You are about to board a plane when you suddenly realize that you have a measly $5 in your account for your trip. That's when you pull out your smartphone and, in a matter of seconds, magically deposit the needed cash into your checking account. From big national chains to smaller regional outposts, banks have improved the functionality of mobile banking so that consumers can transfer funds, pay bills or check balances whenever and wherever they may be. However, before making mobile banking part of their routine, consumers should know that this convenience comes with one hiccup - a lapse in security. Here we look at a few mobile banking pitfalls and steps you can take to prevent becoming a victim of mobile scams. (For more, see Mobile Money: Using Your Cell Phone To Transfer Funds.)

IN PICTURES: Top 6 Mindless Money Wasters

1. Interceptions
Text messages are not encrypted (a method of securing data in transit), which means using a text message to receive updates or communicate with your bank is more susceptible to interception. And experts say that in the event a phone is stolen, sophisticated hackers could retrieve text messages, even if you have deleted individual messages. A good way around this threat is to refrain from corresponding via text when the information being transmitted could be potentially detrimental to your financial security if it falls into the wrong hands.

2. Unauthorized Access
Because mobile platforms aren't equipped with the same security layers as websites or ATMs, they are more vulnerable to fraudsters, who repeatedly change their identities and gain access through a series of quick attempts. Fortunately, users can take extra steps to increase their protection, such as adding additional passwords and encryption barriers that aren't provided by your bank. For example, you should set up the password-protect option on your phone and when it's not in use, lock it. Where available, another idea is to install security software on your mobile phone.

IN PICTURES: 8 Financial Tips For Young Adults

3. Password Theft
Once someone has discovered your banking password and hacked into your account, there isn't much you can do. But in advance, you can protect yourself from this debacle by installing remote-wipe options, a way to erase the information on your phone without physically having it in your possession. You can activate this if our phone goes missing. Select banks offer remote-wiping as a free, downloadable application. Similarly, the MobileMe service allows Blackberry and iPhones users to buy this feature. (To learn more, check out 5 Money Transfer Technologies And Their Risks.)

4. Fraudulent Apps
While applications, or "apps", are what allow you to check your account balance or move money to another account from your cell phone, they also are an added risk for your mobile security. Some have called fraudulent apps the next generation of phishing scams; if you download a fraudulent application, it could be used lift account and other sensitive information from your mobile device. For example, last January, Google removed 50 applications available for the Android phone due to concerns they may be virulent. To protect your mobile security from an application scheme, don't click on pop-ups that advertise apps. You can also check with your bank about the validity of any financial app you are considering, or if possible, download the application directly from your financial institution's website. (Learn more in 5 New Phishing Scams To Watch Out For.)

5. Dropped Calls
Mobile phones are small, compact and portable, but the downside is that they are easily lost or stolen. A criminal who hacks into your cell phone can retrieve personal information, account passwords and proprietary texts. In the event that your phone is stolen, you should also call your bank; this way, the bank can closely monitor your account.

One Last Tip
Remember, the best defense is to be your own activist; always keep track of your bank account and watch for atypical or suspicious activity. Setting up automatic electronic alerts from your bank may also help you stay on top of monitoring your fiscal situation. (For more tips, check out our Banking Tutorial: Safeguarding Your Accounts.)

Related Articles
  1. Stock Analysis

    JP Morgan Chase & Co. Vs. Bank of America Stock

    Examine two of the big four U.S. money center banks, Bank of America Corporation and JPMorgan Chase & Company, by comparing important equity evaluation metrics.
  2. Economics

    What is a Loan Loss Provision?

    Banks set aside loan loss provisions to cover losses from bad loans.
  3. Economics

    Understanding Retail Banking

    Retail banking refers to the mass-marketed, consumer-oriented products and services offered by the local branch of the commercial bank.
  4. Credit & Loans

    Refinance Vs. Debt Restructuring: What's Best For Your Credit Score?

    Discover key differences between refinancing and restructuring debt in regard to terms, the negotiation process and effect on credit scores.
  5. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  6. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  7. Economics

    What's an Irrevocable Letter of Credit?

    An irrevocable letter of credit (ILOC) is a financing vehicle used to facilitate commerce between two parties who are not familiar with one another.
  8. Savings

    Best Banks to Stash Your Million Dollars

    Get the richest perks and red carpet treatment for you and your money from these financial institutions.
  9. Personal Finance

    Insurance Companies Vs. Banks: Separate And Not Equal

    Insurance companies and banks are both financial intermediaries. However, they don't always face the same risks and are regulated by different authorities.
  10. Savings

    Bank Lingo: Routing Number Vs. Account Number

    Each consumer bank account has its own personal ID. And so does the bank. How do these numbers function and how do they protect the account holder?
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. What net interest margin is typical for a bank?

    In the United States, the average net interest margin for banks was 3.03% in the first quarter of 2015. However, this was ... Read Full Answer >>
  3. What are the main benchmarks that track the banking sector?

    The appropriate benchmarks for tracking banking sector performance depend on the type of banking. For instance, commercial-only ... Read Full Answer >>
  4. What are the major categories of financial institutions and what are their primary ...

    In today's financial services marketplace, a financial institution exists to provide a wide variety of deposit, lending and ... Read Full Answer >>
  5. What is the difference between an investment and a retail bank?

    The activities and types of clients for an investment bank versus those for a retail bank highlight the primary difference ... Read Full Answer >>
  6. Is the banking sector subject to any seasonal trends?

    The banking industry, including retail and investment banks, is subject to seasonal trends. Seasonality is most commonly ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!