In the last post we talked about online privacy and ways to prevent having your information stolen when doing business online. One of the most important strategies mentioned was the use of PayPal or another service that protects your credit card and bank account information. If you've never used PayPal before, it works like this: You open up an account and provide your credit card or bank account information. A basic account to make online purchases is free. When you shop at a site that accepts PayPal, like Amazon.com, E bay and hundreds of other retailers, you can pay using PayPal instead of actually giving over your payment information. PayPal takes the money out of your account and sends it to the retailer, and the product is shipped to you as usual.

So what's the difference between PayPal and online retailers in terms of how they keep your information secure? Well, none, really. Both PayPal and reputable online retailers use data encryption to ensure that prying eyes can't decipher your payment information. Put simply, it's a coded message, one that only the authorized parties can decode.

Despite these measures, it's possible for credit card numbers and other valuable data to fall into the wrong hands, or for the authorized retailer to commit fraud. That's where PayPal or another third party provides an extra measure of safety. It's a way to limit the number of people who have access to your money. Once you open a PayPal account, you can send money anywhere online without having to give your actual credit card number or bank account information. PayPal handles the transaction, drawing funds from whichever source you designate.

PayPal is a boon for small business owners, too. From their perspective, every time they take on a customer's personal payment information, they're creating a liability. If they accept payment through PayPal, they still get their money, but they don't have to worry about safeguarding a credit card number.

Even if you only shop online occasionally, or your online business is small, it makes sense to open up a PayPal account. In the age of digital retail, it's just like emptying out the register at night or having a chain on your wallet. Security always pays.