This morning I talked about the relative safety of different online payment methods. As a followup, I wanted to share a tip for protecting yourself from fraud related to online payment services such as PayPal.
On the one hand, online payment services arguably add a layer of protection between your payment information and the vendor on the other end of the transaction. On the other hand, they don’t offer the same sort of fraud protection that is available with credit and debit cards.
Thus, if your account is compromised, someone could drain the linked bank account and you could have a hard time recovering your funds. The simple solution to this problem is to link your PayPal (or whatever) account to an intermediary bank account with no overdraft protection and a minimal balance.
While this might sound like a headache, it’s actually very easy to achieve if you bank with ING Direct. Simply create up a subaccount and link it to your PayPal account. You can move money within the bank instantaneously, so you can fund this account on an as-needed basis.
At the same time, if your PayPal account is compromised, the fraudsters are limited in what they can access.