The Lowdown on Digital Wallets

Paying with a digital wallet

So maybe you’ve heard the term “digital wallet” tossed around but aren’t exactly sure what it is. Well, you no longer have to be in the dark. Here are the basics on a digital wallet and how you can take advantage of its awesome features to help you stay on top of your finances.

What is it?

A digital or virtual wallet is essentially an app that enables you to make mobile payments from your smartphone. With a digital wallet, you can store the info from all your credit cards into one convenient place. Types of digital wallets include Apple Pay, PayPal and Sprig by CO-OP. With a couple swipes on your phone, you can make purchases and payments easily and quickly, no matter where you are.

What are some of its benefits?

There are a ton of great benefits to digital wallets, explains John Thompson, senior vice president at the Center for Financial Services Innovation (CFSI), which include:

Person-to-person payments. 

It’s a breeze to transfer money to your friends and family.

Greater protection.

Because digital wallets employ tokenization, which is a technological process that substitutes non-sensitive info for sensitive, personal info, they can provide greater security.

More privacy.

As your personal information isn’t shared with merchants, there can be more privacy with your transaction history and info.

How can you use a digital wallet to help you budget?

One thing you can do is to create a system to keep track of your spending. “Planning ahead for irregular expenses and saving for your goals with a plan are two of the most important activities to improve financial health,” explains Thompson of the CFSI. “Going digital might help bring those to life for you.” For instance, a digital wallet can help you keep track of where your money is going and how frequently. “A key benefit of using a digital wallet for budgeting is accessibility to past and current purchase transactions to make adjustments to future spending,” adds Jason Vitug of Phroogal.

Here are some ways to create your own system:

  • Set alerts to limit spending.
  • Store loyalty cards and member rewards info to help you save money.
  • Monitor your spending by checking how often you spend at certain stores, and in what categories (i.e., groceries, clothes, entertainment). If you find yourself overdoing it at your favorite stores, you can make tweaks as necessary.

While digital wallets are not an entirely new technology, understanding their full capabilities will help you get the most out of their rich features and stick to your budget. To learn more about digital wallets that are available to you, contact your local credit union.