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Is It Safe To Connect Your Bank Account To Budgeting Apps?

May 25, 2024

Budgeting apps and personal finance tools have become increasingly popular for helping people manage their money more effectively. However, many of these apps work by asking users to directly input their online banking credentials—a practice that, while convenient, raises significant security and liability risks.

While tempting, sharing your bank username and password with others violates your terms of service agreement with your financial institution. Here's why giving out these login details is problematic:

1. Breaching Bank Security Protocols

When you open a bank account, you agree to specific terms about protecting your login credentials and not exposing them to third parties. Banks implement robust security systems and authentication protocols to safeguard your accounts and assets.

By sharing your password with a budgeting app, you override and bypass the bank's secure login measures, creating a significant vulnerability that bad actors could exploit for unauthorized access to your accounts.

2. Risk of Credentials Being Compromised

Even if you trust a particular budgeting app, you cannot guarantee that your bank password is adequately secured and protected within its systems (and its third-party data aggregators). Data breaches, hacking incidents, or even rogue employees could expose your credentials.

Most bank agreements clearly state that the customer is fully liable for losses from voluntary password sharing with third parties. If your credentials are ever compromised after giving them to a budgeting app, you would likely have no recourse to recoup losses, potentially leading to significant financial harm.

3. Violating Terms Means Assuming All Liability

Take a look at your bank's user agreement. You'll likely find clear language stating that you cannot share your password with anyone, including any third-party application, service, or company. You are violating those terms by providing your credentials to a budgeting app.

As a result, the bank can deny any responsibility or liability if fraud, identity theft, or unauthorized transactions occur in your accounts after you share your password. The liability rests solely on you for exposing your credentials against their strict security policies.

Some banks have more advanced authentication that prevents your plan-text credentials from leaking to third-party apps. If your bank lacks oauth support, data aggregators must store your passwords for future data refreshes.

The Safer Alternative: Bank Alerts

Most banks and financial institutions already send you real-time alerts for many money movements:

  • Direct deposit pay stubs
  • Incoming transfers and credits
  • Debit or credit card payments
  • Recurring charges like subscriptions and bills
  • Refunds and account adjustments

Rather than connecting directly to accounts, Skwad monitors your email inbox and parses through these alerts from banks and credit card providers. Skwad automatically extracts and categorizes each transaction detail from these email alerts, allowing you to maintain a unified, real-time financial feed without sharing private login credentials with any third party. Your banking connections and personal information remain 100% private and secure.

The temptation to link accounts easily is high. However, directly sharing your bank password is the equivalent of writing it down on a piece of paper for anyone to access. It's only as safe as the various apps and APIs it passes through.

By embracing bank alerts and removing direct credential requirements, you can get complete financial visibility and organization without the risks. Services like Skwad put you in full control of your money while ensuring absolute privacy and security.

Get a better understanding of your finances today.

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