When choosing a password manager, between all the different features from random built-in password generators to syncing and two-factor authentication (2FA), one matters more than the rest: where are your passwords stored?
Password managers help you safeguard your online security and privacy, allowing you to use complex and strong passwords. In order to do that, the passwords themselves need to be secure. So between entrusting your passwords to a company or storing them yourself, which option is right for you?
What Are Password Managers and Why Do They Need Storage?
A password manager is an app or browser extension that you can use to store dozens of randomized passwords and login credentials. Without one, you’d be relying on a text document or a pen and paper to help you remember all your passwords. Or worse, you could use weak but easy-to-remember passwords.
None of those options are secure or convenient. Weak passwords are one of the leading causes of compromised online accounts.
And writing your passwords down makes it easy for anyone to steal them. Plus, they’re not very convenient or accessible. You’d have to remember to bring them along wherever you go and keep manually updating them every time you create a new account or change a password.
Password managers do all the work of keeping your passwords in one, easy-to-access spot. They need storage because this data must take up space somewhere.
Just like other types of data and files, you have two options to store your passwords: local- or cloud-based. So what’s the difference?
What Are Cloud-Based Password Managers?
Cloud-based password managers are services that store your passwords mainly on remote servers. The servers are often the property of the company that owns the password manager you’re using.
They could also be owned by you. This is the case with self-hosting your password manager, buying or renting a server, or by utilizing free cloud storage services such as Google Drive, Dropbox, and iCloud.
What Are Local Password Managers?
In terms of the software, password managers that store your data locally on your device can be identical to ones that store it online. This type of password manager stores all of your passwords locally and offline.
You can keep them on your laptop or desktop computer, tablet, smartphone, or even an external storage unit such as a USB stick.
Which is the right option for you?
Security
![](https://static1.makeuseofimages.com/wordpress/wp-content/uploads/2021/03/lock-on-keyboard-security-online.jpg)
Security is one of the most important factors that come up when it’s time to choose a password manager. After all, for your passwords to continue protecting your accounts from unauthorized access, they need to remain hidden.
In cloud storage—if you’re not the one managing the storage servers—security isn’t your responsibility. At least, beyond making sure the master password used to lock all of your login credentials is strong and private.
To ensure security when choosing a conventional password manager, look for companies that utilize a strong encryption protocol. Preferably, end-to-end encryption, which means your password data only ever gets decrypted on your device. Otherwise, it’s securely encrypted during transfer through password sharing and syncing, and storage.
But because of the nature of their work, password manager providers are a hacker magnet.
They’re one of the few businesses where a single data breach could reward the hacker with millions of passwords to anything from social media accounts to financial apps and websites, including banking information.
When it comes to local storage, you’re a much smaller target for hackers, as an attack would likely result in the passwords of one person instead of millions. But that doesn’t mean you should leave your passwords unencrypted on your device.
Since you’re responsible for the safeguarding of your passwords, it’s up to you to use the strongest level of encryption you can find.
Privacy
![](https://static1.makeuseofimages.com/wordpress/wp-content/uploads/2020/11/security-camera.jpg)
Privacy isn’t the same as security. Being private means having the ability to refrain from sharing some or all of your personal data and information, and controlling who has access to them.
In the case of password managers, privacy doesn’t stop with what websites or apps you use, but also the personal information you share with the company when signing up. This includes your full name, email address, phone number, and location.
If you’re concerned about privacy, before signing up to a commercial password manager, make sure the company follows a zero-knowledge policy, also known as a no-logs policy. By declaring that they abide by this policy, the company promises that they handle user information with confidentiality.
Another thing you should check is their privacy policy. See what type of user data they collect, what they use it for, and whether they share it with third-party companies.
As for local storage, you don’t need to worry about your privacy. As long as you’re using a free, open-source password manager, you won’t have to share anything with anyone.
Cost
![](https://static1.makeuseofimages.com/wordpress/wp-content/uploads/2021/02/iphone-and-money.jpg)
Costs vary with both options. Some commercial password managers allow you to store a number of passwords on their servers using their free plan. But for most of them, the free plan is severely limited, and you might need to upgrade to a paid-for version.
As for local storage, you have two options. Some commercial password managers, with freemium and premium subscriptions, allow you to store your data both online and offline in case you want to access them without an internet connection.
But if you’re looking for strictly local storage, you can use free open-source password managers. Such options are completely free to use and have a built-in mechanism to encrypt your logins with a master password.
Availability
![](https://static1.makeuseofimages.com/wordpress/wp-content/uploads/2021/04/no-wifi-zone-sign.jpg)
Another important factor when it comes to choosing where you want to store your passwords is availability and therefore convenience.
With cloud-based password managers, you only need a way to use the service of your choice on your device to access your passwords. Your passwords are automatically synced up and available to use on all of your devices.
With local password storage, you’d have to go the extra mile and manually sync your passwords regularly. Not to mention, if you don’t plan ahead, you may end up stranded without your logins, even if you have an internet connection.
What Are Your Options?
There’s no shortage of password managers, whether it’s freemium, premium, or free and open-source you’re looking for.
You don’t need to worry about not finding a suitable option for your preferred storage method. With enough research, you can find one with the right storage place, cost, security and privacy policies, and additional features.