NDSU Extension Service - Ramsey County


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Would You Pay by Phone?

Would You Pay by Phone?


          Americans are known for being impulse buyers and that reputation may be ramped up even more in the near future. Several cell-phone companies in conjunction with credit-card companies hope to implement a app so people can simply swipe their cell phone to pay for everything from cups of coffee to cruises.

          Some credit-card companies and technology companies have already experimented with radio-frequency identification (RFID) payment stickers to attach to your cell phone. They allow customers to rack up charges without even carrying a wallet. Over the next few years, companies including Apple, Samsung and Nokia plan to incorporate special near-field communications (NFC) chips in smart phones that will let shoppers make purchases simply by tapping their phone against a terminal - no sticker required.

          One telecommunication specialist estimates that half of all mobile phones will have the chips by 2015.  While this type of technology sounds incredibly convenient, experts say it could pose a potentially big credit risk, especially to younger consumers who may swipe and forget -- and rack up big debt.

          Why are credit-card companies and others so eager to get us paying with our phones? The answer is simple: We spend more.  For example, one study showed that when PayPal account holders were offered the chance to use its Bill Me Later credit service on eBay, the size of purchases doubled,.

          The technology for this kind of swipe-and-go mobile payment has been in place for years.  It has already been used for public transportation and other types of purchases in Europe, Japan and South Korea.

          Last year, MasterCard launched its own system of payment stickers that can be tapped on its PayPass terminals at 270,000 retailers, including CVS, Home Depot, Best Buy and McDonald's. No signature is needed for transactions under $50.

          For those who carefully track their expenses, set limits and protect their phone, the transition to mobile payments shouldn't pose any problems.

But there is always the chance of fraud. Many people leave their phone lying around more casually than their wallet. If someone steals the phone and it has an automatic login, a thief could do some serious spending.   All of which adds up to another opportunity for consumers to be alert and aware.


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