Legal, Regulatory, and Privacy Issues

Online shopping options offer credit card safety


Learn the credit card fraud dangers of online shopping and how to avoid them.

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

About half of all Americans do at least some shopping online. While buying via the Internet beats fighting the mall crowd, it also carries the risk of identity theft and fraud, so new solutions are being created to further safeguard credit card information. Here are some of the most widely used, and safe, online shopping alternatives.

Virtual cards

Shopping and credit cards
Shopping and credit cards

Don’t allow a convenience to become a curse. If you frequently purchase with plastic, offers useful tips to help you become a savvier shopper.

Virtual credit cards are not very popular, but they are excellent for consumers very fearful about losing control of their personal information. These cards allow consumers to shop using a temporary number connected to their existing account that functions for the length of the transaction or at just one store.  Credit card issuers including Citibank and Discover offer virtual cards.  Because the virtual card is linked to your existing account, charges appear on your regular statement.  While they can be used to minimize the exposure of your credit card information online, virtual cards cannot be used in the physical world.

Scott Mitic, CEO of TrustedID, an identity theft protection company, knows of several new options for further protecting consumer information. “Some issuers are now creating one-time-use cards that can be used in physical stores in addition to online,” he says. “And a company called Revolution Money has recently created an anonymous credit card that contains no personal information on it or stored inside it. That way if it gets in the wrong hands, nobody can connect it with you.” The Revolution Card requires a PIN number to make purchases, which safeguards it if it is stolen.

PayPal, a company owned by eBay, is probably the best-known credit card alternative.  Consumers looking to make payments with PayPal provide the service with a source of funds in the form of either a credit card or a bank account.  Instead of giving account data directly to a seller, you tell PayPal to transfer your payment to the seller’s account, with PayPal identifying you to the seller only through your e-mail address.

Although an increasing number of smaller merchants accept PayPal, most large commercial websites do not.  And while PayPal promises complete refunds for unauthorized transactions, its safeguards against unethical merchants are much less complete. Payments of up to $1,000 are covered for qualified eBay purchases if you do not receive the item or it is “significantly not as described.”

Using a credit card to fund your PayPal account could enable you to recover money via a charge-back through the credit card company.  But because PayPal is responsible for the entire amount, it expects you to exhaust its dispute resolution process before turning to your credit card issuer.

That delay could mean you miss the credit card issuer’s deadline for reimbursement. Even so, Susan Grant, director of the National Consumers League’s fraud center, says consumers should always use their credit cards on PayPal as a safeguard. “There have been some suits by state general attorneys concerning some problems with PayPal in regards to them not making clear to people what their protections are,” Grant says. “When you make payments with your credit card, you have protection from federal rights. But if you make a purchase using your bank account, you lack the same protection.”

Electronic payment systems
More recently, some websites have begun to rely on electronic payment systems that many consumers already use to pay their monthly bills.  With ModaSolutions’ Secure-eBill, for example, the electronic payment system is generally offered as an option for payment in addition to credit cards or PayPal.

Customers who select this option receive an invoice e-mail from the merchant.  First-time customers need to establish that merchant as a payee with their bank or electronic bill-paying service.  After making the necessary payment, the customer is e-mailed a confirmation that the merchant has received the funds. Instead of merchants having access to any bank information, ModaSolutions just informs them that a payment has been posted to their account in the customer’s name.

Difficulties with electronic payment include possibly having to wait several days for the payment to be processed, as well as having to set up numerous payees you may not give repeat business to.  Additionally, since the payment is a direct debit from your bank account, you will have no charge-back remedy if you are unhappy with the purchase.

Merchant programs
Regardless of where you shop, major credit cards have zero-liability policies for credit card transactions without the cardholder’s authorization.  It can be a major headache to clean up if your credit card number is stolen, so for extra safety, shop online at merchants who take part in the Verified by Visa or Verified by MasterCard programs. The number of merchants using these two programs is relatively small, though many more are asking for the card identification number to ensure the card is in the shopper’s physical possession.

Finally, keeping an active eye on your credit card account online can alert you very quickly to any fraud.  Experts recommend going online to look for unauthorized charges that may be a sign of identity theft, which is a much more serious problem than credit card fraud.

Mitic asks consumers to be cautious but not paranoid about their information getting into the wrong hands. “There isn’t a need for consumer hysteria. There are simple steps we should all be doing, but there is no point in living in a state of fear.”

What’s up next?

In Legal, Regulatory, and Privacy Issues

Credit freezes go national, get chilly welcome

All three major credit bureaus have rolled out credit freezes as an identity theft fighting tool, but consumer rights groups say the changes don’t go far enough.

Published: November 1, 2007

See more stories
Credit Card Rate Report Updated: August 21st, 2019
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.