Understanding Digital Wallets and Bank Accounts: A Comprehensive Guide

In today’s fast-paced world, managing your finances efficiently is crucial. With the advent of digital wallets and traditional bank accounts, you have multiple options to store and use your money. This guide will help you understand the differences between digital wallets and bank accounts, how to use them, and when to choose one over the other. At O1ne Mortgage, we are committed to helping you make informed financial decisions. For any mortgage service needs, feel free to call us at 213-732-3074.

What Is a Digital Wallet?

Digital wallets are applications that allow you to electronically store items you might typically keep in a physical wallet. These include debit and credit cards, transit passes, insurance cards, loyalty program cards, and gift cards. Additionally, digital wallets can store event tickets, boarding passes, keys, passwords, employee badges, and student IDs. In some states, you can even add an electronic version of your driver’s license or state ID.

Popular digital wallets include:

• Apple Wallet
• Cash App
• Google Wallet
• Samsung Wallet
• PayPal
• Venmo

These wallets come with security features like tokenization, which keeps your payment details secret. When you use a digital wallet to pay, it sends an encrypted token to the merchant instead of your actual card information, protecting you from card skimming. However, digital wallets are not universally accepted, so it’s wise to carry cash or a physical card as a backup.

How to Use a Digital Wallet

Using a digital wallet is straightforward. Here are the steps to get started:

Add Cards and Information

You can add debit and credit cards by scanning them and verifying the information. Some wallets allow you to connect directly to your bank or credit card’s mobile app.

Add Funds

Some digital wallets let you store money directly in the wallet, which you can use for purchases instead of using a connected payment card.

Make Payments in Stores

After adding a payment card or funds, you can use your smartphone or smartwatch to make payments. Unlock your device using biometrics or a PIN, and tap it on a point-of-sale terminal to pay.

Display Stored Information

You can use your digital wallet to access event tickets, boarding passes, and other stored items.

Make Payments Online

Many digital wallets appear as a payment option when shopping online. Select the wallet during checkout and follow the prompts to verify your identity.

Some digital wallets also offer features like paying for transit with a quick tap or using digital keys to unlock your car automatically.

What Is a Bank Account?

A bank account is a deposit account you can open with a bank or credit union. There are several types of bank accounts, including:

• Checking accounts
• Savings accounts
• Certificates of deposit (CDs)
• Money market accounts (MMAs)

The two most common types are checking and savings accounts. Checking accounts are for everyday expenses and usually don’t earn much interest. Savings accounts are for short- and medium-term savings goals and can earn interest, especially high-yield savings accounts.

Most bank accounts are FDIC insured, guaranteeing up to $250,000 per depositor, per account ownership category, and per bank. This makes bank accounts a safe place to keep your money.

How to Open a Bank Account

You can open a bank account in person or online. Here are the steps to open an account online:

Compare Different Accounts

Look for accounts that offer the best features with the fewest fees.

Create an Account

Use a strong password to keep your account secure.

Enter Your Information

You may need to provide your name, address, Social Security number, and upload pictures of a government ID and a document verifying your current address.

Make an Initial Deposit

Some accounts require an opening deposit.

The bank or credit union may check your ChexSystems report during the application process. If you have a negative banking history, your application could be rejected.

Once your account is open, explore the features of the website and mobile banking app.

When to Use a Digital Wallet vs. Your Bank Account

Digital wallets are convenient for keeping your payment cards and other information organized. They are particularly useful if you have many credit cards, loyalty cards, and other information you want to access without carrying physical copies. Digital wallets can also be a good option if you have trouble getting or don’t want to open a bank account. Some digital wallets store money at a partner FDIC-insured bank, but this is not always the case, so check the fine print.

However, digital wallets don’t typically earn interest like bank accounts. Bank accounts also make it easier to deposit cash and checks or set up direct deposit.

Choose the Best of Both

Most digital wallets aren’t meant to replace bank accounts, and most bank accounts don’t have the same features as digital wallets. Instead of choosing one over the other, consider how you can use both to your advantage. Compare different digital wallets compatible with your devices and see what cards and information you can add to make your life easier. Consider opening a new bank account if it offers more convenience or a higher interest rate than your current account. While you’re at it, look into top credit cards to see if you can benefit from opening a new card.

At O1ne Mortgage, we are here to help you navigate your financial options. For any mortgage service needs, call us at 213-732-3074. We are committed to providing you with the best service and advice to meet your financial goals.