Buhata
Login Start for Free

Home › Life Terms

Household money and budgeting

Digital wallet

An app, such as Apple Pay or Google Wallet, that stores your payment cards on your phone so you can pay by tapping it or choosing a card at checkout.

What It Means

A digital wallet is an app that keeps your payment cards on your phone or another device, so you can pay by holding the device near a store's card reader or by choosing a card at an online checkout, without taking out the card itself. Apple Pay and Google Wallet are two well-known ones. Much of the protection comes from standing in for your real card: Google's virtual card shares a randomly generated number with the merchant instead of your actual card number, and Apple says it doesn't store the original numbers of the cards you add to Apple Pay.

Try It: Card, Phone Wallet or App Balance?

Pick a way to pay and see what's different about it, based on Apple's, Google's and the CFPB's own pages.

Phone wallet, such as Apple Pay or Google Wallet

  • Apple Pay won't work without a passcode on the phone; Face ID, Touch ID or Optic ID can be added.
  • Google's virtual card gives the merchant a randomly generated number in place of your real one.
  • Apple says it doesn't store the original card numbers you add.
  • In stores, Apple Pay uses NFC, which works only over a short distance.

How It Sounds at Home

  • "I left my wallet at home, but I've got my phone."
  • "Just tap your phone on the reader."
  • "Is your card saved in your phone's wallet?"

The Breakdown

An example. Rosa adds her debit card to the wallet on her phone. At the grocery store she holds the phone near the reader and confirms with her face, and the store gets a stand-in number instead of her real card number. Online, she picks the same card at checkout without typing it in. She also has $600 from a side jobSide hustlePaid work done alongside a main job or other commitments, such as freelancing, delivery driving or selling goods; the IRS treats the income as taxable. See more sitting in a payment appPeer-to-peer paymentMoney sent directly from one person to another through a payment app or a bank's app, such as Zelle, Venmo or Cash App. See more's balance, where it has stayed for months because moving it never seemed urgent.

Where it goes wrong. The wallet part works as intended. The $600 is the weak spot: the Consumer Financial Protection Bureau warns that money held in a payment app's balance may not have deposit insurance. And when a friend asks Rosa to send money for a concert ticket, she uses that app, which is a different job from paying a store with a card. The FTC compares sending money to a person through a payment app to handing over cash, because it's very hard to get back.

What to watch for

  • Keep a passcode on your phone. Apple requires one before Apple Pay will work.
  • Move money out of an app's balance into an insured bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more account.
  • Treat sending money to a person differently from paying a store, since the FTC says the first works like cash.

Good to Know

Apple says Apple Pay needs a passcode set on the device, with Face ID, Touch ID or Optic ID as optional extras, that it doesn't keep the original card numbers you add, and that in stores it uses NFC, a contactless technology built to work only over short distances. Google says a virtual card in Google Wallet swaps in a randomly generated number for your real card number when you pay. If a wallet or payment app also holds a balance, the Consumer Financial Protection Bureau warns that money kept there may not have deposit insurance and suggests moving it into an insured bank or credit union account.

FAQ

Is a digital wallet safer than paying with my card?

It adds protections of its own. Apple requires a passcode for Apple Pay and says it doesn't store your original card numbers, and Google's virtual card shares a stand-in number with the merchant instead of your real one. Keep the phone locked, since the wallet sits on the device.

What's the difference between a digital wallet and a P2P app?

A digital wallet stores your cards so you can pay stores and websites. A P2P app sends money to another person, which the FTC compares to sending cash because it's very hard to get back.

Is money in a digital wallet insured?

Cards in the wallet draw on your bank or card account as usual. A balance kept inside a payment app is different: the CFPB warns it may not have deposit insurance and suggests moving it to an insured bank or credit union account.

Do It in Buhata

Accounts

Add the bank account behind each card in your phone's wallet to Accounts, so every balance sits in one place.

Open Buhata

Related Terms and Categories

  • Peer-to-peer payment

    Money sent directly from one person to another through a payment app or a bank's app, such as Zelle, Venmo or Cash App.

  • Checking account

    A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.

  • Phishing

    A scam where someone sends an email or text that looks like it's from a company you trust, to trick you into giving up passwords, account numbers or other details.

Household money and budgeting

Sources

Apple Support, "Apple Pay security and privacy overview"; Google Wallet Help, "Keep your payment info safe"; Consumer Financial Protection Bureau, "Is the money I keep in my payment app safe?"; Federal Trade Commission, Consumer Advice, "Do you use payment apps like Venmo, CashApp, or Zelle? Read this" (2023)

Last updated .