Whether you are buying or selling an item or service, you need to decide on what payment method to use. Possible choices are:
Credit Cards/Debit Cards
Checks & Money Order
Wire Services such as Western Union or Moneygram
Each has benefits and disadvantages for each the buyer and seller.
Good old cash is the preferred method for sellers. Still you need to be careful. In some instances as someone is counting out those hundred dollar bills for your car, the seller is drooling when they should be looking closely. Those bills may be counterfeit! Cash offers no protection for either the Buyer. NEVER send cash through the mail. There are instances of Fake Sellers using someone else’s address to take cash payments but never deliver the goods. There is no protection from fraud or theft with cash. Still, when dealing with someone face-to-face cash can be good for both. If the Buyer understands and accepts the goods with no worry and the Seller checks the bills carefully then cash can work. Before accepting cash pick up a Counterfeit Money Detector Pen such as this available from office supply stores for under $5.
Checks and Money Orders
These can have the same concerns as Cash. Checks and Money Orders can be counterfiet even if they appear to be Certified or Cashier’s checks. Also there is no way to know if there is sufficient funds in the account the check was written from. All checks can take up to several weeks to fully clear, even though your bank has said the funds are available. Please also read our article:
If you are able to verify a certified check or money order then it can be considered a safe payment method for a Seller. If there is any doubt bring the check to your bank to inspect. A Postal Money order can be checked at any Post Office. Money Orders can come in several flavors, purchased at the Post Office, Banks and stores. There are companies that sell Money Orders which are processed the same as a regular personal check and take just as long to clear. These are not the same as a money order issued by the United States Post Office or a commercial bank. A Buyer does have some protection with a Postal Money Order in that you are directed to fill in the receipient’s name which (should) mean only that person can cash it.
Credit & Debit Cards
Individual Sellers usually can not accept credit cards, at least directly. To accept credit cards a Seller must:
Be a licensed business setup through a commercial bank.
Use a Secure third party Internet based Credit Card Processor.
Accept Paypal which can accept Credit Cards.
Credit Cards offer the most protection for the Buyer when it comes to fraud. If the buyer does not receive the item they can contact the credit card issuer for a chargeback. It is important to file any claim as soon as possible. There is some risk when giving a Credit Card to a Seller directly. Stolen Credit Card numbers is unfortunatly a big business today. When the Credit Card is given to a third party or Paypal the Seller does not see the numbers at all which reduces that risk.
The Seller must pay a percentage of the sales amount to the bank or Credit Card processor which can be very high at times. This is why often paying by credit card means a higher price.
Paypal is a service owned by eBay. It allows people to send money without sharing financial information. Sellers will pay a fee for using the Paypal service and must have a Paypal account. While Buyers can have a registered Paypal account, they can also use the service without registering although they will lose a level of protection.
Sellers have virtually no protection. It is standard practice for Sellers to only deliver an item if the Buyer has a confirmed address within their Paypal account. Still there has been issues for Sellers as follows:
1) Paypal has stopped payments and frozen accounts (money) for 180 days, in some cases up to a year.
2) If your account on the Paypal website was compromised you are responsible for any loss.
3) Paypal in disputes tends to take the buyers position unless the Seller follows several conditions for protection. Read the Paypal Seller Protection
In general many Sellers have successfully used Paypal for many items.
For Buyers Paypal is reliable and secure. There is some protection for items not delivered and in some cases where the item was not as advertised. Paypal only offers fraud protection for Buyers when dealing with Verified Paypal sellers. There is as always the risk of having your Paypal account being broken into. Be very careful of any phishing emails that ask for Login information. There have been some emails sent (they all appear real with Paypal logos) with a phone number to call and they then ask for passwords. Paypal never will ask for your Login information!
Wire Services (Western Union, Moneygram)
YOU SHOULD NEVER USE THESE SERVICES FOR TRANSACTIONS!!! Wiring money is mainly used by Liars and Scams. When you wire money, no Identification (ID) is needed and a scammer can pickup at any office in the world. A Liar can ask you to wire money to Joe Johnson in Cleveland, Ohio. The Liar might really be named Mahesh Mantha and can pick up in Bangledesh. You have absolutely no protection. None. NEVER WIRE MONEY!!! Even Sellers should be wary of wire services as they can be the vehicle for various Scams. Also do not give out personal information such as Social Security numbers, bank account info, etc. as they are not needed for wire transfers and will be used for Identity Theft.
Bank Transfers (EFT, Wire Transfer)
For Buyers, much like wire transfers (above) there is no way of getting your money back once a transfer has been completed. For Sellers there is also risk involved. Especially concerning because you will need to give out your bank information for a Bank Transfer to take place. Only the Sender needs to facilitate a bank transfer. A known Scam involves asking the Receiver (Seller) to return/send funds back to the Sender (Buyer) resulting in money that can never be recovered.
Escrow Services (Escrow.com, safefunds.com, TrustedFriend.com)
Escrow services work by holding the funds until the Buyer has received the item and gives approval. The payment is first made to the escrow company. If the Seller does not deliver the item then the funds are returned to the Buyer. This gives protection for the Buyer. Sellers have some protection. Additonally, funds can be held until authroized for release to the Seller. Sellers are protected against Credit card chargebacks and cancelled checks. Fees are from 3% to 6%. Payment to the escrow company can be Bank wire transfers, Credit cards, PayPal, United States drawn money orders, personal/company checks, cashier´s checks. Payment to the seller can be check, wire transfer or electronic transfer. It is up to the Seller and Buyer to determine who (or both) should pay the fees. Escrow services tend to work well with large transactions.
There are a number of fake escrow services. Some will make websites that appear like one of the legitimate companies. In some cases a Liar or Scam will create a website for a fake escrow company. Another Scam is to send Western Union money to what is supposed to be an escrow company but is just the individual. Be sure you are dealing with a reputable escr company like listed here. In countries that are a part of the EU the escrow company must be licensed.