by Bill Hardekopf
After years of speculation, mobile payments are finally a payment option for some smartphone users with the debut of Google Wallet. Mobile phones provide daily conveniences for Americans, but flashing a phone at the register may not be any easier than swiping a credit card, and it may provide more risk to the consumer.
"Mobile payments" allow consumers to make purchases or transfer money with a quick application downloaded to a mobile phone. Even though mobile payment systems are available today, plastic cards and cash won't vanish tomorrow. Consumers and retailers will need convincing and incentives to make the switch.
Consumers won't save money by paying with a mobile phone. The same fees and interest rates for consumers and interchange fees for retailers will apply to mobile payments. Retailers are also reluctant to spend the money to buy the equipment necessary to link your cell phone to their cash registers.
Google Wallet is the first mobile wallet entry, but it won't be the last. At least three competing digital wallets (from Visa, PayPal, and Isis--a joint venture of AT&T Mobility, T-Mobile, and Verizon Wireless) are planned for launch later this year and in 2012.
Google Wallet will not replace your regular wallet. You will still need a place for your driver's license and credit cards that are not a part of Google Wallet. Google Wallet plans to expand to include other banks, but if your bank is not one of the partners, your options are limited by Google Wallet.
Google Wallet is starting with a limited introduction and is currently not available on all mobile phones. If you own a Nexus S 4G phone from Sprint, you can download a Google Wallet app that will allow you to pay for purchases with Citi PayPass-eligible MasterCards or a Google Prepaid Card by tapping the phone on a PayPass terminal. Google Wallet can also work on Visa's payWave System.
Tips for Using Mobile Payments
Most of the electronic payment options are tied to credit cards and debit cards, and the same costs will transfer to mobile payments. Purchase protections vary by type of payment and it is up to the consumer to read the fine print and understand the risks of unauthorized activity or errors on their statement.
- Tie your payments to a credit card. This gives you the best protections no matter where you make your purchase. Credit card purchase protections, caps on liability, and regulations will also apply to a mobile payment backed by a credit card. Under federal law, you are responsible for the first $50 in unauthorized charges after you notify your bank. You also have the right to dispute a charge and the right to chargeback an item.
- Payments linked to debit cards also have the same purchase protections, and liability as a standard debit card.
- Avoid billing to prepaid cards. Prepaid cards have more fees than credit and debit cards. They typically cost more and do not have the same purchase protections or caps on liability.
- Do not bill to gift cards. Gift cards do not offer purchase protections. If you must use a gift card for payment, keep the gift card receipt. If your phone is stolen, contact the merchant immediately to limit your losses.
- Avoid billing to your telephone account. These accounts offer no protections or caps on liability. Ask your carrier to block third-party charges to your cell phone or your landline. Consumers must pay the wireless company for disputed charges even if a report of a disputed amount was made and the report is pending investigation. If you do bill to a telephone company, place a cap on any third-party charges to your phone bill.
- If you lose your phone, immediately call your cellular carrier to disable you phone. Call your bank or credit card issuer to block access to your accounts.
- No matter what payment method you use, look carefully at your statements for any charges that are incorrect and report errors promptly.
- Send complaints to the Consumer Financial Protection Bureau
- Stay within your budget. The easier the payment, the easier it is to make impulse purchases and spend more than you intended.
Ideally, consumers should have strong protections against unauthorized transactions and billing errors with a mobile payment, no matter what form of payment is used. But this is new, and consumers have to know what they are signing up for and the risk. Mobile payments are another easy way to charge more than you can afford. If you can't pay off your balance in full each month, don't increase your credit card balance with mobile payments.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.