Smart phone are popular and versatile devices. About 60 percent of adults in the USA have smart phones. Many consumers want to ditch the plastic in their wallets and pay with their smart phones instead. To do this, the Federal Deposit Insurance Corporations (FDIC) issued several warnings for consumers in the Winter 2015 issue of its quarterly newsletter.
The FDIC is an independent agency created by the U.S. Congress to maintain stability and public confidence in the nation's financial system. The FDIC does this by insuring deposits in banks, and examining and supervising banks for soundness. The FDIC's quarterly newsletter contains valuable tips for consumers. The winter issue of its newsletter contains advice about telephone scams, tips when buying or refinancing a home, how to submit a complaint about a bank, tips to save more of your money, and more.
Here's what you need to know to pay with your phone:
1. Contact-less or NFC-capable phone. The computer chip in your smart phone must support Near Field Communications (NFC). This allows you to swipe your phone near the payment terminal in the retailer's store to make purchases. If you are buying a new phone, ask the sales person if the phone has an NFC chip. If you want to use your current phone, check the Settings menus to see if it has an option to enable NFC.
2. Where you shop matters. The large, national retail chains support contact-less payments with your phone, but many smaller, independent retailers don't -- yet.
3. Digital wallet. You need a digital wallet, the app or software to store payment information on your smart phone. Newer phones may already have this feature. If so, then you can load the payment information onto your phone for your debit- and credit cards.
4. Security matters. You need to protect your phone, both with anti-virus software, and lock your phone with a password. Make sure that your phone re-locks itself when not in use. Back up the list of contacts in your phone. According to the FDIC:
"Many security experts believe that mobile payments are more secure than swiping your magnetic stripe credit card because the mobile service keeps your credit number in encrypted form and does not transmit it to the merchant. But you still should make sure your phone is protected, such as with a password, so it cannot be accessed by a thief. Some of the newest smartphones use fingerprint readers to control access, which can be secure and convenient."
5. Lost or stolen phones. When your phone is lost or stolen, you still need to report your payment information as stolen to your bank or the issuer of your credit card(s). A stolen phone with debit card payment information enabled would give thieves direct access to your checking account. Experts say that consumers get the same protections from the underlying payment type (e.g., debit-, credit) wehn paying with their smart phone.