FTC FACTSfor Consumers

A Consumer’s Guide to

e-Payments

credit

Charge

debit

stored-value

1-877-FTC-HELP

FEDERAL TRADE COMMISSION FOR THE CONSUMER

www.ftc.gov

T

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he Internet has taken its

place beside the telephone

and television as an important part of peopleís lives.

Consumers use the Internet to shop, bank

and invest online. Most consumers use

credit or debit cards to pay for online

purchases, but other payment methods, like

ìe-wallets,î are becoming more common.

The Federal Trade Commission (FTC)

wants you to know about these payment

technologies and how to make your transactions as safe and secure as possible. Keep

these tips in mind as other forms of electronic commerce, like mobile and wireless

transactions, become more available.

AND HOW WOULD YOU

LIKE TO PAY?

Most online shoppers use credit cards to

pay for their online purchases. But debit

cards ó which authorize merchants to debit

your bank account electronically ó are

increasing in use. Your debit card may be

an automated teller machine (ATM) card

that can be used for retail purchases.

To complete a debit card transaction,

you may have to use a personal

identification number

(PIN), some form of a

signature or other

identification, or a

combination of these

identifiers. Some cards

have both credit and debit

features: You select the payment
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option at the point-of-sale. But remember,

although a debit card may look like a credit

card, the money for debit purchases is

transferred almost immediately from your

bank account to the merchantís account. In

addition, your liability limits for a lost or

stolen debit card and unauthorized use are

different from your liability if your credit

card is lost, stolen or used without your

authorization.

Other electronic payment systems ó sometimes referred to as ìelectronic moneyî or

ìe-moneyî ó also are now common. Their

goal is to make purchasing simpler. For

example, ìstored-valueî cards let you

transfer cash value to a card. Theyíre

commonly used on public transportation, at

colleges and universities, at gas stations,

and for prepaid telephone use. Many

retailers also sell stored-value cards in

place of gift certificates. Some stored-value

cards work offline, say, to buy a candy bar

at a vending machine; others work online,

for example, to buy an item from a

website; some have both offline and online

features. Some cards can be ìreloadedî

with additional value, at a cash machine;

other cards are ìdisposableî ó you throw

them away after you use all their value.

Some stored-value cards

contain computer

chips that

make them

ìsmartî cards:

These cards may

act like a credit card
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as well as a debit card, and also may

contain stored value.

Some Internet-based payment systems

allow value to be transmitted through

computers, sometimes called ìe-wallets.î

You can use ìe-walletsî to make

ìmicropaymentsî ó very small online or

offline payments for things like a magazine

or fast food. When you buy something

using your e-wallet, the balance on your

online account decreases by that amount.

ìE-walletsî may work by using some form

of stored value or by automatically accessing an account youíve set up through a

computer system connected to your credit

or debit card account.

“PAYING” IT SAFE

The FTC encourages you to take steps to

make sure your transactions are secure

and your personal information

is protected. Although

you canít control fraud

or deception on the

Internet, you can take

action to recognize it, avoid

it and report it. Hereís how.

ï Use a secure browser ó software that

encrypts or scrambles the purchase

information you send over the Internet

ó to help guard the security of your

information as it is transmitted to a

website. Be sure your browser has the

most up-to-date encryption capabilities

by using the latest version available
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from the manufacturer. You also can

download some browsers for free over

the Internet. When submitting your

purchase information, look for the

ìlockî icon on the browserís status bar,

and the phrase ìhttpsî in the URL

address for a website, to be sure your

information is secure during transmission.

ï Check the siteís privacy policy, before

you provide any personal financial

information to a website. In particular,

determine how the information will be

used or shared with others. Also check

the siteís statements about

the security

provided for

your information. Some

websitesí

disclosures

are easier to

find than others

ó look at the

bottom of the home page, on

order forms or in the ìAboutî or

ìFAQsî section of a site. If youíre not

comfortable with the policy, consider

doing business elsewhere.

