What is a digital wallet? | Credit card

If you want to simplify the way you make payments – and don’t want to rely on physical cash and credit cards – you can use a digital wallet, also known as an e-wallet, e-wallet or, when used on your phone, mobile wallet.

In casual conversation, people don’t always refer to “digital wallets”. They’ll just say something like “Are you using Venmo?” If you pay for things with a service like Apple Pay, Google Pay, PayPal, or Venmo, you’re already using a digital wallet.

If you don’t know much about digital wallets, it may take some time to understand the concept. Read on to learn more about how they work and how to find the right one for you.

How do digital wallets work?

A digital wallet can hold your credit cards, debit cards, and perhaps additional items, such as boarding passes, hotel reservations, gift cards, and concert tickets.

Broadly speaking, a digital wallet is a payment system that protects users’ banking information and passwords and allows consumers to make secure transactions online, in apps, in stores, and even at ATMs. Mobile wallets work using contactless near-field communication, which allows your phone to transact through nearby payment terminals.

Note that you may not be able to use your digital wallet for all transactions and that some digital wallets are more widely accepted than others.

“Venmo, for example, is a great app to use to send money between friends, but isn’t widely accepted by many retailers,” says Amy Shunick, CFO of Bennett Packaging in Kansas City, Missouri, and digital enthusiast. wallet user. “Often you can shop online and use PayPal, but if you’re in a physical store, you need cash or a debit or credit card.”

There are also digital wallets for consumers who own cryptocurrency. With a cryptocurrency wallet, you can store your personal crypto key, send and receive funds, and more.

How to choose a digital wallet

Which digital wallets are right for you will depend on several factors. For example, if you have an iPhone, you can use Apple Pay, while Android users may prefer Google Pay.

Most e-wallets are free, but you might run into fees.

“Many digital wallets will also charge you transaction fees, usually when transferring money to your bank,” says Shunick. For example, Venmo charges a 1.5% fee if you request an instant transfer of funds from your Venmo account to your bank account. But the company waives that fee if you use its standard option, which typically delivers the funds within one to three business days.

You might spend some time deciding what type of crypto wallet to use, says Tal Lifshitz, attorney, partner and co-chairman of the Cryptocurrency, Digital Assets and Blockchain Group at Miami-based Kozyak Tropin & Throckmorton.

“There’s no one-size-fits-all approach to choosing a digital wallet, and these apps are advancing rapidly, so a review or product from a few months ago could already be outdated,” Lifshitz says. There are different types of wallets that perform different functions and have different strengths, he says. “Identify what’s important to you – security, user experience, whatever. Then work from there.”

If you’re hoping for a digital wallet, or several of them, to completely replace your current physical wallet, you might not be able to find it yet. In many states, it’s still not possible to store your driver’s license or ID card on your smartphone.

But that could change soon. For example, Apple is working with several states to add driver’s licenses and state IDs to Apple Wallet.

Are digital wallets safe?

While a thief could grab your wallet and access your credit cards in seconds, digital wallets encrypt your information to protect it from hackers. Even if someone steals your phone, the thief will likely still need a password or biometric authentication to access information in a digital wallet. You can also lock your mobile wallet from another device if you lose your phone.

Security-worried crypto wallet users aren’t paranoid, says Lifshitz. “People are out to get you and your wallet back. But luckily the technology exists to make sure your assets are safe and secure, if you have the right wallet and are managing it properly.”

Advantages and disadvantages of digital wallets

There are quite a few pros and cons, and of course what you think of those pros and cons will vary.

Benefits

  • There are many different digital wallets. The variety of e-wallets means you should be able to find products that suit your needs. For crypto users, “there are so many wallets to choose from and anyone can find the right wallet for their needs and the resources to ensure they manage their wallet securely,” says Lifshitz.
  • Digital wallets are convenient. At least it’s convenient for shoppers who have grown accustomed to having things that were previously only in their physical wallets stored digitally.
  • Security functions. It may be more difficult for a thief to get hold of your digital wallet information than your physical wallet.

The inconvenients

  • There are many different digital wallets. You don’t see double. All this variety can be overwhelming. “Don’t get frustrated and give up on it,” advises Lifshitz. “Try a few. Many are free. Once you get the feel (for crypto wallets), research makes more sense.” Additionally, Shunick points out that – at least right now – people often need multiple digital wallets to manage their money the way they want.
  • Digital wallets could encourage overspending. Having easier access to your cards can have its downsides. “This convenience can also be a negative when it means that your impulse purchases increase because you constantly have your digital wallet at your disposal,” says Shunick. “Digital payments are quick, easy and usually automatic since you enter your account information once and never have to again.”
  • There may be fees associated with an e-wallet. Be sure to review potential fees when you start using a digital wallet.