Will The Credit Cards of the Future Protect You Better?

creditcards

Ever wondered what credit cards will look like in the future? As it turns out, there are some interesting innovations shaking up the credit card industry right now that will have an impact for years to come. While for most people, the basic practice of swiping a credit card at the cash register has not changed much in the last decade, there are signs that the coming decade will see significant changes in how most of us use credit.

Because of the many security and technical constraints that are inherent to the credit card industry, innovations from other industries don’t always make the leap immediately. But some of the rapid changes affecting other industries are now trickling over. Below, we examine some of these trends and offer advice on how to make the new technologies work best for you.

Is Your Phone the New Credit Card?

Last week, both Visa and MasterCard announced new “card-less” payments that use a consumer’s phone (with a corresponding app) to make payments from their credit card. Visa reported that it will store card information on its servers while partnering with app developers to allow for apps that work when a consumer taps their phone for payment at the cash register. MasterCard unveiled a similar service which it is calling Host Card Emulation, and they have partnered with Capital One to implement the technology. Both MasterCard and Visa are relying on the Android operating system to make this possible in a way that protects consumers’ information securely.

In other words, “swiping your card” will be replaced by “tapping your phone” … if you so choose.

The question is, will consumers respond favorably to having their data stored “in the cloud” for easy access from their phone? Most likely, they will. After all, each new technological advance usually raises concerns and complaints at the beginning but ultimately becomes widely accepted. As consumers, we’ll just need to be sure these new ways of paying don’t harm our finances in other ways (more on this below).

Or Will The Credit Card of the Future Be a “Multi-Card”?

Using a phone to make credit card payments sounds pretty convenient, but perhaps the real convenience will come from having all your accounts joined together in one card. Sound impossible? Surprisingly, with the recent launch of Coin, it’s already here. Coin is a new kind of card that saves your credit card information (for multiple cards) on one card and makes it possible to switch between accounts as you choose. The most obvious benefit is a lighter wallet and ease of use. The company also claims there are security benefits, but those remain to be seen. This technology is still young and will probably need some time to mature to the point where it’s ready to be adapted by the majority of consumers. But no doubt other companies will begin creating competitive products similar to Coin and in the near future all consumers will have the options of using a multi-card like this.

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Don’t Let the Ease of Using Credit Cards Draw You Into Debt

Is all of this good news? Well, in general innovation is usually good for the consumer. But there’s one caveat when it comes to credit cards. If these new technologies make it even easier to use your credit card(s) then you could be at even more risk for falling into debt.

To avoid falling into this trap, you’ll need to be extra careful. We talk frequently on this blog about ways to avoid credit card spending problems, and these tips will be even more important in the future:

1. Don’t Use Plastic If It’s Too Tempting: For some people, credit cards are just too tempting because they make it so easy to purchase things (without feeling the pain of losing money from your wallet). To combat this, use cash for all purchases and implement the envelope budgeting system in which you give yourself a strict budget for each type of spending per month (or per week).

2. Evaluate Your Mindset Toward Spending: If you have a problem with spending, take some time to look at why that might be. While low income and the rising cost of necessities are a contributing factor for many, there are also instances where spending is used as a means of creating happiness (for example, with shopping addictions) in place of other more healthy behaviors. Try to determine if this applies to you, and if so, start re-thinking your mindset.

3. Make a Plan to Get Out of Debt: Perhaps most importantly, if you currently have debt, then make a plan today to pay it off! You can use our blog post on the subject, as well as our resource centers. And of course, don’t forget to sign up for ReadyForZero, a free online tool for helping you make a custom plan to get out of debt.

None of us can predict what the future of credit cards will bring, but if we take the right steps today then we’ll be prepared to maintain a good relationship with credit no matter what happens.

Image credit: krysek

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  • http://vivian-lee.net/ Vivian Lee

    I’m honestly surprised at how much press Coin gets when it’s not even the first startup to work on the idea of an integrated card. Omne started work on their card years ago (http://myomne.com), and both Echo (http://getprotean.com) and Wallaby (https://walla.by/the-wallaby-card) are working on similar items. Just wanted to throw that out there!

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Wow, that’s interesting! I didn’t even know these others existed. Thanks for opening my eyes. I’ll take a look and see if I can figure out the differences (if any) between them.