Charge It! A Review of Online Payment Services By Yisroel (Izzy) Goodman AuctionBytes.com
June 30, 2001
In the 2+ years I have been auctioning on the Net, I have not had a single charge back, restricted account or any similar problem with any payment service. So it is tempting to say, "Why not just use the free ones?"
The reason to choose a payment service based on service and security and not cost is because the one time you may have a problem, it might cost you more than you saved in all your previous transactions. But the good news is that the best services are not necessarily those with the highest cost.
Most online payment services charge the seller, and most fees are based on the purchase price of the item being sold. Credit card companies allow a purchaser to "charge back" an item if they are dissatisfied for a valid reason. Some of the online payment services that use credit cards also allow charge backs, giving a degree of protection to buyers.
Here's a look at some of the more popular online payment services used by auction buyers and sellers. See individual Web sites for details.
Citibank's C2ithttp://www.c2it.com
FEES: Fees charged to buyer. 1% fee, $.50 minimum. First month free. $10 bonus when first payment is made. See Web site for spending limits and international fees. (Click on Fees and Limits at bottom of screen)
PAYMENT: seller withdraws funds to credit card (even non-citibank card) or bank account. $3 fee for check request.
SECURITY: Sellers will not be charged if buyer uses an unauthorized credit card. While charge back procedures are determined by the credit card used, sellers will be protected against charge backs as long as there is no indication of seller fraud. Buyers paying by credit card can attempt charge backs if they feel defrauded. The outcome will be determined by the credit card used. My feeling is that buyers and sellers will be protected if they use common sense in making and accepting payments.
CUSTOMER SERVICE: Email and toll free number with fast response.
NOTE: When you open your account, you are given several check off boxes if you do not want your information shared and if you do not want to receive offers. Despite the fact that the text suggests you must send C2it a letter, I have confirmed that all you have to do is check off the boxes. C2it does not work with Webtv.
Western Union's Moneyzaphttp://www.moneyzap.com
FEES: paid by seller. ACH/Checking - 1.75% of $ amount sent + $.35 (minimum fee $.50, maximum fee $3). MoneyZap funds - 1.75% of $ amount sent + $.35 (minimum fee $.50, maximum fee $3). Credit/Debit Card - 2.8% of $ amount sent + $.35 (minimum fee $.50, no maximum fee).
PAYMENT: seller withdraws to bank account
SECURITY: Western Union contacts every payer when the first payment is made. They claim that they have never processed a fraudulent payment. Though they will investigate issues of fraud and charge backs, sellers are responsible for any charge backs made against them. When using a credit card, buyer has charge back rights.
CUSTOMER SERVICE: Email and toll free number with fast response.
NOTE: For U.S. residents only
Achexhttp://www.achex.com
FEES: free unless seller opens a business account with Achex. This service requires sellers to "apply" before giving information about merchant accounts, so auction sellers may not qualify as merchants.
PAYMENT: money is electronically transferred from buyer's bank account to seller's bank account.
SECURITY: Because this works bank account to bank account, there can be no charge backs. However, banking laws do permit a buyer to stop a payment by filing an affidavit of fraud. There is a limited amount of time during which the buyer can do this, and it is a crime to file this falsely. So while buyers do have recourse in the event of actual fraud, sellers will be protected against false claims.
CUSTOMER SERVICE: Fast response to emails. Toll free number. For U.S. residents with U.S. checking accounts only.
BidPayhttp://www.bidpay.com (Not to be confused with BidBay)
FEES: Fees charged to buyer. $5 fee for up to $100. For purchases over $100, there is a fee of $5 plus 2.25% of the purchase price. There is a $500 maximum purchase price.
PAYMENT: seller receives a money order in the mail.
SECURITY: Buyers are on their own, and this is not an escrow service. Once seller has received money order, the transaction can not be reversed.
CUSTOMER SERVICE: In recent months there have been several posts on AW about mistakes made at Bidpay with no response to calls and emails. I cannot verify the veracity of those postings.
NOTE: This service is restricted to auction transactions. See site for geographic restrictions.
