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by Lloyd A. de Vries

Vol. 40 - You Can Bank On It

If you're going to buy and sell stamps and covers over the Internet - and more and more of us are - then you have to figure out a way to pay for them or accept payment.

Of course, you can buy and sell, and then use checks, money orders or even cash by regular mail. Many philatelists still do that. It's not so much that it's a safer method of payment, because thieves can still intercept mail and steal the contents. (This is particularly true if the envelope is addressed to or coming from "Acme Stamp Co." or something that indicates there might be something valuable inside.)

However, many sellers don't want to wait for payment. If the transaction crosses an international border, not only can receipt of the check take quite some time, but converting the currency (your check written in U.S. dollars into euros) can be expensive.

So some online sellers specify an electronic transaction or don't bother to buy.

Serious dealers with sufficient volume may accept credit cards. Banks and their intermediaries (called service bureaus) may require certain credentials before giving a credit card acceptance account to a merchant, such as enough sales, a physical location (rather than just a Web site), and a number of years in business.

Then there's PayPal, which has become ubiquitous for online sale. It doesn't require a track record as a merchant, a brick-and-mortar location (the online term for a physical presence) or even a minimum amount of sales.

What PayPal accounts do require is a bank account, from which the account holder can withdraw funds or deposit them. Of course, most banks issuing merchant credit card accounts also expect the merchants to have business banking accounts at the institution.

There are two types of PayPal accounts: Personal and Premium/Business. (There are differences between PayPal Premium and Business accounts, but they're minor.)

Personal and Premium/Business accounts both work the same way for buyers: You either click on a merchant-supplied link to pay for the item via PayPal, or you log onto the PayPal Web site and direct the service to pay a merchant.

PayPal last year changed its fee structure, so there isn't much difference between Personal and Premium/Business accounts: Both now can accept credit cards and pay a fee for receiving money in commercial transactions, neither of which had been true for Personal accounts. The major difference seems to be that Premium/Business customers get a PayPal/MasterCard debit card that can be used to access an account's funds.

If you use it at an ATM, you'll pay a small fee to PayPal (I think it's $1) and whatever fee the ATM owner imposes.

If the debit card is used as a credit card (that is, with a signature instead of a Personal Identification Number, or PIN), a small rebate is paid at the end of the month. Premium/Business accounts also earn 0.05% interest on their account balances — not a huge amount, but not bad compared to regular banks' accounts in this economy.

I use my PayPal debit card to make purchases. Rather than invoke that ATM withdrawal fee to get cash, I'll make non-philatelic purchases with it and reimburse my philatelic account. That way, I get both the rebate and avoid the ATM fee.

I haven't had any problems in the nine or 10 years I've had a PayPal account, but I have heard horror stories from dealers about how PayPal handles chargebacks (when the seller complains that the merchandise was shoddy or not delivered, and gets a refund). As with most credit card servicing agreements, PayPal presumes the customer is always right, and the burden of proof is on the seller, so when there's a dispute, the money is deducted from the seller's PayPal account.

What happens if there's not enough money in the PayPal account to cover the chargeback? Let's say you sell a stamp for $100, and decide to buy something with the PayPal debit card for $75. The next day, your buyer complains there's a tear in the stamp and demands a refund. PayPal tries to deduct $100 from your account, but there's not enough there.

So PayPal pulls the other $75 from your linked bank account. You authorized that; it's in the user agreement, whether you read it or not.

That's unsettling enough, but if there's not enough money in that bank account, or it doesn't leave enough money to cover a check you've written, you're going to get hit with overdraft fees and other unpleasantness.

Again, this hasn't happened to me, or other sellers I know well, and I don't hear these tales of woe very often. Most stamp collector customers will contact you about a problem before yelling to PayPal.

There's also a safeguard for this: Don't keep a lot of money in the linked account. Mine is a personal checking account, which I use to deposit checks written to me personally, rather than one of my businesses. It rarely has more than $25 in it, because I move anything more into my business checking account. (I can do that online, for free, through my bank's online banking.)

I've expressed amazement in this column before that no one is challenging PayPal for what the industry calls online "micropayments." I expected that from one of the Internet banks, like Orange, or one of the major banking conglomerates.

Instead, the closest competitor is Google Checkout. Users don't have balances online. Instead, buyers pay via credit card, and Checkout sends the money (minus fees) to the registered merchant.

Most of these online methods send the data to the company (the credit card service bureau, PayPal, Checkout, etc.) in an encrypted form. For maximum personal security for your financial data, look at the Web site's URL (address): If the address starts with "https://" that means it's a secure site that uses encryption. If the address starts with plain old "http://" (no "S"), then it's not.

But I've sent my credit card number to sellers in unencrypted e-mail messages, and so far - knock wood! - haven't had a problem. If I'm feeling paranoid, I'll sometimes send part of the credit card information in one e-mail, and part in another. You'd be surprised at the different routes through the Internet consecutive messages to the same address may take!

Back before the Internet, someone could intercept your hard-copy mail, learn your bank account number, go to a distant branch where you weren't known, and try to withdraw money from your account. Sometimes they succeeded. They still can. Every week, there are news stories about bank officers, attorneys and relatives who embezzle from bank accounts.

I think a bigger risk isn't in the transmission of your financial data; it's what someone does with it once it's received, just as with non-electronic finance.

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