Payment Systems Used in eCommerce Systems
The Internet is not just an information storehouse; it is an international marketplace providing users with worldwide access to goods and services. A variety of payment systems are accepted for purchases including cash, money orders, checks and credit cards. Some methods benefit the seller or merchant, while others favor the buyer.
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Cash
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This method of payment has many drawbacks. Payments can be lost in the mail or the seller or merchant can deny receipt of payment, and you have no recourse if the item purchased is faulty, damaged or does not meet your expectations or if you fail to receive the item.
Checks
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Checks are a less costly method of payment than money orders for buyers. They allow you to avoid the fees and finance charges incurred by both buyers and sellers when purchases are made using credit cards. However, shipment of purchases made using checks is delayed until your check arrives. After your check arrives, merchants and individual sellers may also delay shipping the item purchased to allow additional time for your check to clear their account. However, in the event of a dispute, you have a canceled check to use as proof-of-purchase. You also have the option of stopping payment on your check until the dispute is settled. If a problem arises after a check payment has cleared the seller's account and you are unable to resolve the issue, it is extremely difficult -- although possible -- to have your bank recall the payment.
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Money Orders
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Money orders offer the merchant or seller the advantage of not receiving a check from an account with insufficient funds to cover the transaction. They are more expensive for you to use than checks, but they offer an easy payment option for someone who does not have a checking account or credit card. Shipment of your purchase depends upon the amount of time it takes for the money order to arrive.
Credit Cards
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Credit cards provide a speedy payment method and the most frequently-used one for online transactions. The merchant benefits from the immediate availability of funds to complete the transaction, but because of the processing fees incurred, his costs are higher for accepting credit card payments then they are for payments made by cash, check or money order. An additional drawback for online merchants is buyers who dispute receipt of the merchandise. Buyers are often concerned about the security risk involved in transmitting credit card information over the Internet. Some safeguards are in place to make transactions more secure, such as Secured Sockets Layer (SSL), which transmits credit card information in encrypted form. However, there is no way to determine if the credit user is the owner of the card.
PayPal
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Before PayPal, only merchants were able to accept credit payments online. PayPal is a money transfer system that allows individuals to sell online and accept credit cards and instant transfers and e-checks from a bank account as methods of payment. The only requirements are a PayPal account with a valid email address. Neither the seller nor the merchant has access to your account numbers or other personal information; the only information transmitted is your email address, name and shipping address.
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