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 understandably raise security concerns.
The good news is most well-known budgeting apps use strong protections to safeguard your data, such as bank-level encryption and strict data retention policies. However, no digital tool is completely risk-free.
Here’s how budgeting apps work from a security perspective, along with tips on 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. Rather than connecting directly, they usually use third-party aggregators, such as Plaid, that act as a bridge between your bank and the app.
When you connect your account, you’ll usually log in through a secure interface. The aggregator will verify your username and password, but it won’t share them with the budgeting app. That’s why the app receives your data but won’t get full banking access.
“This model has been stress-tested over millions of users at this point, and it has held up reasonably well,” says Scott Jones, a financial advisor and founder of Genesis Wealth Advisor Group, LLC. “When families ask me if linking accounts is safe, my honest answer is yes generally, when you stick with established names.”
With this system, the budgeting app gets “read-only” access, meaning it can view your transactions, but it can’t move money in or out of your accounts.
How 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 that you get with mobile banking. Encryption converts your data into unreadable code when it’s being transmitted or stored. That secret code can only be unlocked by a unique digital key.
Read-only access
When you connect your financial accounts to an app, that app usually gets read-only access. It can view your transactions and balances, which is useful for helping you budget. But it can’t initiate transactions, such as payments, withdrawals or money transfers. Even if a hacker got into your budgeting app, they likely wouldn’t be able to move money out of your accounts.
Secure authentication
You’ll also likely encounter secure login methods that ask you to confirm your identity before granting access to your account. Many apps call for multi-factor authentication (MFA), for instance, which requires you to verify your login by using an authentication app or entering a code you receive by text.
Your app may also be on the alert for unusual activity and notify you of any login attempts from new locations or devices. These safeguards can prevent unauthorized logins to your account.
Third-party security providers
Many budgeting apps use third-party security providers to safeguard user data. They often rely on established data aggregators to establish a connection with your bank accounts. These providers follow strict guidelines for encryption and compliance to keep your data secure.
Are Budgeting Apps Safe to Link to Your Bank Account?
It’s generally safe to link your bank account to a budgeting app, as long as you’re using a reputable app with strict security standards. Established budgeting apps tend to use the same high-level security standards as other financial tools, such as mobile banking apps and investment platforms. But you’ll want to make sure you’re using a credible app — avoid linking your accounts to new, untested services.
Keeping your information safe isn’t just about your app’s technology; it also depends on your behavior. Setting up multi-factor authentication, safeguarding your login credentials and only logging in on private Wi-Fi are a few ways you can boost your security.
Risks to Be Aware Of
Despite high levels of security, there are still risks when it comes to managing your money online. These risks include:
Data breaches: Budgeting apps and financial aggregator services can be targets for cyberattacks. If a data breach happens, your sensitive data could be exposed.
Phishing: Watch out for phishing attempts from scammers trying to get ahold of your financial information. These could take the form of an email pretending to be from your budgeting app or a fake login page designed to steal your banking information.
Fake apps: Along similar lines, look out for fake apps that try to copycat a reputable service. Make sure you’re downloading the official version of the app.
Weak passwords: Using a weak password or repeating the same password across multiple accounts can make you vulnerable to fraud and identity theft.
Over-permissioned apps: Some apps may access more data than you’re comfortable sharing. Before linking your accounts, confirm how much data the app can see.
How to Use Budgeting Apps Safely
Here are some steps you can take to minimize 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 more than one account.
Enable multi-factor authentication: If it’s available, turn on MFA to add more protection to your account.
Only use reputable apps: Stick with well-known budgeting apps that have high-quality security practices.
Avoid public Wi-Fi when logging in: Your data is more vulnerable to theft on a public network.
Review permissions regularly: Check in with your app to see which permissions you granted to which accounts. Make sure to remove any apps you’re no longer using.
Keep the apps updated: Update your apps and phone software whenever an update is available, as outdated technology can be more vulnerable to security risks.
“Credential reuse, meaning the password on your budgeting app is the same one protecting your bank login is what actually causes losses,” 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 look out for.
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 to keep your information secure, including encryption, MFA and alerts for suspicious login attempts.
Established reputation: Rather than risking your information with a new company, stick to apps that already have strong recognition and good reviews.
“[Look for] a privacy policy that clearly states whether your data is sold or shared,” advises Jones. “If the privacy policy is vague, that’s usually your answer.”
Bottom Line
It’s understandable — and important — to be cautious before sharing sensitive financial information with a third party, but budgeting apps are generally safe to use as long as you choose a reputable company and follow security best practices.
Established apps use similar safety procedures as your mobile banking app, including encryption and secure authentication systems. They also typically only have read-only access to your accounts, meaning they can’t move money around.
But no app is totally 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 protect your information and benefit from all the features a budgeting app has to offer.
FAQs
Is it safe to connect your bank account to a budgeting app?
It’s generally safe to connect your bank account to a budgeting app, as long as you’re using a reputable, established app that has strong security practices. Budgeting apps generally only have read-only access to your accounts, so they can view 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, since they’re typically limited to read-only access to your accounts. However, no app is completely risk-free. Your personal information could be at risk if there’s a data breach or someone hacks your account.
What is the safest budgeting app?
The safest budgeting apps are ones that are well-established and have strong security features, such as 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 ads. 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 make sure to review their security practices and reputation before you sign up.
Reporting by Rebecca Safier, Special to USA TODAY / USA TODAY Network via Reuters Connect
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