ï Read and understand the refund and

shipping policies of a website you

visit, before you make your purchase.

Look closely at disclosures about the

websiteís refund and shipping policies.

Again, search through the website for

these disclosures.
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ï Keep your personal information

private. Donít disclose your personal

information ó your address, telephone

number, Social Security number, bank

account number or e-mail address ó

unless you know whoís collecting the

information, why theyíre collecting it

and how theyíll use it.

ï Give payment information only to

businesses you know and trust, and

only when and where it is appropriate

ó like an order form. Never give your

password to anyone online, even your

Internet service provider. Do not download files sent to you by strangers or

click on hyperlinks from people you

donít know. Opening a file could

expose your system to a computer virus

or a program that could hijack your

modem.

ï Keep records of your online transactions and check your e-mail for contacts by merchants with whom youíre

doing business. Merchants may send

you important information about your

purchases.

ï Review your monthly credit card and

bank statements for any errors or

unauthorized purchases promptly and

thoroughly. Notify your credit or debit

card issuer immediately if your credit

or debit card or checkbook is lost or

stolen, or if you suspect someone is

using your accounts without your

permission.
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REPORT PROBLEMS

IMMEDIATELY

The Fair Credit Billing Act (FCBA) and

Electronic Fund Transfer Act (EFTA)

establish protections against lost or stolen

credit or debit cards, and procedures for

resolving errors on credit and bank account

statements that can include:

ï credit charges or electronic fund transfers that you ó or anyone youíve

authorized to use your account ó have

not made;

ï credit charges or electronic fund transfers that are incorrectly identified or

show the wrong amount or date;

ï computation or similar errors;

ï a failure to properly reflect payments or

credits, or electronic fund transfers;

ï not mailing or delivering credit billing

statements to your current address, as

long as that address was received by the

creditor in writing at least 20 days

before the billing period ended; and

ï credit charges or electronic fund transfers for which you request an explanation or documentation, because of a

possible error.

For credit: The FCBA generally applies to

ìopen endî credit accounts ó that is, credit

cards and revolving charge accounts, like

department store accounts. It does not

apply to loans or credit sales that are paid

according to a fixed schedule until the

entire amount is paid back, like an automobile loan.
For more

information on

e-commerce and

the Internet, visit

www.ftc.gov.

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Lost or stolen credit cards: Under the

FCBA, your liability for lost or stolen

credit cards is limited to $50. If the loss

involves only your credit card number (not

the card itself), you have no liability for

unauthorized use. Itís best to notify your

card issuer promptly upon discovering the

loss. Many companies have toll-free numbers and 24-hour service to deal with such

emergencies. Always follow up with a

letter and keep a copy for your records.

Billing errors: The FCBAís settlement

procedures apply to disputes about ìbilling

errorsî for open-end accounts, including

unauthorized charges (you cannot be liable

for more than $50 for unauthorized credit

charges); charges for goods or services you

didnít accept or werenít delivered as

agreed; charges that are incorrectly identified or show the wrong amount or date;

math errors; a failure to properly reflect

payments or credits; not mailing or delivering credit billing

statements to

your current

address, if

the address

was received

by the creditor in writing

at least 20

days before

the billing

period ended;

and charges for which you request an

explanation or documentation, because of a

possible error.
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To take advantage of the FCBAís consumer

protections for errors on your account,

write to the creditor at the address given for

ìbilling inquiries,î not the address for

sending your payments. Include your name,

address, account number and a description

of the billing error. Send your letter so that

it reaches the creditor within 60 days after

the first bill containing the error was

mailed to you. And if you send your letter

by certified mail, return receipt requested,

youíll have proof that the creditor received

it. Include copies (not originals) of sales

slips or other documents that support your

position. Keep a copy of your dispute

letter.

