How to Protect Your Checking Account When Shopping Online

One of the great things about the Internet is the ability to pay our bills or shop online. However, this convenience of online shopping and bill paying is not without risk. Your checking account is at risk every time account information is shared online.

Accounting errors & charges not in your favor

We've all heard about phishing scams where bogus sites pose as your bank, credit card, or some other legitimate site. And, most of us understand that e-mails that promise us money or are asking us to verify our account, PINs, and social security numbers are probably scams. But aside from phishing, another risk a consumer faces when sharing account information online is the possibility of accounting errors and unexpected charges or reversals.

Double Billing: Occasionally, a business set up to accept online payments accidentally double bills a checking account. For example, instead of taking out just one payment at the time of purchase, the system may accidentally take out a second payment several days later. While eventually this error will get fixed, a consumer may have to wait up to 30 days before the money is put back in the account. In the meantime, it's the consumer who is responsible for making sure that there's plenty of money in the account to avoid overdraft fees caused by the shortage.

Charge Reversals: Do you sell stuff online? One of the downsides of some auction sites is that an unhappy (or even crooked) buyer can reverse his payment. An unexpected charge reversal comes directly out of your checking account, leaving you short of cash and scrambling to avoid bounced checks.

How to avoid putting your checking account at risk

There's an easy way to avoid this sort of thing from happening to you. Instead of using your primary household checking account for billpay or shopping online, use a second checking non-linked account instead. It's really that simple. With this second account, you can minimize risk by:

1. Opening the account at a separate bank. A physical separation means that an clever online crook can only empty out this one account, leaving the accounts you have elsewhere secure.

2. Refusing an "overdraft protection plan.". No overdraft protection plan (also called a line of credit) means that your loss is limited to the actual funds in this second account, and no more.

3 Keep a minimum balance. Keep a minimum balance in this account, and only deposit funds as needed for online purchases and billpay.

4. Using a credit card instead of a debit card for online purchases. While you'll probably be offered a debit card with this second account, it's best to ask for a credit card instead. Under Federal Law, if your card is stolen or used fraudulently, you are only responsible for the first $50 of charges. With a debit card, the limit is also $50, but only if you contact the issuer within 48 hours of the card being stolen. For more information about your liabilities in case of credit card theft, Kiplinger.com has a wonderful article that can help.

Protecting your household checking account really isn't that big of a deal. By opening a separate second checking account for online transactions and following these four tips, you can lower the risk of having your household accounts wiped out by billing errors or fraud.