Secure Internet Transactions

Berglund Authority Level 3

by Jesse Snyder <snyderjw@pacificu.edu>


INDEX:

.01 Common Frauds
.02 Internet Auctions
.03 Credit Card Fraud
.04 Spam Fraud
.05 Separate Bank Account
.06 Credit Cards
.07 Paypal and Online Accounts

A few weeks ago, I got married. Part of the whole marriage process for some is creating joint bank accounts. My wife and I recently went through creating a joint checking account. As we were setting everything up, the banker asked if we made many Internet purchases. The reason being, Internet fraud has become somewhat of a problem, and his advice was to leave my checking account intact. The idea is that we transfer funds over from our joint account into my old account, and make only Internet purchases under my old checking account. That way, if some fraud does occur, the damage is localized to my old account, rather than someone taking advantage of our entire joint account. Of course, I was sold.

We ended up leaving my old account intact. Rewind a few weeks prior to the wedding, when one of my bosses was complaining about some fraudulent purchases made with his credit card. After many hours on the phone talking to machines and getting the run around from his bank, my boss ended up not getting his money back. To be honest, it surprised me that fraud occurred, since to me, Internet purchases seemed fairly safe. Within the last few months however, that sense of security seems to have evaporated.

.01 Common Frauds (return to index)

According to the Federal Trade Commission, there's a growing number of ways people are getting ripped off online:

.02 Internet auctions: (return to index)

The most common complaint of Internet fraud has come from making purchases on Internet auctions. While some people will simply not send you an item you have bid won and paid for, others are much more crafty. Some auctioneers will offer a large selection of items and accept only credit card or use of an escrow service. Once you've won on an item, the seller will send you nothing, or a less valuable item. The best way to protect yourself in this instance, is to check the rating of the seller, as well as contact past buyers and make sure they were truly happy with their purchases. It is possible for an online seller to use fake accounts to drive up their rating, although they won't be checking the email addresses of those fake accounts.

.03 Credit Card Fraud: (return to index)

Another common method of fraud comes from sites that must have the user "prove" they are over 18 by entering their credit card information. While this process is legal and is necessary on some sites, some sites use the "over 18" method as a front to take advantage of your credit card. Typically, these sites pose as adult sites. Really, the only way to protect yourself in this situation is to share credit card information only with sites you know and trust. In addition, make sure the letters "https" appear in your URL bar (for example, https://www.pacificu.edu) versus a regular "http." Without the "s," it means the server is not using Secure Sockets Layer, is not encrypted, and therefore not secure. Anyone with enough knowledge could potentially steal your credit card information.

.04 Spam Fraud (return to index)

Many Internet users get more than their share of spam on a daily basis. Many of these unsolicited emails offer ways to make money, deals on vacations, business opportunities that can't go wrong, working from home, easy credit, free goods and more. 100% of these emails should be thrown away immediately. More often than not, they involve pyramid schemes and fake companies. Steer clear of these emails altogether. These scams prey on people who have limited knowledge of the Internet. People who have fallen for these frauds have been taken for thousands of dollars and had no idea what was happening to them until it was too late.

Also, while on the subject of email, never send or accept payment information via email. Invoices are okay to receive, but email is also not encrypted and not secure.

Besides staying away from common frauds, there are other ways to protect yourself incase something does happen.

.05 Separate Bank account: (return to index)

As noted in my story above, set up a separate account that is only used for Internet purchases. Keep only a minimal amount of money in the separate account, and move more money before you make a purchase. Make sure your bank has fraud protection as well. I spoke with my banker from US Bank, and he claims that US Bank prides themselves on fraud protection.

.06 Credit cards: (return to index)

Be sure to get a credit card that offers great fraud protection as well. VISA claims to have excellent fraud protection, or what's called "Zero Liability: Complete Fraud Protection." Essentially, the $50 cardholder liability for fraud has been lifted, and the 48-hour reporting period on fraud has been removed. In addition this protection works with debit and credit cards, which is almost unheard of. However, this does not apply to ATM transactions. Really, the Zero Liability protection is for people who have had their card number stolen and other people are using it online.

.07 Paypal and online accounts (return to index)

By setting up an online account, you keep your regular bank account hidden from potential frauds. Paypal offers a free, online, third party account. The standard paypal account can have funds transferred into it and checks can be mailed to you out of this account. You can set up the account to deposit and withdraw money into your regular bank account as well, but you must also go through a rigorous process to do so. Really, setting up Paypal is more useful, but you run the risk of someone accessing your funds if you set up your account this manner.

Even with all this protection, fraud does happen. Do what you can to protect yourself, but if fraud does happen to you, take care of it immediately. Contact your bank and credit card company. Overall, keep an eye on your bank accounts, watch for purchases you didn't make, and remember that fraud has been going on long before the Internet was around. The only real way to protect yourself from fraud is to not use your card at all.