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New Mobile Wallets Have Hidden Costs

By John Caroll, August 05, 2011

A new era is upon us, one in which consumers can leave the cumbersome bundle of bills and credit cards at home and pay for whatever they need with a wiggle of their phone…well, maybe we’re getting a little bit ahead of ourselves. While the advancements in mobile wallet technology are progressing in leaps and bounds as multiple companies scramble to secure themselves a bigger chunk of the over $50 billion of revenue that is generated annually from transaction fees, according to Consumer Reports, people should educate themselves on the potential downsides of these digital wallets before casting aside their coin purses.

“As these new forms of payment grow more popular, consumers must be careful to understand the costs, and disparities in protections associated with the promise of new convenience,” said Senior Editor of Consumer Reports, Jeff Blyskal.

If you are one of the many who is eager to leave the bulk of a billfold behind you, there are a few things to be mindful of before making the move to mobile. Consumer Reports offers the following advice for anyone planning on “upgrading” to a digital payment device:

Before signing up for a new payment method, read the fine print and check the transaction costs.

Pay by credit card to get the best protections whenever you buy online or pay via cell phone, make a major purchase in a store, or worry that a seller might not deliver as promised. Avoid prepaid debit cards and billing to your telephone account. Ask your carrier to block third-party charges to your landline and cell phone.

Take convenience claims with a grain of salt. Consider new payment choices, but separate true benefits from marketing hype. Keep your mobile shopping tools independent from any branded digital wallet you might choose.

You can control the risk of loss by knowing the threats with each form of payment and taking steps to protect yourself. Don’t share your personal identification and account information, use security software and procedures for your e-commerce, and always keep cash and payment cards in a safe place.

After all, with well over a quarter of a million – say, roughly 300 million – non-cash transactions being processed each and every day, there are bound to be a few things falling through the virtual cracks. Make sure that you aren’t one of them.

John Caroll

John Carroll, one of Credit-land.com’s staff writers, comes to us directly from Long Island’s Newsday. His extensive background in journalism includes writing on real estate for several of New York’s leading real estate publications, as well as covering the political scene for Scepter Weekly. Aside from his work writing about finance, John is also an accomplished musician and songwriter who has performed in numerous nightclubs throughout New York City.