Paying by Phone Is Riskier Than You Think

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Technological advances and the proliferation of smartphones have given consumers an increasing number of ways to pay for goods and services using their mobile phone. Many of these options are similar to online bill paying, in which the user enters their credit or debit card information to conduct a transaction, or goes to their bank’s mobile site or app to pay a bill. Some tools, though, let you charge things directly to your cell phone bill. This is a huge risk, according to nonprofit group Consumers Union, which studied the details of one such proposed plan and liability law.

T-Mobile USA’s Direct Carrier Billing, announced last week, offers customers the ability to “conveniently charge online purchases of digital games, gaming and social networking credits, music, videos and other digital content offerings directly to their existing T-Mobile account,” according to a release from the company. It does sound convenient, but here’s the problem: Because the transaction isn’t done using a credit or debit account, none of the consumer protection laws that cap liability to $50 in the even of fraud apply. If an enterprising hacker managed to worm into your account or even if you just lost your phone, you could be liable for any and all charges a thief makes.

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“[M]obile payment charges that appear directly on a customer’s cell phone bill don’t enjoy the same statutory protections consumers currently get when making payments using a credit card or debit card,” Consumers Union warned in a statement issued Monday. While a carrier like T-Mobile could extend the legal protections pertaining to credit and debit fraud to customers in the contract, this would be strictly voluntary.

According to Consumers Union, T-Mobile hasn’t indicated that they have done or will do this, which leaves customers in a kind of liability limbo. Although the mobile company’s release touts its fraud prevention and security safeguards, it’s not at all clear what would happen if a hacker did breach those barriers.

Conducting a transaction via your smartphone isn’t necessarily dangerous, but make sure you enter your credit or debit information rather than having your purchases added to your phone bill. In addition, security experts recommend that you don’t conduct transactions on an open wi-fi network, and that you set up a master password to “lock” your phone as well as a “wipe” app that will erase your data if your phone is lost or stolen.