Online Wallets

Online wallets: PayPal and Google Checkout

A couple of services let you pay merchants and others though one account, but they aren't full-fledged online bill-payment options because the vendor must first accept payment through them. You've probably heard of or used PayPal. This service isn't so much a full-featured online bill-payment solution as a way to quickly pay for online purchases or even make payments to individuals. This type of service is known as an online wallet. You only need to enter your credit card or bank account information once -- then you supply your PayPal account name and password to make payments to participating online stores, individuals or vendors accepting PayPal on eBay (which actually owns PayPal).

PayPal lets you make payments in 190 countries, and a PayPal account also lets you receive funds as well as pay bills. CNet.com's Elsa Wenzel says PayPal's interface is the "model of clarity." PayPal isn't without critics, however. It never costs you to make payments through PayPal, but there are limitations on receiving payments through PayPal, especially if you want to be able to accept credit and debit cards (if you have an eBay store, for example). You'll pay a fee of between 1.9 and 4.9 percent plus 30 cents for payments made to you with a credit card. Receiving payments from another person's PayPal account is free for those with basic accounts.

Google also has an online wallet service: Google Checkout. Though it's gaining traction, it still isn't as well established as PayPal. Early reviews weren't great, and users had trouble with transaction delays and spotty customer service. But we haven't read any recent complaints about Google Checkout -- unlike PayPal. However, Google Checkout can only be used to pay vendors -- it can't be used to pay individuals (or to receive payments).

In a head-to-head comparison of PayPal and Google Checkout, CNet.com editors prefer PayPal's deeper services. For now, Google Checkout doesn't allow peer-to-peer payments, and it's only used by hundreds of merchants compared to PayPal's thousands. CNet does appreciate Checkout's detailed privacy policy and fraud protection, however. And, you can easily view your purchase history and track orders.

Both PayPal and Google Checkout have fraud-prevention policies in place, and you can file a claim in case of a payment dispute or fraudulent charge. However, we have read complaints about people getting the runaround trying to get a credit from PayPal for fraudulent charges. And ConsumerAffairs.com notes that PayPal isn't "subject to most banking regulations." Users have complained that customer service is difficult to reach. In an article at Consumer Reports, editors suggest using a credit card as your preferred payment method for these services -- that's because credit card companies also have fraud policies in place. You can specify a bank account for payments, but banks don't have the same strict fraud liability limitations in place.

Amazon.com is also launching its own payment service called Amazon Flexible Payment System (Amazon FPS). Though still in beta form, the service will let Amazon customers purchase items or services using their billing information. However, small fees will be collected for each transaction, unlike Google Checkout's free service.