You work hard for your money. We work hard to keep it safe. The same can’t be said for instant payment apps like PayPal, Venmo, and Cash App. Learn why in our latest blog post.
While these apps are a convenient way to send money between friends and family or pay retailers, they are not equipped with the same protection and assurances that banks are.
The Consumer Financial Protection Bureau (CFPB) has released an advisory cautioning consumers against using digital payment apps to store money and has urged them to deposit their money in an insured financial institution for safekeeping.
What does this mean?
Banks and credit unions have the unique benefit of being insured by the federal government. Because of this, you can have the peace of mind knowing that your deposits (up to $250,000 per account type) will be returned to you in the event of financial institution failure or fraud.
Popular payments apps are not financial institutions; they are not covered by federal insurance and are not held to the same regulations that banks and credit unions abide by.
This means, that in the unfortunate event of a financial upset, the money kept in digital payment apps may not be safe from possible loss.
How does this affect you?
When you keep your money stored in an app like PayPal, Venmo, or Cash App, you run the risk of losing your money if the company behind the app encounters any financial troubles.
While holding your funds, these companies have the freedom to invest your money where they choose. When making investments, they do not have to follow the same rules and regulations that insured banks do. So, if their investments were to fail, your money could be lost without the guarantee of being recovered.
As seen in recent news with certain banks and companies failing, having your money in an insured place is more important than ever.
What can you do to protect your money?
With the popularity of these apps on the rise and their transaction volume only projected to grow, it is as important as ever to be proactive about your money’s security.
The first thing you can do is keep an eye on your in-app balances and don’t allow money to accumulate. Be aware of when money will be incoming.
Once you do receive a payment, don’t let it linger in your app. Transfer those funds to your bank account as soon as possible.
In addition, if you’re sending money to people you know and trust, you can opt for a secure service like Zelle®. With Zelle®, your money goes straight from one bank account to another – with all the security that your bank has to offer, without the hassle of the extra steps. Learn more about Zelle® at Texas First Bank.