Will Apple Pay Bury People in Debt?
Apple Pay has the potential to make the purchasing process virtually frictionless. All it will take, Apple says, is a tap of your phone (or watch) and the touch of your thumb.
Apple is expected to launch Apple Pay by the end of October, and several major banks have already signed on to support it. This “virtual wallet” is more secure and more convenient than traditional payment methods, and Apple has the testing and imagination behind it to launch a solution that’s leaps and bounds ahead of other mobile payment apps.
For many people, being able to pay with their iPhone will be a huge convenience. But for others, the seamless payment solution could be a double-edged sword.
The Cost of Convenience
Mobile payment is the next logical evolution in consumer spending — especially when you consider the fact that eight in 10 Americans carry less than $50 in cash in their wallets. (Nine percent don’t carry any cash at all!)
Cash certainly isn’t the most convenient way to pay, but it has one significant advantage for people struggling with managing their money: It’s impossible to spend more than you have.
In fact, the tangible quality of cash alone is enough to influence a person’s spending habits. A number of studies have shown that people are willing to spend more when they’re paying with a card rather than with cash. Once money becomes intangible, it becomes increasingly difficult for people to understand exactly how much a purchase will affect their budget until the bill arrives.
Apple Pay (and services like it) will only increase this disassociation for people. With the feature to easily switch between payment accounts, the barrier to spending will become almost nonexistent. It’s not a problem if you have a handle on your spending, but for many people, it may exacerbate bad spending habits.
The Risks of Apple Pay
The risk of linking an Apple Pay account to a credit card is fairly obvious: The average American household already has an average of nearly $16,000 in credit card debt. But paying directly from a bank isn’t risk-free, either.
While paying from your bank account ensures that you’re only spending money that you have, it doesn’t mean you’re spending money that you can afford.
Unless you’re checking your bank account before each transaction, it’s easy to lose track of just how much money is left for you to pay necessary bills. This is why many financial experts advise those struggling with money management to go cash-only; it makes it just a little more difficult for people to spend beyond their means.
How to Stay Out of Debt in the Mobile Payment Age
If you’re thinking about using Apple Pay, you need to take precautionary steps to make sure you’re only spending the money you have — and spending it wisely.
1. If you use mobile pay, use apps that connect to your account balance. If an app can access your account balance at your bank, it won’t allow you to purchase something if the balance available won’t cover the purchase cost. This age-old saying should be your standard thought process: “If you don’t have the money to buy it, you don’t need it.”
2. Review your finances weekly (at least). Make sure you know which monthly bills may still be pending in “Bill Pay Land” before using mobile payment services too liberally.
3. Know your limits. If you know that mobile pay’s ease of use will cause you financial hardship, do not download the app. I repeat: Do not download the app. Stick with your current method of payment for your daily expenses.
If you’re on top of your spending, Apple Pay probably won’t affect how much debt you accrue. But for those who are struggling, this added level of convenience might really be another level of trouble. If you have problems with debt — or a tendency to make too many impulse purchases — it may be wise to avoid using a virtual wallet such as Apple Pay.
If you know that you’ll be able to pay your bills at the end of the day without fear of overdrafting your bank accounts with your current method of payment, is the mobile wallet really more convenient for your needs? Or is it just a trendy new way to pay that could be exponentially dangerous? Only you know the answer for your personal spending habits. Choose wisely.
Daniel Wesley founded DebtConsolidation.com to help consumers struggling with the burdens of credit card debt and medical bills.
