New, safer ways to pay online
By Holden Lewis • Bankrate.com

In the past few weeks, thieves have stolen millions of credit-card numbers from Egghead.com and creditcard.com. No one would blame you if you're worried.

Even if your card number hasn't been stolen, you might be paranoid this holiday season if you watch TV ads. Take those American Express spots in which sleek yuppies (with digitally obscured faces) fret about losing their privacy as they Web-shop for the perfect basket of fruit for Aunt Maude.

The solution? Disposable card numbers called Private Payments!

Then there are the ads with the aforementioned hackers in the basement who disappear in a blinding flash when a smug shopper brandishes a "cyberized" Capital One card. Kind of like scaring a vampire away with a cross.

How frightened should you feel about online shopping? How useful are Amex's Private Payments? What the heck is a cyberized card? In order, the answers are:

• Online shopping is pretty safe, but you have to watch out for delays that get your package delivered after Christmas.
• Amex's Private Payments are more of a marketing gimmick than a bulwark against theft, but they're useful for buying online porn.
• A cyberized Capital One card lets you view your account information online and makes you eligible for discounts at some online retailers.

Despite hysteria whipped up by credit-card companies, a lot more people are expected to shop online this holiday season than last season. Jupiter Communications predicts that Americans will buy $9 billion in goods online in November and December, and Forrester Research predicts that total online sales, including travel, will reach $10 billion between Thanksgiving and New Year's. That's roughly a 60 percent increase over last year.

This year's holiday shoppers will find that, in the last year, businesses have invented new ways to pay, retailers are doing their best to have inventory on hand so it can be mailed in time, and some online stores are slicker.

New ways to pay
Internet-based payment services such as PayPal and Citibank's new c2it have become popular in the last year. PayPal claims more than 4 million users, many of whom use it to pay for things they buy in online auctions. These services are faster and usually cheaper than mailing a check and waiting for it to clear.

Net-based payment services let you e-mail money to someone else. Your payment can be charged to a credit card or withdrawn from a bank account. You can use them to buy an auction item or to send money to your favorite nephew in college -- the one who does everything over the Internet.

Then there are those disposable card numbers from American Express. With Private Payments, American Express cardholders can generate temporary card numbers which can be used once and which expire in 30 to 67 days. Each temporary number is matched with the customer who generated it.

Private Payments numbers can be used only for online transactions. Because each number can be used only once, it is useless to any hacker who breaks into a retailer's Web site and steals card numbers. The service is free.

Although online credit-card theft is relatively uncommon, some shoppers might feel safer using Personal Payments. Pornography connoisseurs are likely to use the service because some online porn operators have been known to sell their customers' card numbers or to repeatedly add charges to customers' cards. Disposable card numbers that can be used only once will deter these unscrupulous businesses.

For parents who want to keep watch over their teens' spending while teaching them the joys of plopping down plastic, Visa and American Express have introduced stored-value cards for the PG-13 set. Visa's Buxx card and American Express's Cobaltcard look like credit cards and are targeted at teenagers.

These aren't credit cards; instead, they are prepaid cards, like phone cards. They can be used just like credit cards for many retail purchases, online or in stores, and parents can add value to the cards by transferring money online from a checking account to the stored-value account.

With these cards, teens get to act all grown-up and stuff by paying with plastic, while having to live within spending limits. Parents get to set the budget and they can review purchase information online.

Better online shopping
Last year, many shoppers found out the hard way that online retailers don't always deliver as promised. Some online stores were overwhelmed by more business than they could handle, and they didn't do a good job of telling buyers when they would receive their merchandise. Some buyers didn't get their purchases until well after Christmas, which sort of defeats the purpose of holiday shopping.

This year, according to Jupiter Communications, online retailers are spending less on advertising and spending more on making sure they have enough inventory and can ship it on time.

They also are trying to beef up return policies; BestBuy.com advertises that items bought online can be returned to any Best Buy store. Amazon.com will accept returns of gifts within 30 days after they are received and give the recipient a gift certificate.

Finally, the Web allows consumers to reward good online retailers and punish bad ones. A few sites do an especially good job of ranking online stores and letting you know about their strengths and weaknesses: Do they offer competitive prices? How is customer service? Do they ship on time?

Bankrate's "Online Commerce Exposed" series takes a look at dozens of online retailers and a few "shopbots," software agents that bargain-hunt for you.

And take a look at a Bankrate retrospective of last year's holiday retail season, "e-Shopping Lessons of Christmas Past," with sidebars on avoiding snafus and returning online purchases.

Forrester's Power Rankings rates everything from online booksellers to brokerages, judging them on factors including cost, customer service, delivery and ease of use.

And Gomez.com performs a similar service, with a clunkier interface.