We live in a world that is more connected over mobile phones and chats than human connections. From getting a cab to buying furniture, everything can be done online. The pace at which e-commerce is growing globally is mind-boggling. India’s internet economy is majorly backed by e-commerce and as per IBEF 2017 reports internet penetration in India registered a CAGR of more than 24 percent from 2007 to 2017. We are at an upward trajectory of becoming the second largest online retail market in the next 10 years.
With the customer base increasing every year, companies have also evolved to offer a number of payment methods for online shoppers. Net banking, debit cards, credit cards and digital wallets are popular ways of making payment when you are shopping online. But which one of these should you choose?
Credit cards are increasingly gaining popularity as preferred mode of payment for online transactions as popular websites like Amazon and Flipkart are offering discounted deals on specific credit cards. Some credit cards also offer extra rewards when you shop online. So let us delve deeper to understand why credit cards are good modes for online shopping and what should be kept in mind while using credit cards online.
What makes credit cards better options for online shopping?
Using credit card for making an online transaction is a smarter move because of the following reasons-
1- Pay Back in Easy EMIs
With a credit card, you can make all your dream purchases without having to part with a big amount at once. Just swipe the card and convert your big-ticket purchases into easy EMIs which you can pay back over a period. Popular e-commerce websites also come up with no-cost EMI option on some credit cards which means you would not have to pay any interest on that purchase.
The option of EMI conversion is quite convenient when shopping online. You just have to select the tenure of the loan at the time of checking out and the instalments will be made by the bank. The details of the transaction will be communicated in detail in your next statement or you can also login to your credit card net banking profile to check the same.
2- Earn Rewards
Although some debit cards have also come in the market that let you earn reward points every time you swipe them, credit cards have always offered this facility. You can also earn loyalty points and air miles when you make a purchase. The number of reward points earned depends on the card type and also on the category of transaction you are making. For example, SBI Card ELITE lets you earn five-times more reward points when you use the card to pay for dining or departmental store spends whereas SBI SimplyCLICK credit card offers you ten-times more rewards when you shop online with partner stores and 5x rewards on other online spends.
On some travel-centric credit cards, you can earn air miles in place of reward points which can give you discounts when you are booking a flight ticket. Different credit card issuers have an assorted rewards catalogue from which you can choose the gift vouchers or merchandise against which you want to redeem your rewards. This earning-with-spending facility cannot be availed when you are using other modes of payment.
Also Read: Follow These 7 Strategies to Optimize Your Credit Card Rewards
3- Better Fraud Prevention
Over the last few years, government is paying much attention to data theft and online security breach. In light of this, several credit card issuing companies have improved their security and card monitoring functions making credit cards a smarter and more secure way of shopping online. Even if someone has complete details of your credit card, he cannot make any transaction as your card is PIN secured. You are also required to enter the OTP received on your registered mobile number to authenticate the transaction providing additional layer of security. On your part, as a smart customer you should always use your credit card on trusted websites only. Look for the Verisign logo on the payment gateway page. If the page is Verisign approved, it can be considered as a trustworthy website.
4- Faster Dispute Resolution
When you report a fraudulent transaction on your credit card, you can raise a dispute with your credit card company. They will look into the matter and do some basic investigation to ensure that it was a fraud transaction. The amount will be credited back into your account. Dispute resolution process is also available with debit cards but it might take a longer time to resolve.
If your credit card dispute is not resolved at bank level, RBI has appointed an ombudsman to assist the customer. You can escalate the issue to the ombudsman after which the bank is bound to respond within 30 days and provide satisfactory evidence within 60 days in case of wrongful billing.
5- Credit Building
Another important reason why you should put your shopping expenses on credit cards is that it will help you in building credit. When you use debit card for purchases, the amount gets directly deducted from your account. They might give you some rewards, but neither do they help you build credit nor do they report your account activity to credit bureaus. On the other hand, credit cards are short-term loans and when you regularly service the EMIs you are building a good credit history for yourself. If you continue to exhibit responsible habits, your credit score will only improve.
Credit Card vs. Debit Card: Which is safer for online use?
Data breaches being the hot topic these days, several banks have enhanced the security measures on all their products. However, using a credit card adds an extra level of protection against fraud. A number of credit cards come with zero lost card liability cover under which you are not liable to pay for any transaction made on the card provided that you inform the bank about card loss within 24 hours. Debit cards offered with premium savings bank accounts may also have this feature but it is quite common with credit cards.