The creditor must acknowledge your dispute in writing within 30 days after it is

received, unless the problem is resolved

within that period. The creditor must conduct an investigation and either correct the

mistake or explain why the bill is believed

to be correct, within two billing cycles (but

not more than 90 days), unless the creditor

provides a permanent credit instead. You

may withhold payment of the amount in

dispute and any related finance charges and

the creditor may not take any action to

collect that amount during the dispute.

For debit: The EFTA applies to electronic

fund transfers ó transactions involving

automated teller machines (ATMs), debit

cards and other point-of-sale debit transactions, and other electronic banking transactions that can result in the withdrawal of

cash from your bank account.
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Lost or stolen debit cards: If someone

uses your debit card, or makes other electronic fund transfers, without your permission, you can lose from $50 to $500 or

more, depending on when you report the

loss or theft. If you report the loss within

two business days after you discover the

problem, you will not be responsible for

more than $50 for unauthorized use. However, if you do not report the loss within

two business days after you realize the card

is missing, but you do report its loss within

60 days after your statement is mailed to

you, you could lose as much as $500

because of an unauthorized withdrawal.

And, if you do not report an unauthorized

transfer or withdrawal within 60 days after

your statement is mailed to you, you risk

unlimited loss. That means you could lose

all the money in your account and the

unused portion of your maximum line of

credit established for overdrafts.

Some financial institutions may voluntarily

cap your liability at $50 for certain types of

transactions, regardless of when you report

the loss or theft; because this is voluntary,

their policies could change at any time. Ask

your financial institution about its liability

limits.

EFT errors: The EFTAís error procedures

apply to certain problems. This can include:

ï electronic fund transfers that you ó or

anyone youíve authorized to use your

account ó have not made;
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ï incorrect electronic fund transfers;

ï omitted electronic fund transfers;

ï a failure to properly reflect electronic

fund transfers; and

ï electronic fund transfers for which you

request an explanation or documentation, because of a possible error.

To take advantage of the EFTAís error

resolution procedures, you must notify your

financial institution of the problem not later

than 60 days after the statement containing

the problem or error was sent. Although

most financial institutions have a toll-free

number to report the problem, you should

follow-up in writing. For retail purchases,

your financial institution has up to 10

business days to investigate after receiving

your notice of the error. The financial

institution must tell you the results of its

investigation within three business days of

completing its investigation. The error must

be corrected within one business day after

determining the error has occurred. If the

institution needs more time, it may take up

to 90 days, in many situations, to complete

the investigation ó but only if it returns the

money in dispute to your account within 10

business days after receiving notice of the

error, while it reviews your concerns.

For stored-value: The FCBA and the

EFTA may not cover stored-value cards or

transactions involving them, so you may

not be covered for loss or misuse of the

card. However, stored-value cards still

might be useful for micropayments and
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other small purchases online because they

can be convenient and ó in some cases ó

offer anonymity. Before you buy a storedvalue card or other form of e-money, ask

the issuer for written information about the

productís features. Find out the cardís

dollar limit, whether it is reloadable or

disposable, if thereís an expiration date,

and any fees to use, reload or redeem

(return it for a refund) the product. At the

same time, ask about your rights and

responsibilities. For example, does the

issuer offer any protection in the case of a

lost, stolen, misused, or malfunctioning

card, and who do you call if you have a

question or problem with the card?

FOR MORE INFORMATION

Your financial institution, local consumer

protection agency and law enforcement

agencies like the Federal Trade Commission or your state Attorney General are

among the many organizations working to

help consumers understand electronic

commerce and new online payment options.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair

business practices in the marketplace and to

provide information to help consumers

spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call

toll-free, 1-877-FTC-HELP (1-877-382-

4357); TTY: 1-866-653-4261. The FTC

enters Internet, telemarketing, identity theft
and other fraud-related complaints into

Consumer Sentinel, a secure, online database available to hundreds of civil and

criminal law enforcement agencies in the

U.S. and abroad.

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Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

March 2003
F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov