Is Your Money Safe in a P2P Payment App?

Popular peer-to-peer (P2P) payment apps like Cash App® and Zelle® provide a quick and easy way to split a restaurant bill, send money, and receive payment from someone else. However, there are risks to storing money on these financial apps. Here are four worth considering:

1. P2P apps are not federally insured.

P2P apps work as digital wallets, holding your money until you transfer it. These apps can process simple financial transactions, but they don't offer the safety of a credit union or bank. They are mobile payment service providers. Neither the National Credit Union Administration (NCUA) nor the Federal Deposit Insurance Corporation (FDIC) insures money in the app. This means that, unlike a credit union account or a bank account, your funds are not protected if the company fails.

2. P2P apps offer limited consumer protection.

Credit unions and banks have established procedures for disputing charges and recovering funds in cases of fraud. With P2P apps, the policies can be less consumer friendly. For example, if you send money to a scammer or the wrong person, you have little recourse since you authorized the transaction. Or, if someone gains possession of your mobile device, they could access the app and send your balance to their account. Like other cash transactions, money sent via digital payment apps is gone once the recipient receives the funds.

3. P2P apps attract scammers.

Most P2P payment apps have robust security measures, such as data encryption and fraud detection systems. They may also require two-factor authentication to protect your account. However, no system is foolproof, and users must exercise vigilance to protect their balances from scammers. 

Con artists are known to pose as legitimate online businesses and request payment via the app for goods or services the victim never ordered. It can be easy to pay these imposters without thinking when you have the money sitting in the app.

4. Many P2P apps are free to use, but they could still be costly.

Traditional savings accounts at credit unions and banks provide an opportunity to earn interest. While rates vary, interest earned on certain accounts can compound daily or monthly, allowing your balance to grow with little effort. However, balances in P2P apps do not earn interest. So, any money stored in these apps is not working for you, which puts you at risk of failing to achieve your financial goals.

P2P payment apps are undeniably convenient for quick and simple transactions. However, these apps don’t offer the financial peace of mind that comes with maintaining balances in bank or credit union accounts. Protect your money by transferring your app balance to a federally insured financial institution like SAFE, where funds are insured by the NCUA up to $250,000. Open an account today!