Perhaps as more confirmation that the era of mobile payments is finally upon us the publisher of Consumer Reports is offering warnings and best practices to consumers. The publisher, Consumers Union, says that people should link mobile payments to 1) credit cards, 2) debit cards and 3) carrier bills or pre-paid cards in that order for maximum protection and recourse should there be any fraud or disputes.

As Consumers Union explains, credit cards offer consumers the most legal protection, while carrier billing is the most risky: 

[W]hile mobile payment technologies may offer a convenient new way to pay for goods and services, consumers could be at risk of losing money when mistakes are made by merchants and processors or as a result of fraud, according to Consumers Union, the nonprofit publisher of Consumer Reports . . . 

Federal law protects consumers in the event that their credit card or debit card is lost, stolen or misused. But current protections are badly fragmented and don't apply to all new types of payments . . .

If mobile payment transactions are backed by a credit card and appear on the credit card bill, then consumers are entitled to all available protections.  If the transaction amount is deducted from the consumer's deposit account with a financial institution like with a debit card, it should receive the same protections as any other electronic fund transfer.  This means consumers receive a legal right to get back money for errors and theft, but not for a dispute with a merchant about the goods and services.

However, if the transaction is funded by a prepaid card, even the protections for unauthorized use may be missing, and there also will be no legal guarantee of protection in the event of a dispute with a merchant.  If the payment service is provided directly by the mobile carrier . . . the product might escape consumer protections entirely.  If the cell phone company asks the consumer to make a prepaid deposit to the phone company to cover future charges, protections also will be missing unless the contract provides them.

Depending on how the forthcoming mobile carrier payments systems are structured this type of warning to consumers -- if widely publicized -- could harm or even doom their competitive chances vs. traditional credit card issuers, PayPal (if tied to a credit card) and iTunes.