Pros and Cons of Digital Wallets: Is it Time to Leave Your Wallet at Home?

person paying with phone

One of my friends was an early adopter with digital wallets. When the app that corresponded to his mobile OS hit the scene, he uploaded a credit card to pay from his phone as soon as he could. In the early going, he ran into a few issues where he couldn’t complete the transaction. Lately though he’s told me he hasn’t even taken cash or a backup credit card when he goes out, just his phone and his driver’s license.

What is a digital wallet?

In the simplest terms, a digital wallet is a cellphone app that stores methods of payment, including credit cards, debit cards, and more recently cryptocurrencies. Instead of swiping your card, you simply tap your phone to make a payment. Is it time for you to ditch your wallet? Here are some of the pros and cons to think about before leaving home without it.

Pros

Convenience. The main reason people are going to digital wallets is many can have everything they need on their phones (especially as states are beginning to develop digital driver’s licenses). People today – especially young people – are more apt to remember their phone than their wallet.

More security. Digital wallets communicate with the card reader at an establishment by using randomly generated payment codes instead of sharing your actual card number. This is a one-time code, so even if someone is able to steal it, the expired code will be worthless. Also, your credit card information may be safer in your phone, if you take advantage of security features in your phone like passwords or a fingerprint reader. Your physical wallet with your actual cards won’t have this level of protection.

Yuck factor. Even as the world has opened up from Covid, many people still are reticent to touch shared surfaces. While tapping your credit card provides the same benefit, there are still stores where you must insert the card and enter information onto a shared screen to complete the transaction. Tapping your phone removes much of this worry.

Tracking services. Many digital wallets provide tracking of all purchases you made using the app and the physical card. Instead of reviewing several different credit card statements or websites, or keeping up with receipts, you can closely watch how much you spend across all types of payments.

Cons

Tracking services. Some see tracking your purchases as an advantage. Others see another layer/company that has access to everything you’re buying as a disadvantage. Instead of one credit card company knowing some of your purchases while your other credit card company knows the rest, these apps know everything. You now have another company with your information stored on their servers, open to hacking or being sold to the highest bidder.

Some stores still prefer cash. While many stores have done away with cash transactions altogether, some retail outlets still deal only in cash. If you have your physical wallet, chances are you have a few dollars with you in case this arises.

Note – if you are traveling, make sure you have physical credit cards and can access the local currency. When we were in London, the vast majority of outlets accepted credit cards. In Germany there were more cash-only transactions. Research before you go.

Some stores don’t accept digital wallets. Just like with cash, some stores haven’t updated their systems to accept digital wallets. They may accept credit cards but may not have the ability to process your digital wallet payments.

Your wallet won’t die. I’ve been surprised several times when I see how little battery life is left on my phone. That’s something you won’t have to worry about with your physical wallet.

My solution, right now

I live in a state where digital driver’s licenses haven’t been approved, so I must take my wallet along with my phone whenever I go anywhere. Until that issue is solved, I won’t entertain the idea of using a digital wallet.

But that’s not the main reason I probably will not use them. There are enough companies out there that have a pretty good idea of every move I make and every dollar I spend. Why give another company that information? My wallet is small (I actually use a business card holder) and I know I have payment methods that are accepted at all retail outlets.

If you want to experiment with digital wallets, carry back-up cash and at least one credit or debit card with you when you first go out. Try paying with just a tap of your phone and see if you like the benefits and downsides to transaction tracking. You can always remove the cards and delete the app if you discover it’s too invasive. Or if you like the ease of use, you may embrace your digital wallet for all transactions.

Photo by Nathan Dumlao

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