Holiday Cheer and the Millennium Grinch

by John Doan
December 16, 2005

It's that time of year again when holiday shoppers throw down their credit cards and their caution to hunt down holiday deals. With the growing numbers of under-educated Internet users, the Grinch has abandoned his sled for a broadband Internet connection; setting out to ruin Christmas in a Whoville near you. Little John Who and Cindy Boo-Hoo may open their credit card statements in January to find unauthorized purchases. Or the X-Box 360 Grandpa Scrooge ordered from Hong Kong, won't find its way to Tiny Tim's stocking before Christmas; or ever.

Rather than scare the audience out of making future Internet purchases, let's instead focus on some best practices for online shopping.

If the deal is too good...
Your parents warned you of the door-to-door scam artists or Larry the used-car salesman and still you trust everything as advertised. You wouldn't buy a home theater system from the guys in the parking lot, so why would you go to a no-name Internet store? The problem is undereducated users don't know what is and isn't a reputable seller. Most people would know to trust Sears.com or JCPenney.com, but what about Amazon.com? Mistyping Bestbuy.com lands you on a seemingly similar site, but I personally wouldn't shop there.

Electronics and camera shopping has always been a bad experience waiting to happen. Even if you do manage to receive the item you paid for, there's still a good chance the item is considered "Gray Market." That means the item was meant for purchase outside of the United States and as a result does not carry the same warranty a US model does. Telltale signs of a gray market item include photocopied instructions or brown-box packaging. Another scam, is the re-stocking fee. While even legitimate vendors may charge a return/re-stocking fee, some Internet stores make a sizeable income on these. Read the Store/Company policies prior to making a purchase. If they are charging anything over 10%, they are most likely a scam. Here is how this scam works. You place an order on their website and shortly afterwards you receive a call to confirm your order. They confirm your shipping address, credit card information, etc then give you an order number. Before finishing the call, they tell you that you need many other accessories to make your product function. These can be batteries, filters, lenses, etc. Sometimes, they sell you things that should be included in the box in the first place! If you choose not to add any of these accessory items, they tell you that they don't have any in stock that aren't pre-packaged as a kit. It may take up to six months to get they item you want back in stock. At that point you wish to cancel your order. Guess what? You have canceled your order and thus they are justly authorized to bill you for 30-50% restocking fees! Eventually, you can work with your credit card company to have the charges removed but the headaches and risk to affecting your credit score wasn't worth the $100 you would have saved by not going to a reputable seller.

Credit or Debit? That is the question...
Nowadays, most people can get by without carrying any real currency. Debit cards have revolutionized the way people spend money. In fact, banks are going out of their way to promote debit cards because they make added money in merchant fees. Wonder why it is so hard to make a credit card purchase from the point-of-sale systems featured at retail stores? That is because the bank charges a different fee depending on whether you choose to use the card as credit or debit, where you supply your PIN. Typically, a credit purchase costs the merchant 2-4% of the actual sale, while a debit purchase costs them around $.25 to process. Since it costs the same to you, whether you choose debit or credit does not really matter. Just remember, the merchants build that in to their pricing so choosing debit helps keep costs low for everyone!

Internet shopping is a different animal. You should NEVER use your debit card for online purchases. While credit card purchases protect the cardholder with limited or no liability for fraudulent purchases, debit cards offer no such protection. Even if the Internet store you are buying from is legitimate, a breech in their webserver may disclose your debit card information to the bad guys. Smaller Internet boutique stores may outsource their credit card handling so you never know who has access to your information. If you don't use credit cards, check to see if the merchant accepts payments through services like PayPal, which offers limited liability to the purchaser. If you do use credit cards frequently for online purchases, you should check to see if your credit card company offers one-time use card numbers. Usually, they give you a number or a few numbers that are only valid for a few days.

Conclusion
While the Internet has opened the door to cost savings for the consumer, it isn't likely to replace the brick and mortar stores of yesterday. It's true that the Internet can save you time and money on holiday shopping, but it can also cause headache, heartburn and frustration if you aren't careful. Because it can offer anonymity, would-be thieves and opportunists often prey on uneducated users. Just like you wouldn't shop from a flea market for high end products, you need to be cautious of the "Junk Peddlers" who offer "too good to be true" items on the Internet. If you happen to find a great deal out there, research the company offering the item to see what other customers thought of their service. www.resellerratings.com is a great place to find out who and who isn't legitimate.