Generally, making a payment with near-field communication is more secure than using a credit card with a magnetic stripe. Merchant payment systems typically store information from cards that you swipe, making it relatively easy for hackers to steal it and make fraudulent purchases. When you pay with NFC wallets available today, the transaction involves “tokenization,” which means that your real account data is replaced with a substitute that is meaningless if it’s intercepted. Similarly, criminals have a harder time using payment info they grab from transactions with EMV chip cards.
Plus, NFC applications that make payments must employ a “secure element” to store and encrypt your financial credentials. Apple says that it doesn’t store account numbers on its servers. Google says that financial information in Google Wallet is encrypted and stored on secure servers. Softcard says it does not receive or intercept transaction data.
For most people, protecting their devices from thieves is a bigger concern than payment processing, says Kevin Johnson, chief executive of Secure Ideas, a security-consulting firm. Lock your phone’s screen by using a strong PIN or passcode, or use a fingerprint sensor if your device supports it. Set up the ability to wipe your phone of data remotely if it goes missing, such as with Apple’s Find My iPhone or the Where’s My Droid app for Android.
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Keep an extra-close eye on your bank and credit card accounts if you use them to make mobile payments, says Michael Eisenberg, a CPA and personal financial specialist with Eisenberg Financial Advisors, in Los Angeles.
Look for unauthorized charges as well as any glitches that the nascent technology might experience, such as double charges for one item. If a crook gets hold of your phone and uses it to make payments, the same liability protections should apply as if he’d swiped your card. Legally, you could be responsible for up to $50 in unauthorized credit card purchases, and your liability for fraudulent debit card transactions could be unlimited, depending on when you report the problem. But as long as you promptly inform the issuer, it will likely cover the purchases.