3 things to know before adopting mobile payment apps

It's impossible to dispute the fact that today's consumers have more ways to pay for everyday needs than ever before.

"Mobile payment apps make everyday expenses even easier to handle - but they aren't flawless."

From RF capture technology that allows smartphone users to upload essential credit card information and pay without opening a wallet, to mobile apps that let friends quickly settle minor debts in this increasingly cashless world. Also, the potential exists for transactions made with these apps to factor into alternative credit reporting scores. But it's important to acknowledge certain aspects of their operation before diving in headfirst.

Check for any fees
While not the only mobile payment apps, PayPal and Venmo can safely be considered among the best-known options in the field of such services. Both charge customers for certain services to generate revenue.

Investopedia noted a 2.9 percent fee for all credit and debit card transactions from PayPal, while Venmo levies a 3 percent fee for credit charges. Neither platform takes a cut of transactions originating from users' app balances or checking accounts, but those don't process as quickly. Apple Pay, meanwhile, assesses a 3 percent credit transaction fee. Google Pay, the computing giant's new fusion of now-defunct Android Pay and Google Wallet, hasn't announced its strategy but may maintain Android Pay's lack of transaction charges.

Security concerns
Venmo's growth is undeniably rapid, as its total payments processed increased fivefold on a year-over-year basis between Q3 of 2013 and 2014, according to Slate, and it claimed to have handled $1 billion in January 2016 alone on its official blog. However, that pace hasn't been matched by internal development, so customer services in the event of a hack or other problems are limited.

Slate reported that a user who was fraudulently charged nearly $3,000 through a Venmo hack in 2015 received little help from the company, though the bank connected to his account reimbursed him after conducting due diligence. 

PayPal, Venmo's parent company, has been operating for longer than its subsidiary, so its fraud contingencies are more thorough. Apple and Google, meanwhile, have global corporate resources behind them. But no system is invulnerable to breaches, so the onus falls on users to use apps carefully.

Credit effects
Transactions made via any of these apps shouldn't harm your FICO score or your report with any of the Big Three credit bureaus. However, if the provider suspects fraud - perpetrated by you or upon you - or if you want your account to be considered a business, they may conduct a credit check. (It depends on the app's terms of service, which you should closely review. PayPal reserves this right, for example.) notes that, as is true of any company conducting an inquiry, this could cut a few points from a conventional credit score. But you should be fine if your credit isn't frequently being checked by businesses. Alternative scoring models would likely remain unaffected. 

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