Do you use a third-party budgeting app? It could nullify your account protection

At 3:35 p.m. on Nov. 2, 2018, I downloaded the budgeting app Mint.

At 4:07 p.m. on the same day, I deleted it.

Mint, like many other third-party budgeting apps out there, links to your bank account(s), analyzes how and where you spend your money, and helps you budget more effectively.

But when I saw the app mirror the balance in my chequing account, the debt owing on my credit card, and the measly amount of money in my savings, I freaked. Suddenly, I was acutely aware that someone other than me and my bank had access to my account information. And it felt icky.

Third-party budgeting apps aren't for everyone. But for some, they’re an incredibly useful tool, even if it means letting a company take a peek behind your financial curtain. While third-party budgeting apps are perfectly legal, they do come with risks, especially when it comes to liability.

You’re on the hook for unauthorized transactions

Third-party budgeting apps open consumers up to liability that their bank would otherwise be responsible for. 

In March 2018, the Financial Consumer Agency of Canada (FCAC) issued a warning to consumers about the risks of giving their banking information to third-party online services.

“Consumers may risk losing their protection against unauthorized transactions offered by their financial institution and be held liable for any unauthorized transactions on their account if they give their online banking information (debit and credit card information, user IDs, passwords or PINs) to any other party,” the warning said.

That means that if you use a third-party budgeting app and your banking information is somehow hacked, and money is siphoned out of your account, your bank won’t be on the hook for reimbursing you.

Why? Because by opening up your account information to a third party, you’ve effectively nullified your account protection agreement with your bank.

“Review your credit card and banking user agreements carefully to determine whether sharing information with another party will result in losing your protection against unauthorized transactions,” Jane Rooney, FCAC’s Financial Literacy Leader, said in the consumer alert.

Try your bank’s in-house budgeting tool instead

The good news is there are other ways to manage your money that don’t involve nullifying your account protection.

If you’re a more risk-averse person, you might want to consider staying in-house with your budgeting.

Many banks now offer budgeting tools directly within their own apps, allowing you to see what categories most of your money goes to (food, transportation, bills), and how much you’ve gone over budget.

Tangerine Bank, for instance, has a feature in its app called “Left to Spend,” which uses information from your chequing account and credit card account(s), and allows you to see how your monthly spending is progressing. You plug in your income, fixed expenses, and savings goals, and it will tell you what you’ve got left to spend for the month.

Delete your account if you’re no longer using it

The same day I downloaded and deleted Mint, I activated a 34-day free trial of You Need a Budget (YNAB), another third-party budgeting app. I guess I wanted to see if I felt any more confident using a different app. 

I didn’t. I let the free trial expire. And according to the emails I received from the YNAB team, my trial account (and any data associated with it) was properly deleted. 

If you do decide to go the third-party budgeting app route, make sure you understand how (and for how long) your data is collected. Once you stop using a third-party budgeting app, it’s in your best interest to properly delete it, rather than just stop using it. According to Consumer Reports, these apps can do something called “screen scraping” where they continue to pull data from your account even if you’ve been on a hiatus, or are no longer using them.