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FDIC Consumer News - Summer 2001

Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Shopping and Paying From Home Over the Internet...An illustration of a computer with an online shopping site on the screen. An order form is being displayed with an "Authorize Payment Now" button beneath the form. On the wall to the left of the computer there is a "Home Sweet Home" picture.
Do Your Homework First

With the benefits come potential pitfalls, including the risk of ID theft. Here's how to protect yourself.

As people are becoming more comfortable using the Internet, they're also more willing to shop for goods and services online. After all, the Internet lets you research products, comparison shop among hundreds of businesses, sign up for special deals, and pay for your purchases 24 hours a day, seven days a week without ever leaving home. But while online shopping offers great convenience, there also can be hazards.

Perhaps the most serious risk is identity theft, which happens when criminals obtain personal information, such as a credit card or Social Security number, and use it to commit fraud in someone else's name. Much less troublesome, but still a concern, are unwanted advertisements and junk e-mail that originate when companies gather and sell information about consumers who visit their Web sites.

Online shopping is definitely catching on," says Cynthia Bonnette, Assistant Director of the FDIC's Bank Technology Group in Washington. "But it is different from the way we're accustomed to shopping, and you must be careful in how you decide to share sensitive information online."

FDIC Consumer News previously published tips about safe shopping online, but given the increased popularity of Internet buying, plus new developments, such as online auctions, we are returning to the subject. Here are our simplest, best suggestions for protecting yourself:

1. Deal with a reputable company.

"Practically anyone anywhere in the world can set up a Web site anonymously," says Michael Jackson, a Senior Bank Technology Specialist with the FDIC in Washington. "That creates an environment in which parties are not always certain with whom they are doing business, and that increases the potential for fraud and other troubles." Jackson notes there have been instances of con artists and identity thieves tricking consumers into divulging credit card numbers and then buying goods or withdrawing money using the accounts of innocent victims.

How can you minimize your chances of dealing with a problem Web site?

Stick to companies you already know from their retail outlets, mail order catalogues or other services. Be suspicious if the merchant doesn't list a physical address or a phone number.

Closely review the letters and numbers in the Web site's address (URL), especially if you are provided a link to that site in an unsolicited e-mail. Some con artists try to lure consumers to their fraudulent Web sites by using corporate names or Internet addresses that are very similar to those of legitimate, well-known companies. You can confirm the correct Web address in a company's literature or by calling the company using a number from the phone book, a government agency or some other trusted source, not the one provided on the Web site (in case it's a scam).

Contact a knowledgeable friend, your state's Attorney General's office (see "Government Agencies That Can Help") or the Better Business Bureau and ask about the merchant's reputation.

2. Take precautions to protect the privacy and security of your personal information.

Read information on the company's security practices and its privacy policy, primarily to find out how it safeguards bank account, credit card and other confidential information. For example: Does the online merchant keep personal information in its computers in an encrypted (coded) form? Is your credit card number or other personal information transmitted during an online payment also encrypted and "secure" (often indicated by a padlock logo on the computer screen)? Can you "opt out" or block certain personal information from being shared with other people or companies?

Also, provide the minimum information needed to complete a transaction. Don't divulge your Social Security number, credit card number, address, phone number or other personal information unless you're sure the Web site is legitimate and you know why that information is needed. And never disclose your password to anyone. "Don't even provide your password to customer service representatives," Jackson says. "They don't need that information to assist you."

If you don't understand something about a Web site's security procedures or privacy policy, contact the company by phone and ask questions. "If you can't find this information on the Web site or you just don't feel comfortable with the situation, you may be better off choosing another online merchant," warns the FDIC's Bonnette.

3. Know your options for paying.

Credit cards and, to a lesser extent, "check cards" (a debit card that works like a check to deduct funds from your bank account) are the most common ways to pay online because of their convenience, widespread acceptance, and federal consumer protections (see "Federal Laws That Can Help"). Remember: Protect your card numbers by shopping at Web sites that encrypt your card number so they can't be read by outsiders. Also look into new security methods (such as temporary, substitute account numbers) that let you use your credit card without providing your real account number or password online.

Bonnette also notes there are other ways to pay merchants electronically. Examples include:

"Electronic cash," also called "digital cash," which is a form of electronic currency that can be purchased, downloaded and stored on the hard drive of your computer or a special card;

Deductions from pre-arranged accounts with online payment services (see the article about e-mailing money);

Additions to your monthly phone bill or other utility bills;

Bonus points you earn that can be used to make additional online purchases from participating merchants; and

"Electronic checks," which generally involve sending instructions to have the funds deducted electronically from your checking account.

If you're unsure about the pros, cons and consumer protections for a particular way to pay, Bonnette suggests that you ask about such things as the security procedures and how quickly funds will be sent or received.

4. Be prepared for a possible problem.

Before you make a purchase or a payment, read the information on the Web site regarding your right to stop payment or the company's refund and return policies for damaged goods or faulty service. Print out copies of purchase orders and confirmation numbers in case there's a dispute. Also regularly check your bank and credit card account statement for errors or unauthorized withdrawals.

Remember that, depending on the situation, you may be protected by federal and state laws against such woes as account errors, unauthorized use of your account information, and the unwanted sharing or selling of your personal information. Several major federal laws are cited in "Federal Laws That Can Help". And if you need help understanding your rights or resolving a problem, a federal or state government agency (see "Government Agencies That Can Help") may be able to assist you.

The bottom line about shopping and paying online from home—it can be safe and easy, but you've got to do your homework before entrusting your personal and financial information to just any Web site.


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Last Updated 08/22/2001 communications@fdic.gov