Payingfasthttp://www.payingfast.com
FEES: Fees charged to buyer: $4.49 for up to $100 plus an additional 1.5% of purchase price for transactions over $100. See Web site for details and maximum purchase amounts.
PAYMENT: seller receives a money order in the mail.
SECURITY: Once seller has received money order, the transaction may not be reversed.
CUSTOMER SERVICE: Toll free number and email.
NOTE: Payingfast is a small, privately owned company. It is offering a $2 bonus to sellers who recommend the service. See Web site for geographic restrictions.
PayPalhttp://www.paypal.com
FEES: Personal accounts are free and are limited to receiving $100 in credit card payments per month. Business accounts are charged 2.2% + .30 for credit card transactions, paid by seller. NEW FEES: PayPal will introduce two pricing tiers for Premier and Business accounts effective July 14, 2001. The Standard Rate for receiving payments will be 2.9% + 30¢. It will offer a Merchant Rate of 2.2% + 30¢ to members who have received an average of over $1,000 per month and who have been with PayPal for at least three months.
PAYMENT: withdrawal to bank account. Fees charged if check requested.
SECURITY: Paypal tried an ambitious "protection plan" devised to protect both buyers and sellers, but I find it unsatisfactory.
CUSTOMER SERVICE: I've heard bad things about PayPal's customer service, and the Better Business Bureau reported having received many complaints about PayPal's customer service as well.
NOTE: PayPal offers a $5 sign up bonus to new members and a $5 referral fee (with restrictions).
eBay/Well Fargo Billpointhttp://www.billpoint.com
FEES: Fees paid by seller. There are two kinds of accounts: merchant account and seller account. A merchant account pays 35 cents for transactions of $15 or less, and 35 cents plus 1.75% for transactions over $15 (if credit card used). Check the Web site for details as fee structure is complex. Here's the Seller Fee Structure: http://pages.ebay.com/help/sellerguide/bp-fees.html
PAYMENT: withdrawal to bank account.
SECURITY: In recent months I have heard of several (unverified) reports of buyers using unauthorized credit cards. For buyers using credit cards, Billpoint is safe because charge backs are allowed.
CUSTOMER SERVICE: Email or contact form on the site. In my opinion, they are not as responsive as the other services.
Yahoo Paydirecthttp://help.yahoo.com/help/us/paydirect
FEES: free (Web site says " Fees may be introduced in the future.")
PAYMENT: withdrawal to bank account
SECURITY: Once payment has been sent, Yahoo cannot step in to resolve disputes. The Web site says that chargebacks are not allowed, even if buyers use credit cards to fund their accounts: "Please also note that transactions used to fund your PayDirect account are separate from any payment transactions made via PayDirect. You may not dispute or charge back a transaction used to fund your PayDirect account on the basis of any dispute with a recipient,... This is true even if you used your credit card to fund your account." I believe they are wrong, and that no merchants can prevent chargebacks when a credit card is used.
CUSTOMER SERVICE: I find Yahoo Paydirect's customer service extremely unsatisfactory and have heard many complaints as well. Automatically-generated email replies often don't match the subject.
A Note about Chargebacks
No merchant can prevent chargebacks when a buyer uses a credit card. While PayPal may restrict a buyer's account if the buyer makes a chargeback without first contacting PayPal, according to several posts on AuctionWatch, OTWA and eBay forums, Paydirect and Billpoint allow the same buyer to make multiple chargebacks with no penalty and with all costs going to the sellers. Sellers should use caution when using services that allow buyers to pay with credit cards and should keep this in mind when comparing services.
Always use caution when selecting which online payment service to use (and accept), and do your own research! Things change quickly on the Web.
Yisroel (Izzy) Goodman owns Complete Computer Services Inc. and sells electronics and ink cartridges online. His Web site http://www.ccs-digital.com contains articles about creating web sites, using HTML and ASP, obtaining a merchant account, payment service ratings, and avoiding fraud. His informed opinions are based on his own experience and from reading about others' experiences with payment services as well as discussions with users, representatives of the services and experts in the field. (Note: He is not affiliated in any way, directly or indirectly, with any payment service.) He can be reached by email at izzy @ ccs-digital. com.
