What Is A Password Manager?

A password manager is a tool that remembers all your website passwords, such as for your email, social media and banking. With a top password manager, you can log in by auto-filling passwords with the click of a button, so you don’t need to remember numerous online passwords yourself.

With most of us juggling dozens of passwords on a daily basis, it’s all too easy to forget some, or fall into bad security habits. A password manager means that you can stay safe online and not have to worry about creating (and remembering) loads of complicated passwords.

In this article, we’ll be unpacking what a password manager is, what benefits it can bring to you and your business, and what security challenges they face in 2024.

In this guide:

• What Is a Password Manager?
• How Do Password Managers Work?
• Password Manager Features
• Are There Risks to Using a Password Manager?
• Types of Password Managers
• Should You Pay For a Password Manager?
• Best Password Managers

What Is a Password Manager?

A password manager is an online tool that helps users to create, save, manage, and use their passwords whenever they need them. Rather than relying on memory or offline storage, which can be unsafe, users can store their passwords in an encrypted “vault.”

Today, many online goods and services require memberships or signups. This usually means the user has to create login credentials, meaning they have to memorize dozens of different potential passwords – or leave themselves at risk of “credential stuffing” attacks.

This is where a password manager comes in. With a good password manager, users can store their sensitive data, change their passwords from one central dashboard, and auto-fill their information for a frictionless login experience.

How Do Password Managers Work?

Password managers, such as the popular LastPass, are refreshingly simple in what they do. Most are either browser plug-ins or downloadable software, which happily run in the background until you happen to get to a login page. At this point, they will automatically log in for you. No more getting locked out of your account or having to reset your password, just a couple of clicks and you’re securely logged into your site.

You might already have used a similar system in your browser, when it asks if you would like it to remember your password when logging in to a site. This is a very basic form of password manager, and while it is a competent alternative, a dedicated service can offer a fuller, more secure experience with a host of additional features.

The LastPass sites dashboard, on desktop and mobile. Source: LastPass

Password Manager Features

It’s not just passwords that a password manager will remember. Most services have the ability to remember other information too, such as financial details, passports, driver’s licenses…pretty much anything. Alongside this, most platforms offer bonus functionality. We’ve outlined some possible features below.

Extra storage

Most services have the ability to remember other information too, such as financial details, passports, driver’s licenses, or storing PDFs. One of the benefits of this is that you have more control over where your details are and who has access to them.

Take an online retailer for example, who might ask if you want it to remember your payment details during an order. If you’d rather not have them saved on the company’s site, you can just store them in your password manager and add them when needed with a simple click. No concerns about the company storing your payment details, and no getting up to grab your wallet each time you want to pay for something.

Password generator

Most services will even assist you with creating passwords, pointing out when the one you have chosen is too weak, or even generating them for you at the push of a button. The ones that the managers generate are typically a random cluster of letters and numbers. You won’t have to worry about remembering them, so they can be more complicated, and therefore, more secure.

This means that you’re not using the same one for more than one site – a real no-no when it comes to creating passwords. In a worst case scenario where one site is hacked and username and passwords stolen by people with nefarious intentions, using the same password across multiple sites opens up even more opportunity for fraud across multiple sites. A password manager can remove this risk entirely.

Security alerts

Some password managers, like 1Password and Dashlane, will go a step further, and alert you when a site you use has been breached. While site breaches are an unwelcome part of daily life, speed is key, and the faster you can change your password, the less damage can be done.

Viewing “password health” on Dashlane, with flagged security alerts. Source: Dashlane

Digital demise

One of the most interesting features offered by paid-for password managers is that of what happens to all your passwords should you pass away or be otherwise incapacitated. We’re sorry to bring it up, but it’s an area of life that most online services are well behind on. Some paid-for services will allow you to pass on all your passwords to a named person or people when you go. Morbid to consider? Perhaps, but it’s a genuinely innovative feature.

Are There Risks to Using a Password Manager?

No system is infallible, but using a password manager offers more security than trying to remember all your own logins, or doubling up and using the same password across multiple sites. Below, we’ve outlined some of the biggest risks inherent with using a password manager.

Master password

Each password manager tends to use a similar approach – you only need to create one “master password” in order to access your password vault, where all the others are stored. While that’s far easier to remember than trying to juggle dozens of passwords, it does present a unique risk – forget your master password, and you lose access to all your passwords. Going one further – if a bad actor gains access to your master password, they gain access to all your accounts.

You can often create a trusted emergency contact, however. So, if the worst happened and you forgot your master password, a friend or family member could securely recover your account details.

Brand trust

The hardcore skeptic might question the security of putting all their eggs in one basket with a password manager. Nobody is more aware of this than the developers of the services themselves.

If one were to be compromised, it would obliterate its brand legitimacy overnight, with customers likely leaving in their thousands, and tarnishing the service with a spotty reputation for years to come. That’s why these services employ numerous levels of security and constantly update their software to protect their customers, and also, themselves.

That hasn’t always been enough to deter cybercriminals. LastPass, one of the most popular password managers on the market, suffered two high-profile breaches in 2022, which ultimately resulted in the seizure of $35 million in customers’ crypto assets.

Viewing login credentials in 1Password, with integrated rating scores. Source: 1Password

Types of Password Managers

Password managers are great for two different purposes: keeping track of your personal account information and securing your business. There are a few different varieties of password manager, each with its own strengths and weaknesses. We’ve outlined them below.

Local password managers

Local password managers store user data locally on the specific device that the customer is using. They’re quite outdated these days, and have largely given way to cloud-based password managers. With local password managers, the burden of responsibility falls on the company in question, or even the individual.

Cloud-based password managers

These store user data in the cloud, meaning that it can be retrieved from any internet-enabled device. Examples include LastPass, 1Password, Dashlane, and more. They’re one of the most popular choices for individuals and businesses, as they safeguard data in their own servers, unlike local password managers.

Syncing between devices on Sticky Password. Source: Safety Detectives

Business password managers

Business password managers are, like the name suggests, oriented towards large enterprises. They offer extra functionality, including role-based access control, and additional layers of security. Usually, businesses will outsource their storage to major security vendors.

Should You Pay for a Password Manager?

A lot of password managers offer free versions, and you could find that the features bundled in with these are all you really need for day-to-day browsing. However, subscribe to these services for a small monthly fee, and you’ll open up a wealth of options.

You might be wondering what else a password manager could possibly offer aside from, well, managing your passwords, but some of the additions are really rather smart. For example, what happens if you want to share some or all of your passwords for various services with others? This is a fairly standard premium feature of most password managers.

You can also expect one-on-one tech support. Password managers are relatively basic and straightforward to use by nature, but for a few dollars you can buy peace of mind in case you come unstuck or experience any problems.

If you like to juggle your online life across multiple devices, like a phone, tablet, laptop, desktop PC and so on, premium versions of password managers will work seamlessly on various bits of kit you own, bringing the one-click login experience to every device.

Read more about what makes a good password right now.

Best Password Managers

When it comes to adopting a new password manager, customers are spoilt for choice. To help you make your mind up, we’ve put together a list of the best password managers. For an at-a-glance overview, take a look at our table below.