Payment Service Ratings

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Payment Services

For a free e-book called "The FoolProof Guide to Accepting Credit Card and Check Payments," click here.

Read What the payment services don't want you to know

Read A lawyer's interpretation

Helpful phone numbers and web sites dealing with Internet fraud www.Basestealer.com.

Don't play with fire!

For the curious, My Credentials.

My agenda

Ratings of payment services Update 2/4/2008

Google Checkout Permits Invoicing

The main thing preventing me from wholeheartedly endorsing Google Checkout was the difficulty the average seller would have making it work with their web site. A lot of programming work was needed if you had ever-changing items and discounts. But Google has made this easier with e-mail invoicing, similar to paypal. Your customers place orders and indicate that they wish to use Google checkout. You sign in to your Google account and send them invoices. They pay those invoices and the money goes into the bank account you have set up in your Google account. It's not quite as easy as paypal, but it's pretty close. I believe Google is more secure than paypal (I haven't heard of anyone complaining that their Google account was locked, while money was being accepted "for them" that they couldn't withdraw or refund.) I also find that many of my customers find me due to Google searches. Google's fees are also slightly lower than Paypal's. Competition from a real player can only be good for all of us.

I can't really rate this service on safety from fraud and prevention of fraudulent charge backs. I do know they're big and accepted by many large vendors (as is paypal). I haven't heard a single complaint. If anyone has some feedback, I'd like to hear it.

Bidpay is back!

Bidpay is back in business with a revamped method and as close to 100% buyer/seller protection as anyone can expect. See the rating further down below.

Beware of New Payment Services

New payment services keep popping up. Many of them use the public's fear of certain heavy-handed services like Paypal to garner "customers." Their sites say things like "Are you tired of payment services that can freeze your whole account? Well, we won't." Then they make all sorts of grandiose promises. Some offer bonuses for signing up and referring your friends. Be very careful! Some of these so-called payment "services" are no more than frauds set up by thieves. Their purpose is to get you to reveal your credit card number, bank account, even social security number. You give these thieves access to your identity. The cost of identity theft is incalculable. It has cost people thousands of dollars, many hours of their time, any possibility of ever owning a home, and worse. Do not sign up for a payment service without checking them out carefully! Here are some tips:

Who is behind the service? A number of these services do not reveal the names of the principals or the companies behind them.

When was the site registered and who owns it? Some of these payment services were registered recently to a single individual using a hotmail (or yahoo, juno, etc) ID. Not a very reassuring sign of stability.

Read the text carefully Some of these sites do little more than bash Paypal and then make vague promises. One particular site has contradictory statements. After promising they will never freeze accounts, under their terms they mention "and if your account is frozen." After saying they won't allow chargebacks like Paypal, they mention "and in the event of a chargeback." Their legal terms could not have been reviewed by an attorney because they make statements that even a non-attorney like me knows would never stand up. For example, they claim that their terms can change at any moment without notice and customers are bound by this. Even Paypal understood that customers have to be warned about changes to the terms and given the opportunity to accept or reject them. They claim that making a chargeback for any reason is fraud. Cardholders have the right to make chargebacks under certain situations and this is not fraud. So to me these are all warning signs of a service that is at best being run by rank amateurs or at worst, by someone interested in harvesting credit card and bank account information.

C2it is no more

Citibank's unwanted, ignored orphan child has finally been put out of its misery. In its inception, this payment service seemed like a ray of hope: a service run by a reputable company that followed real regulations and couldn't just make up the rules as they pleased. But very quickly it started showing signs of being an unwanted child. Citibank seemed unwilling or incapable of addressing the many bugs, which prevented many people from signing up. It wasn't as if they were spending nothing on the service. There was 24/7 toll-free support. Transactions which did make it through were completed quickly and efficiently and, for a long time, at no cost to buyer or seller. The site was updated regularly with new information and new graphics. But the bugs were not fixed and the frustration led to more people abandoning C2it as a viable option. Soon the service will be gone and I doubt it will be missed. Only Citibank can explain why they spent so much money and effort in order to produce a failure.

