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How does an online payment service work?

The first step is to set up an account with details on how you want to pay – whether it is through credit card, bank transfer payment processing company etc. When you want to make a payment to a seller promoting a certain service, you simply have to tell the service who to pay. The amount is charged to your credit card or withdrawn from your account and immediately transferred to the seller.

If the payment cannot be made electronically, some services will issue a check or money order especially for overseas customers. However, this has some drawbacks.

• It is inconvenient because you need to get to a bank to first purchase the money order.
• Secondly, it takes time to get you merchandise to you. Many sellers who accept checks and money orders will delay shipping your purchase until your check has cleared or they have been able to confirm the money order is kosher.
• Thirdly, there is no protection with checks and money orders as you do when you pay with credit cards. Banks and money order issuers can't do a charge back the way a bankcard merchant account provider can.
• Lastly, the potential for fraud with check payments is higher than with credit cards. Check amounts can be altered, or the seller can use the information on your check to steal from you later.

Another online payment option that is popularly used with high-dollar purchases is an escrow service. Here, you deposit the funds with an independent third party. The merchant ships the merchandise when it receives confirmation that the funds have been deposited. When you receive your purchases and are satisfied, you can let the escrow company know, and the funds are released to the seller. If you are not satisfied or you don't receive the goods, the funds are held while you resolve the problem with the merchant.

Cash and debit cards are hardly ever used for online transactions. Cash can easily be stolen. While debit cards do offer some security and fraud reimbursement programs , most do not offer the same level of protection as a credit card.