woman paying for lunch with her mobile wallet
Financial Literacy

Key takeaways

  • You can use a mobile wallet to make purchases and store loyalty cards, boarding passes, event tickets, and gift cards.
  • When you use a mobile wallet to buy something, no one has access to your credit card numbers or account numbers.
  • There are different types of mobile wallets to suit various spending and storage needs.

Have you been shopping lately and seen someone waving their smartphone–or watch–over the credit card terminal and thought, “What are they doing?” No, it’s not magic, it’s the wonder of technology! Instead of using cash, a debit or credit card, or writing a check, they’re using a mobile walletto pay.

But what is a mobile wallet? And how secure are they? In this article, we’ll explain what amobile wallet is, how they work, and how to use one.

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What is a mobile wallet? 

A mobile wallet is a virtual wallet—a digital version of a physical wallet. Your credit cards, debit cards, and loyalty cards can be stored digitally on your mobile device through a secure mobile app. Digital wallets can even be used to keep boarding passes, movie tickets, gift cards, and reward cards safely stored for future use.

Some smartphones come with preinstalled digital wallets, like Apple Wallet or Samsung Pay. PayPal has a mobile payment app, and so does Google. Even Amazon offers an online-payment platform where you can store multiple cards for making payments. With the Apple Pay app, an Apple watch also can make in-store payments with a tap of your wrist.

Apps like those from Venmo or PayPal let you make payments outside of stores, as well. Instead of using cash, the apps might be used to pay for items from yard sales, Craigslist, or Facebook Marketplace. Private sellers often prefer cash, and rarely accept checks or credit cards. Mobile wallet payments provide more convenience and more safety than carrying a traditional wallet stuffed with cash and credit cards.

What are the benefits of mobile wallets? 

Mobile wallets keep you from having to carry around physical wallets full of credit cards. That can take up a lot of space in your purse or pocket. Mobile wallet technology might lighten the load, especially since you likely have your mobile device with you wherever you go.

You don’t have to print out movie or other entertainment tickets. With a mobile wallet, you can have theQR code on your phone scanned at the door.

Travel tickets are also easier to carry—especially for group travel. Who wants a pocket full of paperwork? Plus, updates can be reflected right away on virtual tickets on your mobile device.

Some hotels let you save your room key in a digital wallet. Many apps let you check in and out without even visiting the front desk. It’s faster and easier, and it reduces health risks.

When you pay with a credit or debit card, there’s no telling how many folks will touch your card. Even if it’s just one server or cashier, your card will touch the sales terminal. And many other cards have touched that. The contactless payments of mobile wallets mean fewer chances of germs being spread.

Mobile wallets typically are quicker to use. A debit card usually requires you to enter a PIN code on the terminal keypad, and credit cards might require a ZIP code or a customer signature. A mobile wallet app asks for none of that. It keeps you from having to touch a keypad or pen.

How safe is a mobile wallet? 

Mobile wallets might offer greater security than even physical cards. When you swipe a magnetic strip, your card’s information is transmitted through various systems. Hackers can steal that information while it’s in transit.

Mobile wallets employ many security features. With a mobile wallet, every payment is encrypted. Payment information—card and account numbers—is not shared with merchants. A Device Account Number (DAN) is used instead of the actual account numbers. Even if someone managed to steal your DAN, it’s of no use, because mobile wallets use encrypted keys.

Plus, mobile wallets work with what’s called a personal identification format. That means when you use your wallet for a transaction, you have to provide some type of additional identification. A fingerprint scan, PIN entry, or facial recognition are typical methods. If you lose your phone, these measures make it less likely that someone could access your mobile wallet.

Which type is best for me?

Mobile wallets come in three basic formats:

  • A closed wallet is provided by a single company for its own sales. For instance, Amazon has a closed wallet where shoppers can store credit cardsfor purchases only at Amazon. Refunds and returns are credited to this wallet.
  • A semi-closed wallet allows shoppers to buy goods and services through multiple merchants that are affiliated with the wallet issuer. They sometimes allow a transfer of money between wallet users.
  • An open wallet is usually issued by banks or financial institutions. Users may make purchases anywhere that open wallets are accepted. In addition, an open wallet lets you make withdrawals or transfers from your associated bank accounts.

You’ll need to decide which system fits your needs. If you have an Apple device, you might lean toward Apple Pay. If you have an Android device, Google Pay might make more sense. PayPal is widely accepted online, but not as much for in-store purchases. If you mostly make online purchases through an online merchant, like Amazon, look into their in-house, closed wallet.

How do I use a mobile wallet?

After you decide which wallet to use, download and install the app on your mobile device. Set up an account, andadd your credit and debit cardsor bank account numbers as needed. Enable two-factor authentication, so any access requires two different identifications. That keeps your account safer than single-factor authentication.

If you’re getting tickets, memberships, or boarding passes, issuers will often let you know there’s a mobile wallet option. When they send you the ticket, there will be an “Add ticket to wallet” button displayed. Sometimes you’ll see the button when you buy the item, sometimes it’ll come in a text or email.

Many retailers are prepared for mobile wallets. When you’re at a small business or a shop that will accept mobile wallet payments, the point-of-sale terminal usually displays which methods are accepted. There will often be a contactless payment symbol as well, which looks like a sideways Wi-Fi symbol.

Open your mobile wallet’s app and log in. When it’s time to pay, hold your phone close to the payment terminal. Mobile wallets use NFC technology (near-field technology) with a 2-to-4-inch range. You’ll have to hold your device close. It’s another safety feature that keeps you from accidentally paying for someone else’s purchase in the next lane.

The app will notify you there’s a request for payment. The amount is displayed, and it will ask for your authorization. After you do so, it should tell youthe payment was successfully made. Your payment is then sent to the payment processor, and you’re all done.

Going mobile

More and more consumers are getting on the mobile wallet bandwagon. Give mobile wallets a try and enjoy the convenience and safety that thisnewer payment method offers.


This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.

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