Auctionbytes Seller Survey

Auctionbytes recently did a survey of sellers and this little tidbit was among the results: "10% of sellers have had a buyer do a chargeback on a purchase when using an online payment service, and 8% of sellers have had their account frozen by an online payment service due to a problem buyer or by error." As cynical about payment service as I am, these numbers scared even me. I would never have guessed that the problems were this bad. Even a 1% rate would be bad enough. Would you open an account with a bank that said, "We routinely shut down 1% of our accounts with no warning for security reasons"? Would you open a store where the landlord has the right to lock you out of your own store for weeks on an unsubstantiated complaint, even if he only did this 1% of the time? Why are sellers entrusting their entire business to a heavy-handed "partner" whose actions violate every rule of business management or ethics?

Sellers, beware of dealing with the wrong merchant!

Some folks have asked about getting involved in drop-shipping deals, where they run the auctions and the goods are sent directly from the merchant to the customer. Though I and others have been doing this for years and it works very well with the right merchant, it is very important to know who you are dealing with. Dealing with the wrong merchant will leave YOU holding the bag. The link I posted about this is no longer on the web. Incidentally, this crook, like many others, used paypal to receive money from his victims. Months later, his account was still open despite numerous complaints and despite his sending his victim a letter boasting about how he was a "safe as teflon because nothing sticks to him." Paypal was of absolutely no use. We discovered that complaints had been made against him months earlier, some of which had even been upheld and the buyers reimbursed. Why did they allow him to continue to scam?

Credit card scammers arrested in NY.

Merchants are fighting back. Join a group of Online merchants who have banded together to exchange information on fraudulent cards and methods of combatting online fraud. Merchant911.org.

I have stated in the past that when folks use an online payment service to make a payment, they may be giving up their charge back rights. I was told this by officers in the credit card department of several banks. Here is a link to an article which states this. Note that it is a bit out-of-date, particularly in reference to the fees being charged. Online Payment Services.

Author meets with celebrities and lawmakers to discuss online payment services. Article and photos

My 7/1/01 AuctionBytes Article on Payment Services Quick Ratings Chart with Fee Information

Just for the record Because of certain baseless accusations that have been made against me on the forums I would like to state for the record:

1) I am not an employee of, consultant of or have any connection to any payment service except as a customer or former customer.

2) I personally have never had any charge backs from any payment service and my account has never been restricted. My personal experiences with payment services, (including the ones I don't recommend such as Paypal, Paydirect and Billpoint) have been good.

I post these web pages as warnings based on information that I received via email or found on the boards. You can choose to disbelieve them all if you like. You can decide that hundreds of posters had nothing better to do than make up stories about companies providing them with free services. You can also wonder why, if these stories aren't true, the companies didn't just say so. Instead, those (like Exchangepath and Paypal) who bothered to go to the sites where the complaints were posted, either blamed the complainer or the complainer's ISP or made excuses for why it happened.

Note about credit card services: There are three problems to worry about in a transaction: 1) the buyer is using a stolen credit card, 2) the buyer will receive the mechandise and charge it back with a false complaint 3) the seller will receive the payment and not ship or ship something very different than what was ordered. Because credit card rules are so badly skewed in favor of the buyer (see What the payment services don't want you to know) sellers run a high risk when they accept credit cards and an even higher risk when using a third-party payment service. Banking laws are more clearly defined and validation of payer ID is higher. Therefore a service that uses a bank account payment will be safer. I have therefore rated the payment services based on how they respond to these three problems.

General note about fraud: A basic fact of a business transaction over the Internet is that there is no way to protect both parties. The method will either favor the buyer or the seller. Credit cards favor the buyer and many sellers have been taken by scamming buyers. Money orders favor the seller and there have been buyers scammed by dishonest sellers. I believe that it is the sellers who need protection more than the buyers for these reasons:

1) There are far more buyers than sellers. If there is a tool that can be used by buyers to scam, it opens a much bigger door for fraud than a tool that can be used by sellers.

2) Buyers can choose their sellers. Sellers don't have the luxury of choosing their buyers. Buyers can check out a seller's ratings before making a bid. There is a reason why the famous saying is "Buyer Beware." Only the buyer has the means by which to be aware.

