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By Ben Heinze
For many people, bringing a wallet along whenever leaving the house is essential. Not only is it a way to store physical cash and an ID, but also numerous credit cards, debit cards and more. Some wallets end up getting quite full with the number of cards in them!
This can result in a cumbersome process whenever it comes time to actually use one of those cards, as finding the right card and digging it out can be a hassle. Not to mention, if your wallet gets lost or stolen, remembering all the cards you need to freeze and replace can be difficult, as well as dealing with any fraudulent charges made. However, there’s an easy and secure alternative – a digital wallet! Learn more about how to set up a digital wallet, the advantages they bring and how they help keep your payments secure.
As the name implies, a digital wallet accomplishes a similar use-case as a physical wallet, but it is stored on your personal electronic device (oftentimes a phone or tablet). You’ve likely heard of at least one digital wallet before, such as Apple Pay®, Google Pay™ or PayPal.
Like a physical wallet, a digital wallet can be loaded with various payment methods, such as a credit card or debit card. Every digital wallet will have a slightly different method of adding payment methods, but the general idea remains the same – you will input all of the card information into your digital wallet, then select that pre-uploaded payment option when it comes time to make a payment. Digital wallets utilize contactless tap-to-pay technology, meaning you can use them whenever you would otherwise be able to tap your card to pay.
While you may not be able to fully eliminate the need to carry around any cards (for example, you should still have your driver’s license on you when driving), a digital wallet eliminates the need to carry numerous payment methods around. This keeps your pockets lighter and offers peace-of-mind, as you no longer need to keep track of all those physical cards when you’re out and about.
Have you ever had to fumble through your wallet or purse trying to find a particular card? That annoying experience is something many modern shoppers can relate to, and it’s one you can forget about with digital wallets. Everything you need is right there on your device – all you have to do is tap it!
Plus, if you’re shopping online, you can access your stored card information immediately, rather than entering it manually.
Many digital wallets offer peer-to-peer digital payment services, making sending and receiving money between friends and family easy. Whether you need to pay your share of rent or split a pizza, digital wallets allow you to transfer money from a stored card or from a linked bank account.
In addition to the rewards you can earn through using your cards normally, some digital wallets even offer additional rewards. While these rewards won’t change your life, they’re a great perk for making purchases you were going to make anyway.
Yes! It’s understandable to have reservations about using a digital wallet, especially since they can be used to store many different payment methods at once. However, digital wallets take the security of their customers’ financial information seriously. In some ways, digital wallets are actually more secure than using your cards the old-fashioned way.
One key security aspect of digital wallets is that, in the event your device was lost or stolen, anyone attempting to use your digital wallet would need to unlock and access your device first. If you’ve set your device up with security measures such as fingerprint login or two-factor authentication (2FA), this will likely prove to be a very difficult task. With a physical wallet, anyone who comes into possession of your wallet would have free reign to use your cards until they’re frozen.
Additionally, the payments themselves are more secure with a digital wallet. Digital wallet payment security is a complex subject due to the technology involved, but the important thing for the average consumer to know is that for every transaction you make, security procedures are being used by the retail outlet, the credit card company and the bank or credit union issuing the card. A key security element is called “tokenization,” where the 16-digit credit or debit card number is replaced by a randomly generated “token” number the retailer receives. If a data breach occurs, the hackers would only receive that token, not your card number, and would be unable to use your card to make purchases anywhere else.
Finally, you don’t lose out on any of the security measures you have when using your cards outside a digital wallet. Many credit and debit cards come with some degree of fraud protection already, such as Visa Zero Liability, which you will still have access to, even with a digital wallet.
While digital wallets are great tools overall, there are a couple things to keep in mind before going all-in and ditching your physical wallet.
As a way to make payments, digital wallets are well-equipped to do the job. However, if you need to present a form of identification, such as a driver’s license or passport, digital wallets may not be the best choice. Current laws on this vary on a state-to-state basis, so be sure to research your state’s stance on this as a valid form of identification. Furthermore, not all digital wallets may have this functionality.
While the number of retailers not offering contactless/tap-to-pay payments is shrinking, you may still encounter situations where you are unable to use your digital wallet. For these instances, it’s a good idea to carry at least one backup physical payment option, such as a physical credit card or cash.
Using a digital wallet is a great way to make your financial life easier, more convenient and more secure. With digital wallets having numerous benefits and limited drawbacks, setting one up is a great decision for most people. Even if you don’t plan on using a digital wallet as your primary method of payment going forward, setting one up may still be worth your while.
Check out these other articles on using credit cards effectively:
Ben Heinze is a marketing content specialist with a passion for financial education. Instilled with a strong sense of frugality from a young age, he views money as a means to building the life you want, rather than an end in itself. From reading Money Mentor, he hopes you discover new ways money can be used to build your ideal life—whatever that may look like.
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