Dear Carrie: My 20-something son is all for using Apple Pay for his purchases. Though I’m no technophobe, these types of easy payment systems make me nervous. Am I just being old-fashioned? — A Reader
Dear Reader: Thanks for giving me a chance to weigh in on a topic that is understandably on a lot of people’s minds right now. There’s been a great deal of talk about Apple Pay, as well as similar payment methods, such as Google Wallet and PayPal, and how these systems are changing the way we pay for our purchases.
I find the technology intriguing, and I’m all for ease and convenience. That said, I do have some concerns, not around the system itself but around how it affects people’s control — or lack of control — over their spending.
But let’s start by looking at the benefits.
Ease of Use Is a Plus
According to recent reports, it appears that Apple Pay is ahead of the pack in terms of digital payment methods. It’s easy to set up on your iPhone 6 or Apple Watch; it doesn’t require a special app or a separate account; and it’s free.
And it couldn’t be easier to use. Once it’s set up, your mobile device carries digital versions of your credit and debit cards and your fingerprint. When you put your device near what’s called a near field communication payment terminal, an image of your credit or debit card appears. Rather than use the old-fashioned method of swiping your card, you simply touch the “home” button with your finger, and Apple Pay communicates with your bank.
It’s More Secure Than Carrying Multiple Cards
Though a lot of folks initially worry about security, Apple Pay may actually be a far more secure method of payment because you never physically hand your card to someone else. Just think — no one sees your card, your number, your security code or even your name. Plus, each communication with your bank triggers a unique number for that specific transaction, and it isn’t stored on your phone.
Losing your phone is another worry. But the Find My iPhone app can suspend or permanently remove the ability to pay from the lost device. Alternatively, you can contact your bank to suspend the service. To understand more about Apple Pay’s security measures, contact your bank or go to http://www.apple.com for the latest information.
But Apple Pay isn’t just about technology; it’s about spending your money. And that’s where I’d counsel a bit of caution.
Tech Aside, You’re Still Stuck With the Bill
No matter how easy it is to pay for something, we’re still talking about credit and debt. And it’s well-known (and well-documented by behavioral economists) that people tend to spend more when using credit than when paying with cash.
Credit cards remove us one step from the awareness of what we’re spending. Signing your name to a $100 charge doesn’t carry the weight of handing over $100 in cash. So my concern is: If we don’t even have to take out the card and can just pay with a single touch, are we even further from understanding just how much we’re spending?
One way to help avoid going overboard on credit card spending is to link Apple Pay to just a debit card, not a credit card. Although using a debit card is not the same as paying with cash, knowing you’re depleting a cash account can help prevent you from running up an oversize credit card balance.
In other words, no matter how compelling the technology, I believe there’s a bit of old-fashioned money management wisdom that needs to hover nearby — because while we’re making it easier than ever to run up debt, it remains just as hard to pay it off if you’re not mindful of your spending. Using a payment method such as Apple Pay can feel like a game, but the rules of budgeting, the difficulty of living within one’s means and the importance of saving mustn’t get lost in the fun.
I suggest having a few more conversations with your son. Get on board with the technology. Learn what you can from him. But in return, share some of your own financial experience.
Make certain that he understands the need to control spending and debt, how interest can add up, how misuse can impact your credit rating and how this can affect your future ability to borrow. Encourage him to set goals and begin saving for retirement.
Past technological advancements, from bank debit cards to online investing, have helped us simplify and take greater control of our time and our finances. I believe that digital payment systems can do the same — as long as we realize that it’s not just the technology that’s important but also how we use it. And using it wisely is the key.
Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER ™ is president of the Charles Schwab Foundation and author of “It Pays to Talk.” You can e-mail Carrie at askcarrie@schwab.com.