3) Sellers have to maintain a reputation, buyers don't. So it is far easier for a buyer to keep changing their ID and scam victims than for a seller to do the same. Most buyers who have been scammed on auctions bought something from a seller with low ratings. In a sense, they asked for it. Now I don't condone taking advantage of a person under any circumstances, but if someone fails to exercise their due diligence, they have no right to complain that another party (an auction site, a payment service, a government agency) should have protected them from their own ill-conceived actions. There are laws to protect people from muggers and burglars. But should we make a law that if someone leaves their wallet in a restaraunt and it disappears, they can sue the restaraunt? Some people want to hold the payment services or auction sites responsible for their own negligence. Paypal tried to come up with a plan to protect everyone. The result became so convoluted that only the scammers managed to stay protected.

If you feel you have been defrauded on the net by an individual, company or payment service, you can fill out an online fraud report.

Beware of another auction scam!

Egold is a payment service similar to paypal but with a few significant differences. 1) It is based on gold. When you open an egold account, you are actually buying a quantity of gold. If the price changes, the value in your account changes. 2) The price you pay depends upon the quantity purchased. The more you buy, the better price you get. 3) There is a minimum amount which must be purchased. 4) Payments are made to account numbers. You don't see the name of the recipient. 5) Payments are non-refundable. If you pay the wrong account by accident, it's too bad.

Because of these factors, it is common for people to open egold accounts with large purchases and then sell them in smaller blocks to investors who can't come up with the minimum purchase. There are also sellers who accept egold for their auctions. If you win one of their auctions and don't want to open an egold account, you might pay an existing account holder who accepts paypal to act as a middleman and ask him to then pay your seller.

A well known egold seller received several emails from someone telling him that some payments for egold were on their way and giving him an egold account number in which to deposit these payments. He then received some money orders and payments via other payment services, just as he had been told. He began depositing egold payments in the account that he had been instructed to fund. Along comes a money order with a note reading, "this is for the digital camera on ebay."

Now this egold seller does not sell anything on ebay. So he called the person who had included his name and phone number along with the money order. He was shocked to discover that a seller had been offering all sorts of popular and expensive items on ebay and instructing his winners to send checks, money orders and electronic payments to this egold seller. The egold seller had then sent off non-refundable payments to an annonymous egold account. The actual scammer remains completely untraceable and the egold seller is on the hook for a few thousand dollars.

The moral of the story:

-know who you are doing business with. Buyers should not have been bidding on the expensive items of a brand new seller with a hotmail address and no ratings.

-always include some basic information with a payment, particularly who you are and what the payment is for. If the first few buyers had done this, the whole scheme would never have worked.

Bidpay ***

After disappearing for a while, Bidpay is back. The company was bought by another consisting of some of the original managers. Bidpay also has a whole new way of doing business which appears much smarter than the old way. This is the first payment service which appears to fully protect both buyers and sellers. Buyers use their credit cards, so they have all the protection offered. Sellers receive payment directly into their bank accounts. No more waiting for money orders which have on occasion gotten lost in the mail. No more receiving emails to ship the product, only to get one later saying "Sorry, don't ship yet." (When this did happen, which was rare, Bidpay covered the cost.) Bidpay also guarantees the payment. As long as the seller adheres to some very simple rules, they are protected. Seller must be able to show proof of shipping to the buyer's registered address - not proof of delivery, (which you can't get on foreign shipments). Bidpay will never go into a seller's account to remove the payment. (Unlike Paypal's promises of protection which are often voided.) At the moment, because they never go into a seller's bank account, they don't even offer a refund option through the service. If the buyer or seller can't complete the deal, they have to come to their own agreement. However, in the future Bidpay plans on offering order cancellations and bank account to bank account (ACH) tranfers. Bidpay can be used for auctions only. It is not an open-ended payment service like Paypal.

In a change of policy, sellers pay the fees. Originally, buyers paid the fees, but sellers were protected from charge backs. This model makes more sense. Payment services have always been buyer-oriented or seller-oriented. A credit card is buyer-oriented because the seller has little recourse against charge backs. A money order is seller-oriented because once it is sent, the buyer has little recourse against seller fraud. I believe Paypal's big mistake was trying to be both. I also believe that the "customer" is always right (or at least most of the time) so I don't understand services which take the other party's side against their own customer. The "customer" of a credit card is the seller. It's the seller who pays the fees. Yet the buyer wins in most disputes. The "customer" of a money order is the buyer, yet a seller paid with a money order almost always wins. Bidpay protects its customer, the seller, against charge backs, while the buyer's credit card protects him.