So what should you do when you see a fraud transaction on your credit card?
The first thing to do is call your bank and inform them about the fraudulent transaction. If you have lost the card, the bank will immediately block it after you report the loss. You may also be required to lodge an FIR with a police station. This will work as a proof at the time of dispute resolution. A copy of your passport may also be required if the card is lost in a foreign country. The bank will issue a new card for you in case of card loss or theft.
Also Read: Unauthorized Transactions on Credit Card: What Should You Do?
The Reserve Bank of India (RBI) recently stepped in to protect customers against credit card frauds.
- The cardholder will have zero liability for the fraudulent transaction if there is contributory negligence on part of the bank.
- In case of third party breach, if the customer inform about the fraud within three working days and there is no deficiency on part of neither the customer nor the bank, the customer would not be held liable.
- Banks have to ask their customers to mandatorily register for SMS alerts and e-mail alerts.
- If the customer fails to report the fraud within 7 working days, the liability will be determined as per the bank board approved policies.
- In case of unauthorised electronic banking transactions, the burden of proving customer’s liability is on the bank.
- If the fraud has happened due to the negligence of the customer, he will be held liable for it.
What to watch out for when using your credit card for online shopping?
Along with the benefits of shopping online, there are a handful of precautions that you need to take when using your credit card online. There is a web of credit card scams out there and to keep you safe, you must follow these practices-
1- Use your credit card on trusted websites only
As mentioned above, you should always use your card on trusted websites only. Double-check the website on which you’re making the credit card transaction to make sure whether it is from the real merchant or not. Some sites which are poorly designed and outdated should be treated with suspicion and should be avoided. It is advisable to thoroughly check the domain name as the name of the fake sites differs from one character only in most cases. Never enter logins, passwords, banking credentials, or any other personal information on the site unless you are sure of its authenticity. You can usually trust big names like Amazon, Flipkart, etc.
Avoid clicking on email links, particularly in unsolicited emails, because these links could take you to fake websites that would look like a realistic website but have been set up for the sole purpose of stealing your credit card information. Instead of clicking the link it’s better to type the address yourself to avoid landing on a fake website owned by the spammers.
2- Do not use your credit card at public networks
One should never use public computers and networks to make online transactions. Login credentials are often saved at public computers which increases the risk of fraudulent activities. Even after logging out, it is possible that your keystrokes are recorded by the hackers. Hackers set up a free Wi-Fi that doesn’t require a password so that you’re on the same Wi-Fi signal. In this way, snagging your information while it’s being transmitted becomes easy for the hackers. Hence, it is always advised to do the credit card purchasing over a secure network as sensitive personal information like credit card information, personal data, etc. can be stolen by anyone. Wi-Fi connections at public places like airport, cyber café, coffee shop and other public places aren’t secure and should be avoided to make credit card related transactions.
3- Keep an eye on your credit card statements
Every time you use your credit card, a record of that transaction is maintained with the bank making it easier for them to trace and recover your valuable money at the time of fraud. You should regularly monitor your credit card statements to detect any fraudulent or unauthorized transactions. If you notice anything amiss and suspicious, immediately contact the issuer. Also make sure your statement doesn’t contain any error or unusual fee. If you spot any such discrepancy in your statement contact your bank to remove the false amount and don’t forget to check whether the money has been reimbursed.
4- Don’t save your card details on shopping websites
Though it seems convenient to save your information in your browser or on a popular e-commerce websites, inconvenience may be better to maintain the security of your credit card. Whenever you make a purchase from a website, you will see a pop-up that gives you the option to remember your information automatically for the future purchases. You should simply click on the ‘No’ option if you do not want credit card skimmers to know your personal information. The browser you are using may also ask the same so that it remembers your card number, name on the card and expiry date. The next time you make the payment using the same browser, you can auto fill your saved card information. However, this is also not recommended to maintain the security of your card.
So, these are the things you need to keep in mind before making an online transaction with your credit card. You should also consider the currency conversion fees when you make a purchase from an overseas merchant.
Final Thoughts
If you compare, credit cards have indisputable advantages over other modes of payment. With a credit card, you can buy almost anything on the internet along with better security against fraud. And at the end of the day, convenience and security should matter the most.