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Being able to shop, bank, and pay your bills online makes life easier. It also means you need to remember a lot of passwords. Indeed, recent research reveals that the average person has around 100 passwords.
Instead of trying to remember each and every single one (which is unreliable) or keeping them in the "notes" section of our phone (which is unsafe), many people turn to password managers keep track of their many passwords. Password managers make it easy to access your accounts across different devices, and can also help you create strong and unique passwords for your accounts. In addition, these programs generally cost just a few dollars a month, and some are even free. But are password managers safe? Generally, yes, but they aren’t ironclad. Here's what you need to know about password managers, from how they work to how to use them safely.
What Are Password Managers?
Password managers, also known as password keepers, are online services that help you generate secure, unique, and long passwords for each one of your online accounts and store them all in one place (an encrypted vault). You only need to remember one “master” password to access the encrypted vault, which then gives you access to all of the other passwords you have stored.
Password managers also can be used to store security questions, PIN codes, credit card numbers, CVV codes, and other sensitive information that you wouldn’t want to land in the hands of a cyber thief. Some password managers also allow you to share sensitive financial and banking data with trusted friends and family, rather than send that information over text or an email. Recommended: Finding Your Bank Account Number
How Do Password Managers Work?
Each password manager works slightly differently but, essentially, you log onto a password keeper through an app or dashboard with your master password or, in some cases, biometric authentication (fingerprint or face recognition). Once you're logged in, the password manager can generate safe, secure passwords and also store them. It will also automatically fill in all of your login credentials for websites and applications, making the login process more convenient and efficient. The best password managers are cross-platform compatible, which means that once you've entered your passwords into the password manager on one device, they'll automatically show up on all your other devices on which you've installed the app.Password managers can also help guard against phishing attacks. If the program doesn't recognize the URL where you're entering your login credentials (which indicates it’s a phishing site), its autofill function won't offer to fill the credentials.Recommended: Avoid These Six Credit Card Scams
Are Password Managers Safe?
Generally, yes. Password managers typically use sophisticated encryption algorithms and robust security measures to keep your passwords safe. However, like any digital tool, there is a potential risk of vulnerabilities or breaches. It's important to choose a reputable password manager and follow best practices to enhance security.Here are some things to keep in mind when choosing a password manager:
Multi-factor authentication Should your master password become compromised, multi-factor authentication (which requires at least two verification factors to grant access to your account) will help keep your information protected.
AES 256-bit (or higher) encryption At minimum, your password manager should have AES 256-bit encryption. This ensures that even the password manager itself cannot access your passwords.
Strong (and long) passwords A password protector that has the capacity to auto-generate strong passwords saves you from having to think up new passwords that meet security requirements every time you create an account.
What Are the Best Password Managers?
There are numerous password managers available, each with its own set of features and strengths. Some are free, such as the built-in password management features provided by some web browsers. However, these free programs generally don’t provide the same level of security and robust features as dedicated password managers, which range in price from around $10 to $36 a year. It’s a good idea to research and compare different password managers based on factors like security features, user-friendliness, cross-platform compatibility, and cost to find the best fit for your needs. Popular password managers include:
Bitwarden
Dashlane
1Password
NordPass
Password Boss
Keeper
Bitdefender Password Manager
LastPass
What Are Some Ways to Protect Your Account?
To make using a password manager as safe as possible, here are some things to keep in mind.
Create a Strong Master Password
Should a hacker manage to steal a password manager’s encrypted user vaults, all they need to do to access your bevy of passwords is to crack your master password — a simple task if your master password is weak. The best way to protect your data in case of a breach is to create a strong master password.It should be long, include a mix of numbers and letters, different letter cases, and a few symbols. And of course, it should be unique.
Store Your Master Password in a Safe Place
Remember: You can't store your master password within your password manager. If you can’t remember it, you can jot it down on a piece of paper and then store that paper in a secure place.
Opt for Multi-Factor Authentication
When prompted, it’s a good idea to turn on two- or multi-factor authentication. This adds an extra layer of protection by requiring an additional verification step, such as a unique code sent to your mobile device.
Should You Use a Password Manager?
If you have trouble remembering the password to access your checking and savings accounts, tend to use the same or similar password for all your online accounts, or spend an exorbitant amount of time resetting passwords, then a password manager could be a good idea. These programs eliminate the need to remember multiple complex passwords, while also providing an additional layer of protection against data breaches and unauthorized access. While a password manager can’t offer 100% security, it may be significantly safer than your current system.
Extra Mobile Banking Safety Tips
Whether you opt for a password manager or not, here are some ways to enhance the security of any type of bank account.
Use Secure Mobile Banking Apps
Be sure you only download banking or budgeting apps from trusted sources, such as reputable app stores. It’s also important to keep your apps updated to benefit from the latest security patches.
Enable Biometric Authentication
Whenever possible, utilize biometric features like fingerprint or facial recognition to add an extra layer of security to your mobile banking app.
Use Secure Networks
Try to avoid accessing your mobile banking app on public Wi-Fi networks. Instead, use secure networks or consider using a virtual private network (VPN) for added security.
Set Up Bank Alerts
Getting notified about bank transactions in real time can clue you in on any unusual activity. If you notice something that seems suspicious, you can reach out to your bank right away and look into the situation before much (or any) damage has been done.
The Takeaway
Getting a password manager can help make your digital life a little simpler. Whenever you open a new bank account, or any other type of online account, the program will generate a unique and secure password for that account and then store it away. The next time you log into that account, the program will automatically fill in your credentials. No need to guess what your password is and then, after you guess wrong three times, go through the hassle of resetting your password.If you’re in the market for a new savings account, Lantern by SoFi can help. With our online banking marketplace, it’s easy to compare high-yield savings accounts based on annual percentage yield (APY), fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.
Frequently Asked Questions
What can I use instead of a password manager?
Are password managers safe for bank accounts?
Photo credit: iStock/Delmaine Donson
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About the Author
Jackie Lam
Jackie Lam is a freelance writer with experience covering small business, budgeting, freelancing and money, and personal finance. She has written for more than 60 outlets, including Salon.com, CNET, BuzzFeed, Business Insider, and Time's NextAdvisor. She is currently working on her AFC® financial coaching certification to help artists, freelancers, and small businesses.
