Yahoo Finance What You Need to Know About Mobile Wallets
Americans' lives have become centered around smartphones. They play the role of cameras, phones, web browsers and are an indispensable way to keep connected and chronicle daily life. Smart devices are constantly present in pockets and purses and have the potential to replace another commonly carried item: the wallet.
While Americans have grown comfortable using mobile devices to replace cameras, phones and computers, they haven't rushed out to replace credit cards and cash. Even though the most familiar mobile wallets were launched in the last four years, only 39 percent of U.S. consumers have a mobile wallet, according to a 2017 study by First Annapolis Consulting Inc, an electronic payments consulting firm. But the expectation is that the number will increase exponentially.
Before you load all your credit cards on to your smart phone and leave your billfold at home, there are some mobile wallet basics you should know.
[See: 9 Financial Tools You Should Be Using.]
What is a mobile wallet? A mobile wallet is an app on your mobile device that stores payment information from a credit card or debit card, then allows you to use your device to make purchases. There are a number of different mobile wallets that are compatible with specific devices. Like a credit card, your mobile wallet will only work at retailers that accept your device as a payment method. The major mobile wallets are Apple Pay, Google Pay and Samsung Pay. The apps come integrated in your mobile devices. There are also mobile wallets you can download from the app stores, including wallets from banks such as Chase and Capital One and merchants such as PayPal, Walmart and Starbucks.
The main benefit of mobile wallets is convenience. First, you can store all your payment card information in one place, so you don't have to carry the cards with you. For some, that could mean no longer carrying a wallet. Also, mobile wallet transactions tend to be quicker than paying with cash or a credit card. When ready to pay, open the app, touch your phone to the compatible reader next to a register, and you're on your way. Mobile wallets are not limited to smart phones and can be loaded on to tablets and smartwatches.
Which mobile wallet should you choose? While there aren't many mobile wallet choices, there are some options to keep in mind. First, not every mobile device is compatible with mobile wallet technology. If you have an older device, you may have to check with the manufacturer. Also, which device you own will limit which integrated wallet you can use. IPhones have Apple Pay. Android phones have Google Pay. Samsung phones have Samsung Pay. If you have a card from Chase, Capital One or Wells Fargo, you can download their mobile wallet app to any device and use it where accepted. Merchant wallets will only work in that merchant's store or online. For instance, the Starbucks wallet will only work at Starbucks.
The mobile wallets that come with your devices generally take fewer steps to use and offer a quicker transaction experience. Using merchant wallets can earn you a bonus for shopping with that merchant.
How do you set up a mobile wallet? Once you choose the mobile wallet you want, setting it up is easy. Basically, you open the app and add the information for each card you want to store in the wallet. Keep in mind that even though you may load up all your credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you will have to change the default card before you make the transaction.
[See: 10 Ways to Protect Yourself From Online Fraud.]
Can you still earn credit card rewards? Many credit cards offer points, miles or cash back on every purchase you make. Using a mobile wallet, you will still earn those credit card rewards as you would if you used the credit card at the point of sale. One possible issue arises when using a rewards card that offers bonus points for shopping with a specific store or merchant, such as 3 percent cash back on dining or 2 percent back at supermarkets. A mobile wallet may not categorize the sale correctly to earn the bonus rewards, so make sure to check with your card issuer before making those purchases.
On the other hand, you can earn bonus rewards just for using mobile wallets. Chase Freedom cardholders can earn 5 percent cash back on mobile wallet payments through the end of March. With Samsung Pay, you can not only earn rewards with your credit card, but you can also earn Samsung reward points, redeemable for Samsung products.
Are mobile wallets secure? Unlike cash, which can be stolen, and credit cards, which can be copied, the card information you load into a mobile wallet is encrypted. In order to make a payment, you have to unlock your device and also type the pass code or use your fingerprint to unlock the mobile wallet. To reduce your risk of fraudulent charges if your device is lost or stolen, make sure to set a strong pass code and enable fingerprint authentication to lock your device once you enable a wallet.
[Read: How to Protect Yourself From Identity Theft.]
Are there any drawbacks? With the increased convenience and security of mobile wallets, there are some things you should keep in mind. Keep an eye on your battery life. If your device runs out of power, you may get stranded without access to your mobile wallet. Also, because mobile wallets are a newer technology, it may take time for consumer protections to catch up. Depending on the privacy policy, the mobile wallet issuer may collect or share your spending data in ways that aren't allowed when using a credit card.
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