Using your debit card online
By Diana McLaren • Bankrate.com

When bank cards were first introduced, I counted myself among those who said, "Not me!" Never, I said, would I trust a little piece of plastic with my hard-earned assets. But I now count myself among those who use it for almost everything I buy plus all my banking transactions. (I do pay cash for take-out at my local coffee haunt, as long as it meets my two-toonie limit.)

This puts me in good company with my fellow Canadians. Together, we are numero uno when it comes to swiping plastic for shopping and as the gateway to our online and telephone banking. Consider the numbers: 81.7 debit-card transactions each in 2003, compared to 63.4 for the Americans, 20.2 for the Germans and a modest 10.5 for the Italians. Canadians also score big when it comes to Internet shopping -- our online spending was $3 billion in 2003, a 25-per cent increase from the previous year.

This Canadian success story is poised to get even bigger as Interac Online is introduced, allowing us a whole new way to click and buy from the comfort of our own homes. Launching in early winter 2005, it will open up online shopping for people who don't qualify for credit cards or those of us whose financial management system consists of locking up our Visa card as a way to minimize debt.

How it works
At the moment, the Interac Online website lists only three major banks and a handful of merchants and organizations. Among those who have taken the leap is CompuServe. With 35 stores across the country, accounting for the majority of its annual $125 million business, the Quebec-based company hopes the Interac Online option will boost its online sales.

"Currently, the Internet represents about 1 per cent of our yearly sales," says Simon Bitton, CompuServe's vice-president of marketing. "We have researched this extensively, and our goal a year from now is to double or triple online sales."

Bitton says the Interac Online option is so new they don't yet have any sales figures for it.

Internet security is always a concern, especially where banking information is concerned. "The idea of putting my bank information on the Internet scares the heck out of me," says 27-year-old Victoria Walsh of Toronto. So, Interac Online has been designed to maximize consumer safety and minimize their fears.

Here's how it works: When you're ready to make a purchase at online retailer, select Interac Online under the payment options. You then choose your bank from the list of participating financial institutions (you need to be registered for web banking first), at which point you'll be transferred to your bank's site.

Login to web banking with your usual login ID and password and then choose the account you want to pay from and confirm the payment. You are then automatically returned to the merchant website, where you get your confirmation page

This differs from the U.S., where bank cards have been used for some time to make online purchases directly from a merchant's site. Although it's not a credit card, Visa and MasterCard provide the payment infrastructure for the transactions, according to Asaf Buchner, an analyst with Jupiter Research in Boston.

Here in Canada, you don't give your bank information to the merchant, you simply conduct an online bank transaction much like you already do, as though you were paying a bill. "That would definitely assure me it's safe to use," says Laura Dent, a Toronto psychotherapist who uses the Internet extensively to purchase books for her practice. She adds that the only thing that might deter her from using Interac Online is that with Visa or other credit cards, you can withhold payment if there's a problem with the merchandise. With direct debit, you pay upfront.

Check the security measures
Fees or fraudulent use of your card are governed by your existing bank card agreement. The same charges apply for debit purchases, and the banks will still take responsibility if, after investigation, they determine you've been a victim of theft or fraud. So read the fine print in your agreement -- you can be held responsible if you haven't held up your end of the agreement, which usually involves protecting your banking information.

Some tips to help you:

• Make time to check out the security section on your bank's website. There's a lot of important information about how to secure your information by safeguarding your password and using a firewall and anti-virus software.
• Check out the security link on the website for information on protecting yourself against fraud and what to do if you suspect it.
• Keep records of all documents and transaction numbers.

Consider your own financial security
There's another kind of safety that online shoppers need to keep in mind -- your financial security. Interac Online allows people who don't qualify for credit cards (or who are trying to limit their credit purchases) the option of online shopping. And while this can be a plus, "people are parting with their money far too quickly these days," says Laurie Campbell, program manager with the nonprofit Credit Counselling Service of Toronto.

Even if you aren't charging purchases Interac Online won't stop you from running up an overdraft, where interest rates are 18 per cent to 20 per cent, she says. "Canadians' debt has never been higher, and our savings never lower. People need to remember that the online environment is very seductive."

So remember when you're safeguarding your bank card to safeguard your bank balance, too.

Diana McLaren is a writer in Toronto.