Alternative Payment Methods For Best Privacy

Alternative payment methods can help protect user’s identities and private information. For example, journalists and individuals who want to buy a burner phone do not use payment methods that leave paper or digital trails. Instead, they opt for alternative payment methods. The same applies to individuals who want to make charitable donations without being the cynosure of all eyes.

Unfortunately, scammers have muddled anonymous payment for everyone. If you’ve ever received a scam phone call or phishing email before, you might notice the scammer always requests money in a form that makes it pretty much untraceable. Unless it is an elaborate fraudulent scheme by a company, scammers rarely request that you send them traceable money via credit card or check. After all, you can always request a chargeback for fraudulent transactions on your credit card, and you can always stop a check before the fraudster cashes it.

Protecting Your Privacy When You Pay 

Technology has made privacy very hard in the twenty-first century. There are records for everything now, even your finances and spending habits. Any time you make a purchase or send a payment, your payment processor records this transaction. Depending on the transaction, the record will show what you paid for, the date and time of the transaction, the recipient, and other data about you. Entities with the tool, skillset or legal authorization can easily get this information.

Nevertheless, it is possible to make completely anonymous payments or decrease the amount of identifying information you provide in traditional transactions. Consider some of the alternative payment methods for the best level of privacy.

1. Cash is King

Nothing beats cash as an alternative payment method. Unless you are buying certain items, no one asks questions when you pay with cash. Sure enough, the cash withdrawal over the counter or from the ATM will be on your financial statement. But that is where it ends since you don't have to provide personal information when you spend the cash at retail outlets.

Even better is to get the cash without going to the bank or withdrawing in the first place. You can sell a product or provide a service and get paid in cash only. Then, you can use that cash anonymously. Regarding cash from other persons, spending marked bills can compromise your anonymity. Likewise, traveling with huge sums or withdrawing huge sums can compromise your anonymity.  

The US dollar is borderless and accepted almost globally. While you can use cash outside the country, the law requires you to declare substantial cash when traveling in or out of the United States. Individuals who carry more than $10,000 must report the amount to the US Customs and Border Patrol. Otherwise, they will incur civil and criminal liabilities. Declaring money creates a paper and digital trail, so carry cash less than $10,000.

The same rule applies when you make transactions within the country. Your bank is required to report cash withdrawals over $10,000 to the US Department of Treasury. The Internal Revenue Service (IRS) will have access to this report for five years. This $10,000 rule is not set in stone and applies to combined daily withdrawals from one person. So, if you make several small withdrawals in a day from different banks or ATMs, your bank will still file a report with the Treasury Department if the combined amount is over $10,000.

Even under certain circumstances, the bank will flag suspicious cash withdrawals above $2,000. This practice helps stop grandparent scams and fraudulent distress withdrawal where scammers con individuals into withdrawing huge sums to avert some fictitious danger. Note that the signs or standards for spotting distress withdrawals vary with the bank. Banks do not generally make this information public.

2. Prepaid Debit Cards

A prepaid debit card is a temporary – and anonymous – card that you can use to pay for products or services if you cannot use cash. Also known as a stored-value card, a prepaid debit card already has money stored on the debit card. All you have to do is buy the cards at any convenience store, usually at face value or at a slightly higher markup, and use it for any transaction. Many people prefer prepaid cards to cash because they get roughly the same value without carrying several dollar bills around, making them less conspicuous.

Since you can pay with cash and don't have to provide any identifying information when you buy a prepaid card, your anonymity is pretty much guaranteed. Prepaid cards are reloadable for a small fee, but you will have to provide your personal information. Thus, the best practice is to buy, use, and discard these cards for one-time payments. Otherwise, you leave a string of paper and electronic trails that persons with the right resource and skillset can use to identify you.

Besides the anonymity, another endearing feature of prepaid debit cards is that you don't have to undergo a credit check before you get one. Furthermore, you don't need to have an account with the bank or payment service provider before you can use the prepaid card. Some prepaid cards include American Express Bluebird, Walmart MoneyCard, and Chase Liquid.

Note that prepaid debit cards have expiration dates. Although the funds on the card will not expire when the card expires, you will have to contact the service provider to reissue the card. In many cases, you will have to provide identifying details, which defeats the purpose of anonymity. Furthermore, some service providers are notorious for failing to reissue expired prepaid cards. Sure, you can file a claim with the Consumer Financial Protection Bureau (CFPB). However, you will have to provide personal information and contact details that may sabotage your anonymity or the reason for getting the card in the first place.

3. Gift Cards

Gift cards work like prepaid cards. They are preloaded with money, and anyone can get them without providing identifying details. There are two types of gift cards, i.e., open-loop and closed-loop gift cards. Suffice to say that open-loop gift cards are cards that contain the exact amount of cash you traded. You can use these cards for in-store purchases or online anywhere – hence the name open loop. American Express, Visa, Discover, and MasterCard are some of the providers of open-loop gift cards. In some cases, the service provider will require the user to pay a nominal activation fee before the card is ready for use.

