How to Safely Use Digital Wallets for Payments

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What Is a Digital Wallet?

A digital wallet, also known as a mobile payment service, stores various payment methods such as credit cards, debit cards, gift cards, and bank accounts electronically. This allows for a convenient and generally safe way to make purchases using your mobile phone. Popular digital wallet options include Apple Pay, CashApp, Google Pay, PayPal, Samsung Pay, WeChat Pay, and Venmo.

What Are the Risks of Using a Digital Wallet?

According to a 2022 Experian survey, 62% of respondents have used mobile wallets. While digital wallets offer fast and easy payment options, they come with certain risks.

Your Identity May Be Stolen

When making a purchase with a digital wallet, the app generates a token, or random identification number, instead of using your actual account number. This helps protect sensitive data. However, identity theft has increased significantly, and using an unreliable network or someone observing you entering your password can compromise your information.

You Could Lose Your Phone

If your phone is lost or stolen, you could lose access to your digital wallet. Without adequate password protection, your digital wallet could be used for fraudulent purchases.

Your Money Might Not Be Insured

Some digital wallets, like PayPal and CashApp, are protected by their partner banks’ FDIC insurance. However, others, such as WeChat Pay, are categorized as money transmitters and do not offer the same protections. Funds stored in these accounts could be lost if something goes wrong.

How to Make Payments Safely With a Digital Wallet

While digital wallets offer convenience, it’s important to take extra precautions to protect your money and personal information.

Use Strong, Unique Passwords

Create long passwords that mix symbols, letters, and numbers. Consider using a password manager to store and create strong passwords.

Enable Multifactor Authentication

Use multifactor authentication, a two-step login process, to add an extra layer of security.

Put a Password on Your Phone

Lock your phone with a password and use biometric protection, such as facial recognition or fingerprint, to keep your device secure.

Install Extra Security on Your Mobile Device

Use your computer to locate, lock, or wipe your phone if it goes missing to protect your data.

Be Careful in Public

Avoid using public Wi-Fi networks and be aware of shoulder surfers when entering passwords.

Keep an Eye on Your Accounts

Regularly check your account statements for unknown charges and report any suspicious activity immediately.

Monitor Your Credit

Regularly checking your credit report can alert you to new accounts opened in your name.

Store Funds in Insured Accounts

Transfer funds from unregulated apps to traditional bank accounts or credit unions where your money is insured by the FDIC or National Credit Union Association.

The Bottom Line

To keep your digital wallet safe, be vigilant with your mobile device and take precautions to protect your personal information. If you suspect your information has been compromised, resources are available to help you regain control of your digital identity.

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