The service is still "new," so some features may become available in the future such as refunds and direct bank account to bank account transfers between buyers and sellers.

Seller protection against fraud: high. Buyer protection against fraud: high. Seller protection against charge backs: high.

Payingfast.com

Payingfast is gone.

Paypal ?* (Use caution)

There have been a number of improvements, particularly in the area of customer service. There is a toll-free number and I was able to get through fairly quickly to a helpful person. But my situation had nothing to do with fraud or a chargeback, areas where people tell me paypal is of little use. Complaints in general have gone way down. But every so often I still run into a seller with very high feedback who tells me he was forced to pay a scammer, despite the other person's numerous negatives on ebay and repeat offenses. Some sellers had their accounts frozen over one or two complaints. This is unconscionable. The only excuse for freezing an account is if there is a valid reason to suspect fraud. Can you imagine if your bank froze your account over a single bounced check and then held on to your money for months? Continuing to accept money into frozen accounts, money which the seller can't even refund to the rightful owners, is tantamount to fraud in my opinion. When a seller commits to accepting paypal, puts it all over his site and in every auction, and then has his account frozen over one complaint, he can be put out of business. Though it is happening rarely, Paypal should not be permitted this practice.

I also don't understand why I can accept credit card payments from a verified account with a confirmed address and have paypal show me that it is not eligible for protection.

Sellers thought if they did not accept credit card payments they would be safe. That is not true. Scammers have reversed non credit card payments. Buyers thought were safe if they used credit cards. That is not true. The charge sometimes goes through as a service of money transfer, rather than as a payment for goods. Therefore the service was provided and no charge back can be done even if no merchandise is received. I received an email from a buyer who used his Discover card via paypal and received nothing. Paypal refused to help and Discover denied his charge back. So while paypal works if both parties are honest, it leaves the field wide open to scammers. If you want more details, we have a detailed Paypal page.

So while I still recommend paypal as a safe way to pay and accept payments, provided some caution is taken, I strongly advise NOT to make it your only payment method. The chances of your account being frozen are low, but would you do business with a bank who froze even 1% of their accounts?

Seller protection against fraud: minimal. Buyer protection against fraud: moderate. Seller protection against charge backs: almost none.

Propay *x0 (use extreme caution)

At 3.5% + 35 cents per transaction, and another 35 cents to withdraw the funds, they are rather pricey. But they do offer two advantages. You can pretend to have a merchant account, since you charge the card yourself and the address verification reports if the address given you matches the cardholder. They also have two problems. One, you don't find out if the address matches until AFTER the charge goes through. If it doesn't match, you have a small window of opportunity to cancel the transaction before you are charged transaction fees. Two, I have tried to charge at least 12 cards and in every case it reported that the address didn't match. The last card I tried was my own, which I have used successfully for years. Propay reported that the zip code didn't match. I tried it twice and it's hard to misspell a zip code. So I am pretty certain that Propay's verification doesn't work. Yet their customer service wants me to believe that the same problem is the fault of 12 different banks.

You have to wait a few days for the money to be available in your Propay account. Then you have to withdraw it to your bank account and wait another few days. Propay's fees are rather high for less service than you get with Paydirect and longer waits for your money. What kind of protection does a seller get? Absolutely none. Sellers are responsible for all charge backs plus charge back fees. Though some sellers have told me that they like the fact that Propay lets them pretend to have a merchant account, I feel that the fees are too high, the service too low and the potential for charge backs too high to justify using it regularly. But because there are foolish buyers out there who think that you are somehow more reputable or that they are safer if you charge their card directly, I did use it before I got my merchant account.

Seller protection against fraud: moderate. Buyer protection against fraud: high. Seller protection against charge backs: none.

Incidentally, a site once popped up called Paymentalt that copied Paypal's text. Whole sentences were copied right out of Paypal's pages. I warned folks to stay away from them, since any company that does this is not to be trusted. Sure enough, about 14,000 folks signed up and later many found fraudulent charges on their CC. Last I heard, the owner was being sought by authorities. So beware of new sites that pop up, offer incentives for joining and have no background info on the principals.

The Good News

Even Visa itself is responding to the complaints of numerous vendors. They are now beginning a program which will allow even online vendors to verify that the person making the charge is indeed the cardholder. If the merchant belongs to this program, then the cardholder can not claim the charge was unauthorized. Visa Security article