Credit Cards Still Best Option for Online Buying

I'm sure I would be singing a different tune if mine had been one of the credit card numbers snatched by hackers, but I just don't see a real need for alternate payment systems.

8 Million Users

Such systems seem to have caught on with auction sites: PayPal has a lucrative deal with EBay (Nasdaq: EBAY) and claims to have more than 8 million registered users. Nothing against PayPal, but I would be curious to know how many users registered, used the service once and then gave up.

The company claims its system is more convenient than credit cards, but I don't think any payment system is easier than typing in a credit card number, which I can do in three seconds flat, from memory, with one hand tied behind my back.

Pay To Play

With online payment systems -- such as PayPal, Citibank's c2it and Ecount -- you must not only register and open an account, but also pay a fee for some types of transactions.

Use a credit card and let the merchant pay the fee, that's my motto.

And most online payment services let online shoppers pay with a check, bank transfer or credit card. Why not just use a credit card in the first place?

Online payment systems have real value for smaller Web merchants because they cost less than credit cards -- but unless consumers are offered more significant incentives to use them, these systems are unlikely to catch on for non-auction e-commerce.

Fraud Still Exists

Then there is the safety issue. Online payment systems have not been immune from fraud, especially in the early days of e-commerce.

And for those concerned about giving out a credit card number online, does it really make more sense to give a payment system direct access to your checking account, as you must with Western Union's MoneyZap?

When problems with online fraud have cropped up in the past, customer service has been less than stellar. And because person-to-person payment systems are not regulated by brick-and-mortar banking laws, consumers have nowhere to turn if they have a problem with such a system, be it fraud or some other complaint.

Cash and Web Don't Mix

Proponents of online payment systems argue that a significant percentage of the population uses cash or checks exclusively. Therefore, they say, Web sites that cannot accept those forms of payment are missing out on a huge market.

But are those people really likely to use the Internet to make purchases? My father doesn't believe in credit and uses his checkbook so often he should have a holster for it, but you couldn't get him near the Internet if you hitched him to a team of Clydesdales.

No Big Deal

It's not that I don't know what it's like to have a credit card stolen. In fact, I have had plenty of experience -- just not online. Once, a crafty New York subway criminal relieved me of my wallet and went on a buying spree at Woolworth. Nothing like shooting for the stars.

Another time, I left my credit card in my hotel room, and someone on the housekeeping staff found it and helped herself. It was just like Internet fraud -- I never even knew the card had been used until I got the bill. Fortunately, the thief was dumb enough to order a multitude of goods on the Home Shopping Network and have them delivered to her home address.

Presumably, Internet criminals are a bit more savvy, since they need to know how to hack into a Web site. Even if your credit card is stolen, however, all you have to do is call the company in order to be absolved of almost all charges.

I realize, of course, that I have now jinxed my luck, and I fully expect my credit card number to be stolen the very next time I buy something online, after which I will be right back here complaining about the shameful lack of Web security. Stay tuned!

What do you think? Let's talk about it.