Is mobile banking putting your personal privacy and the security of your accounts at risk? As millions of Americans turn to the latest convenience in making payments and accessing their bank accounts, this question is becoming increasingly pertinent.
Consumer advocates point to rising threats ranging from new forms of malware that target your smartphone to applications that spy on your spending patterns and even read through your address book.
"Smartphones contain a lot of sensitive personal information, like your address book and your location. And when you use them to make mobile payments, even more information is added," said Susan Grant, director of consumer protection and privacy at the Consumer Federation of America. "It's really important to know who has access to that information and how they might use it."
To protect yourself, what should you know, do and avoid?
Do link mobile payments to a credit card. No matter whether you're paying by waving a smartphone, using a Web browser, a quick-code or a text message, the merchant will ultimately be paid by either credit card, debit card or via your phone bill when the charge gets added to your monthly payment. Federal laws provide the most consumer protections for credit cards, so where you have the option, link any mobile payment accounts to a credit card. That gives you the ability to dispute fraudulent charges before they're paid.
Don't download apps without reading the terms and conditions. Smartphone apps are increasingly likely to be spying on your every move, pulling up your GPS data to see where you live, eat and shop. They can access your calendar, your contacts and the websites you visit. Applications that do this disclose it, but the disclosures are in "terms of service" agreements that most people "accept" without bothering to read.
In reality, they're dense and difficult and reading through them is a pain, the CFA's Grant agreed. And, sure, the app's maker may say it's gathering all this data solely to send you "relevant" advertising. But the FBI would need a warrant to get that much information on you. You should know whether you're freely providing it to any number of parties.
If you don't like what you see in the terms and conditions, don't download the app. You can find other ways to, say, check on your friends or find out what they're buying. Heck, maybe you could invite them to lunch or call on the phone.
Do protect your smartphone with a password. And don't make it "password" or "1234" or some other easy-to-guess cop-out. If you access your email and your bank or brokerage accounts through your cell phone, you make those accounts vulnerable to any crook who steals it if you don't protect access to the device with a hard-to-guess password.
Don't click on random links -- even when you think you know the sender. Malware attacks are increasingly striking mobile phones, so your friend's phone could be infected and sending you messages to infect you -- and everyone in your address book, too. If you think a friend has sent a link, text back and ask what it is before you click.
Do use an app rather than browser. If you regularly use your phone for financial transactions -- buying coffee at Starbucks or transferring money from savings to checking, for instance -- make sure you do that through an authorized app rather than going to the site via Web browser. Most mobile apps have additional layers of security built in, said fraud experts at Javelin Strategy and Research. These keep the app from accessing other data on your phone and have firewalls that keep prying eyes out of your mobile wallet.
Don't use public Wi-Fi to access sensitive data or sites. You know this, right? Public Wi-Fi is just that -- public. Unless you want someone looking over your shoulder at your bank balance, don't use the Wi-Fi at McDonald's or public parks or airline lounges to check it.
Do watch your accounts. You have rights if someone accesses your accounts to make fraudulent purchases or drain your account, but your vigilance is the first line of defense. Watch your bank and credit card statements for unfamiliar charges and notify your bank immediately of anything that's suspicious.
Don't disable security features on your phone. Just like your front door has locks designed to keep burglars out, your phone has security features designed to protect your data. Disabling those locks is like leaving the front door open, just begging crooks to come in.
Do take the time to learn more. The Consumer Federation of America just launched a website to provide information -- including where to get help if you've been scammed -- on mobile payments. If you're uncertain how mobile payments work and how to protect yourself, it's a good place to start gathering necessary information. Go to www.consumerfed.org/mobilepayments.
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