Budgeting apps often require you to connect your financial accounts so they can track your spending and help you manage your money. That level of access can naturally raise security concerns.
The good news is that most of the well-known budgeting apps use strong security like bank-level encryption and strict data retention policies to protect your data. However, no digital tool is completely risk-free.
Here’s how budgeting apps work from a security standpoint, along with tips for using them as safely as possible.
How Budgeting Apps Work (From a Security Perspective)
With your permission, budgeting apps often connect to your bank and other financial accounts to view your transactions. Instead of connecting directly, they usually use third-party aggregators like plaid, which act as a bridge between your bank and the app.
When you connect your account, you’ll typically log in through a secure interface. The aggregator will verify your username and password, but it will not share them with the budgeting app. This is why the app receives your data but will not have full banking access.
“This model has been stress-tested on millions of users at this point, and it has largely held up well,” says Scott Jones, financial advisor and founder of Genesis Wealth Advisor Group, LLC. “When families ask me if it’s safe to link accounts, my honest answer is yes, generally, when you stick to established names.”
With this system, the budgeting app gets “read-only” access, meaning it can see your transactions, but it can’t move money in or out of your accounts.
How do budgeting apps protect your data?
Budgeting apps use multiple layers of security to protect your data. Here are some of the most common practices.
encryption
Many budgeting apps use the same level of encryption you get with mobile banking. Encryption converts your data into unreadable code while it is transmitted or stored. That secret code can only be unlocked by a unique digital key.
read only access
When you link your financial accounts to an app, that app typically gets read-only access. It can view your transactions and balances, which is useful for helping you budget. But it cannot initiate transactions like payments, withdrawals or money transfers. Even if a hacker got into your budgeting app, they still probably wouldn’t be able to take money out of your accounts.
secure authentication
You’ll also likely encounter secure login methods that ask you to confirm your identity before granting you access to your account. For example, many apps require multi-factor authentication (MFA), which requires you to verify your login using an authenticator app or by entering a code you receive by text.
Your app can also be on alert for unusual activity and notify you of any login attempts from new locations or devices. These security measures can prevent unauthorized logins to your account.
Third-Party Security Providers
Many budgeting apps use third-party security providers to protect user data. They often rely on established data aggregators to establish the connection with your bank accounts. These providers follow strict guidelines for encryption and compliance to keep your data safe.
Is it safe to link budgeting apps to your bank account?
As long as you’re using a reputable app with strict security standards, it’s generally safe to link your bank account to a budgeting app. Established budgeting apps use the same high-level security standards as other financial tools, such as mobile banking apps and investing platforms. But you’ll want to make sure you’re using a trusted app – avoid linking your accounts to new, untested services.
Keeping your information safe isn’t just about the technology of your app; It also depends on your behavior. Setting up multi-factor authentication, protecting your login credentials, and logging in only on private Wi-Fi are some of the ways you can increase your security.
beware of risks
Despite the high level of security, there are still risks when it comes to managing your money online. These risks include:
- Data breach: Budgeting apps and financial aggregator services can be targets of cyber attacks. If a data breach occurs, your sensitive data may be exposed.
- Phishing: Beware of phishing attempts from scammers trying to obtain your financial information. These could take the form of emails appearing to appear from your budgeting app or a fake login page designed to steal your banking information.
- Fake Apps: Similarly, keep an eye out for fake apps that try to mimic a reputable service. Make sure you are downloading the official version of the app.
- Weak password: Using weak passwords or repeating the same password across multiple accounts can make you vulnerable to fraud and identity theft.
- Apps with more permissions: Some apps can access more data than you can share. Before linking your accounts, confirm how much data the app can view.
How to Use Budgeting Apps Safely
Here are some steps you can take to minimize the risks and use budgeting apps as safely as possible:
- Use strong, unique passwords: Use long passwords that contain a mix of numbers, symbols, and mixed-case letters, and avoid using the same password on multiple accounts.
- Enable multi-factor authentication: If it’s available, turn on MFA to add more security to your account.
- Use only reputable apps: Stick to well-known budgeting apps with high-quality security practices.
- Avoid public Wi-Fi when logging in: Your data is more vulnerable to theft on public networks.
- Review permissions regularly: Check in your apps to see what permissions you’ve given to which accounts. Make sure to delete all apps you no longer use.
- Keep apps updated: Update your apps and phone software whenever an update is available, as older technology may be more vulnerable to security risks.
“Credential reuse, meaning the password on your budgeting app is the same one that protects your bank login, really causes harm,” says financial advisor Jones.
What to look for in a secure budgeting app?
Before linking your accounts to a budgeting app, look for signs that the app takes the security of its users seriously. Here are some indicators to pay attention to.
- Clear Privacy Policy: The app should have an official privacy policy that explains how it collects and uses your data.
- Transparent Data Practices: It should also discuss whether it shares your data with third parties and if so, why.
- Security Features: The app should have features including encryption, MFA, and alerts for suspicious login attempts to keep your information safe.
- Established Reputation: Instead of risking your information with a new company, stick with apps that already have a strong reputation and good reviews.
“[Find]a privacy policy that clearly states whether your data is sold or shared,” advises Jones. “If the privacy policy is unclear, that’s usually your answer.”
ground level
It’s understandable — and important — to be cautious before sharing sensitive financial information with a third party, but as long as you choose a reputable company and follow security best practices, budgeting apps are generally safe to use.
Installed apps use the same security procedures as your mobile banking app, including encryption and secure authentication systems. They typically have read-only access to your accounts, meaning they can’t move money around.
But no app is completely risk-free, especially if you use a weak password, download an unverified app or become a victim of a phishing scam. By taking simple precautions, you can keep your information safe and take advantage of all the features budgeting apps have to offer.
questions to ask
Is it safe to link your bank account to a budgeting app?
Connecting your bank account to a budgeting app is generally safe, as long as you’re using a reputable, established app that has strong security practices. Budgeting apps typically have read-only access to your accounts, so they can see your transactions and balances but can’t transfer or withdraw money.
Can Budgeting Apps Steal Your Money?
Legitimate budgeting apps can’t steal your money, as they’re usually limited to read-only access to your accounts. However, no app is completely risk-free. If there is a data breach or someone hacks your account, your personal information could be at risk.
What is the most secure budgeting app?
The safest budgeting apps are those that are well-established and have strong security features like encryption, MFA, and a transparent privacy policy.
Do budgeting apps sell your data?
Some budgeting apps sell your data to third-party advertisers or data aggregators, but it’s usually anonymized and aggregated. They may also track your data to show you targeted advertisements. You can review an app’s privacy policy to see how it handles your data.
Are Free Budgeting Apps Safe?
Many free budgeting apps are safe to use, but be sure to review their security practices and reputation before signing up.
Reporting by Rebecca Safier, special to USA TODAY/USA TODAY Network via Reuters Connect
