Shopping Online: Part 1 – Payments

Today’s post is a how to shop online guide, especially for Greek readers as I do not know how the Banking system in other countries works.

People and friends often ask me how I shop online, how I pay etc. I will first present the available means of payment online  Excuse my lack of knowledge on exact financial terms! I do hope I can make myself clear.

a) Credit Card. All major banks offer credit cards and all you need to do is visit your local branch and apply for one. The maximum credit limit is usually determined by your age and employment and what usually varies from bank to bank is the rate of interest. The bank will most probably ask you to start a deposits account (which will be connected to your card)

Pros: You can pay for goods even though you may currently have no money. You can make the payment later in installments which are set according to your expenses. I have found that being punctual to your payments to the bank results in minimum extra charges due to interest and taxes.

Cons: If you overdo it and surpass the credit limit you will be charged extra taxes and you will find yourself paying far more money for what you bought. Same case if you skip on your payments. Also there is a chance you will get carried away and shop more your actual budget can afford.

b) Pre-paid card. Again, all major banks can provide you with a pre-paid card. Now this works differently. You apply for one and pay a startup fee of approximately 5 Euros. Each time you want to use it,you have to charge this card either with the exact amount of money you want to spend, or charge it with a starting capital and spend it wherever you want in time. Each time you charge it, the bank substracts a fee which is either fixed (e.g  for Cyprus Bank 1,5 euro) or is a percentage of the money you put in the card.

Pros: You shop on a fixed budget-no credits. No money, no honey. Personally if I want to buy something that costs 50 euros, I will charge my card with appr. 54 euros, so that would be 52,5 euros minus the fee and the 2,5 euros are my currency safety. I will talk about that later. Also your bank will provide you with an e-banking option so as to check your card status, pending payments etc.

Cons: You have to visit the bank each time you want to charge the card, that is tricky when you work (banks work from 8:00-14:00). Also if you charge it in the morning, your money is usually available around 17:00 (on working days)!

Tip: Choose a bank with a fixed fee and with ATM charging option ( you can charge your card 24/7 through any ATM of the bank that issues your card. Though the ATM options stalls the availability of your money (Charge it Monday night – available on Tuesday afternoon)

c) Debit Card. It is connected directly to an existing bank account and it uses your current deposits. It is the card the bank issues for deposits and withdrawals as soon as you create an account. I have found that many sites do not accept debit cards, you can use it with PayPal though.

Tip: Ask your bank is this card is capable of online transactions (sometimes debit cards meant to be used online are marked as electron).

d) PayPal. “PayPal is a global e-commerce business allowing payments and money transfers to be made through the Internet. PayPal is an acquirer, performing payment processing for online vendors,auction sites (such as e-Bay) , and other commercial users, for which it charges a fee. It may also charge a fee for receiving money, proportional to the amount received. The fees depend on the currency used, the payment option used, the country of the sender, the country of the recipient, the amount sent and the recipient’s account type. In addition, eBay purchases made by credit card through PayPal may incur extra fees if the buyer and seller use different currencies.”

When sites/sellers  support Paypal transactions you will see these icons:

Paypal does charge you with a fee but provides you with insurance for your money (up to an amount, but that is certainly over a thousand dollars, check the site’s policy) . That means, if someone receives your money but you don’t get your order, you open a dispute in Paypal and it will refund you. You only have to sign up for an account and then you have to connect one or more card/bank accounts to your Paypal account. Paypal automatically converts currency at it’s own rate but I have found that the fees and conversion deviations are not a deterrent at all. You also provide the site with your billing and shipping address/es for easy, fast checkouts.

Pros: Insurance, easy checkout. It is also the standard method of payment in sites like e-Bay.

Cons: I guess the fees, but it is not that big of a deal compared to the safety it offers you.

e) Bank to bank/Wire transfer. After making an order, the seller might provide you with his/her bank account number and details (eg Full name and address) and you can send him/her money through your own bank. There are also services like Western Union Bank which makes easier payments to Asia compared to standard european banks.

Pros: It is for those that do not wish/are not able to have any sort of card.

Cons: It usually takes more than 2-3 working days for your money to get to the seller/site. That delays the transaction progress. There is no insurance either.

f) Cash on delivery. Only if you are buying from sellers/sites in Greece. Usually has an extra fee (around 2 euros). When the courier arrives with  your package, you pay him in cash.

Pros: Very easy and safe as the package is already in your hands.

Cons: I have only had this option when shopping in Greece.

These are the most common means of payment (at least where I live). I’d like to discuss a little bit on currency. When you shop within the EU, all prices are in euros so what you pay is what you get. Shopping in the US is different though. You have to calculate what the cost in US Dollars corresponds to. For example, as for taday, June 1st 2013, 1 Euro is equivalent to 1,30 USD, so the dollar is actually cheaper. The british pound on the other hand, when you are shopping in the UK, is more expensive. Today 1 British pound is equivalent to 1,17 euros. Currency rates change daily, so keep up with them the day-days when you are ready to make your order, especially if you are using a prepaid card and you want to pay for the exact cost.

Tip: I sometimes wait for the dollar to drop before I make an order in the US! That way I save some money.

I hope this guide was helpful, please let me know if you have any questions or corrections! Part 2 coming soon and it will be about my favorite online shops and deals you can find!

xoxo readers,

Diana

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