Conversely, a closed-loop gift card is a single-use card that a cardholder can only use at a specific merchant. Generally, you can identify a closed-loop card if it has the company's logo on it, e.g., Starbucks gift cards and Amazon gift cards. A closed-loop card will not have the payment provider's logo. Although the card is limited to a single merchant, there are no activation costs.

Most people who seek anonymous payment methods use open-loop gift cards because of the payment flexibility. The activation fee is nominal enough, usually under $5. Meanwhile, individuals who wish to take anonymity up a notch usually arrange for a third party to buy a gift card and share the card details with you. Likewise, if you are uncomfortable carrying cash around, you may get several gift cards to convert your cash. Then, you can sell a card for cash based on your needs.  

4. Cryptocurrency

Cryptocurrency is a quasi-anonymous way to pay for products and services without using cash. The most popular of these are Bitcoin, Ethereum, Tether, Binance Coin, and Cardano.

Contrary to public opinion and what crypto pundits say, cryptocurrency is not entirely anonymous. The blockchain records all transactions on a public ledger and linked to specific addresses. For example, the bitcoin address 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa belongs to Satoshi Nakamoto. So, if an individual or entity can confirm that a cryptocurrency address belongs to a person, the user's anonymity fails. Imagine if Nakamoto's real identity is known. 

One reason cryptocurrency is quasi-anonymous is that a person must create an account with an exchange or wallet provider. Another reason is that most people buy cryptocurrency using money from their traditional bank account. Say that a government agency subpoenas the bank records and reviews the individual's transaction history to see the amount, date, time, and platform where the transaction happened. All they must do is run a system check on the public ledger for transactions approved for that specific amount around that time and on that particular day. Sure enough, the search will return hundreds of results, and tracking down each result will take time and resources, but it is possible.

Better still, the investigator could subpoena the exchange to provide records regarding the account owner since they already know their names. Cryptocurrency exchanges located outside the United States are not necessarily bound to comply with subpoenas, but investigators can always bypass this restriction depending on the country. So, when you consider the reach of well-funded agencies and individuals with the skill and resources, you realize that a cryptocurrency transaction is traceable. Still, there are ways to make the payment method truly anonymous. 

Protecting Your Anonymity With Cryptocurrency

One way to protect privacy and anonymity is to create anonymous wallets on exchanges that provide this service. Several cryptocurrency exchanges let interested persons create wallets without providing any personal identifying information. However, their services are limited to certain countries, so you need to use a Virtual Private Network (VPN) app to switch your location.

Even if there are no restrictions on your location, you still need a VPN to conceal your IP address and internet activities. Otherwise, your internet service provider and other prying eyes can easily see what you are doing online. Besides a VPN, it is also best to use a burner phone for this purpose.

Meanwhile, certain software wallets allow interested persons to create and use anonymous wallets to purchase cryptocurrencies and make payments. Either way, funding a new wallet is always a major problem, especially because old users on these platforms rarely deal with unverified anonymous users. You may wait until you find someone who will give you the benefit of the doubt. Alternatively, you may buy crypto with another anonymous payment method like prepaid cards or gift cards if the platform supports it. Since the card details do not contain your personal information in the first place, this payment method becomes untraceable. You may also buy cryptocurrency with cash on bitcoin ATMs (BTMs). However, many BTMs have ID requirements. So, find the BTM that best suits your privacy needs.

A rule of thumb to guarantee privacy and anonymity with cryptocurrency is to use a wallet once. Fund, pay, close, or delete the account or wallet. Then, create another account or wallet. 

5. PaySafeCard

Paysafecard is a type of closed-loop gift card but with more flexibility. You can use the card to make anonymous payments. PaySafeCard guarantees your privacy and anonymity because the company, merchant, and payment provider do not know who is making the transaction. The user buys a preload voucher containing a 16-digit code and uses this code to make payments with merchants that accept PaySafeCard.

You don't have to submit any identifying information such as name, address, phone number, bank account, or credit card details. Despite the anonymity, there are limitations to using PaySafeCard. For one, the card is available to online gamers and online gamblers who want to purchase tokens or load their gaming/gambling account with money. Furthermore, the amount you can purchase is small. Interested persons can only buy $10, $25, $50, or $100 vouchers.

Recap: Alternative Payment Methods For Best Privacy

• There is no absolute guarantee that an alternative payment method is totally anonymous.
• If you use an online payment alternative, use a VPN and burner phone to add a layer of anonymity. 
• It is a clever idea to combine several alternative payment methods to lock down anonymity.
• Some alternative payment methods are limited in the amount you can spend at once.
• If you are traveling out of the country with cash, comply with regulations on cash declaration.