers in general is that cryptocurrencies have a steep learning curve and a level of volatility that other payment methods do not.
While cryptocurrency transactions are generally safe and transparent, they are not proof against scammers and thieves. And since there is no central authority to handle them, if your cryptocurrency wallet is stolen, you will have no way to reclaim it, so protecting your password is vital.
If you know what you’re doing and have time to learn how to handle them, don’t hesitate! But if not, we recommend waiting a bit until this option becomes a bit easier to use.