How to Properly Track and Protect Your Money on Venmo, PayPal, Zelle, and Cash App

In a growing digital world, who wants to find cash and watch their friend scrummage for change just to pay them back? Why not take the simple route of simply opening an app and sending the exact amount? As the plethora of online resources grows, it is time to modernize everyday occurrences. Luckily, American consumers are finding ways to save time and create elegance by leveraging Peer-to-Peer Payment Apps (P2P Platforms) such as Venmo, PayPal, Zelle, and Cash App when splitting a bill at a restaurant or other instances of paying a friend back.

These platforms allow a user to seamlessly send money to a username from their mobile device. If used responsibly, P2P platforms can be completely free. However, there are many ways that these platforms might be taking fees from your transactions. Ideally, one hopes to achieve the maximum benefit from their hard-earned money – whether they are working their first job or are retired – so how can we ensure that 100% of our money is going to the right place with P2P platforms? To do this, we must understand common ways that P2P platforms charge fees:

#1: Instantaneous Transfers

When we have the same delivery on Amazon, or instant transfers with banks, who wouldn’t want their most up-to-date balance available as soon as possible? Instantaneous transfers exploit this weakness by charging transaction fees that would not occur if the user simply waited a couple of business days.

One of the most downloaded P2P platforms, Venmo, acquired 77.7 million active users in 2022, but even they charge fees for instantaneous transfers to a bank account. In fact, they charge 1.5% of the money transferred with a minimum of $0.25 to a maximum of $15. While this seemingly small percentage number may not seem like much, that value can quickly add up. For example, if during a year you consistently chose to transfer $500 a month instantaneously, that 1.5% would have cost you $90 by the end of the year – certainly not an inconsequential amount. Why not have a nice dinner or enjoy a movie with the people you love instead? So, unless you really need the money as soon as possible, wait 1-3 business days, especially if your account is secure.

#2: Credit Card Fees

Unfortunately, users must be meticulous in handling their transactions. The simple mistake of not connecting the right type of card to an account can have monetary consequences. Using a debit card typically results in no fees, but a credit card does just the opposite. P2P platforms such as Venmo, Cash App, and PayPal all charge about 3% when a user sends money via a credit card. Moreover, when using a platform such as Pay Pal, a user cannot even use a debit card or Pay Pal Credit. Instead, the only way to have a free transaction is by sending money via their bank account directly or using an existing PayPal balance.

#3: Foreign Transaction Fees

Transferring money internationally has never been an easy process, but P2P platforms such as PayPal are probably not your answer either. PayPal has a 5% international fee enabling heavy expense.

Despite the Fees, are P2P platforms safe?

Transferring money has truly never been easier, but the implications of that go both ways. For the majority, P2P platforms are directly linked to bank accounts, meaning they are more liable for fraud than credit cards. Unlike a credit card, if you pay for something online, but never receive it, you will not be reimbursed. Only on rare occasions will the platform themselves attempt to act as a mediator between the parties concerned. Therefore, you should only use P2P platforms for people you know and trust, otherwise you are opening yourself to a lot more risk than necessary.

However, the risk of P2P platforms does not stop there. The money that is on the platform itself, instead of in a bank account, can easily be lost. This is all in the terms and conditions of the P2P platforms themselves because they can freeze or even deactivate consumer accounts, essentially locking up consumer money. Although this is unlikely to happen, especially if the consumer is following the proper guidelines, there are still ways where an account can be at risk. Nowadays risk protection is vital, because thieves can steal digitally from the comfort of their homes, and a consumer may never find out until it is too late. Some ways they may do this include:

  1. Unauthorized electronic fund transfers: This type of scam occurs when money leaves your account, but you never sent it. This could occur because your account was hacked, you had a guessable password, a stolen device, or possibly even a phishing scam.
  2. Seller scams: This occurs when you pay for an item, often because it is on sale, making you rush to buy it, but you never actually receive the item that you have already paid for.
  3. Buyer scams: This occurs when you are selling an item, and someone falsely claims they have paid too much, and makes a request for the difference. In this case, you think they are telling the truth, so you give them the item, but they never really paid. In the end, it is possible they have the refund money and the item, while you have absolutely nothing.
  4. Money mule scams: This is probably the scariest type of scam to be involved in because there is a potential for legal repercussions. Essentially, this scam tries to make you a money launderer by sending you money and then making you send it to another person. Guess what? In the eyes of authority, you just sanctioned the illegal transfer of money.

How can I ensure my safety with P2P platforms?

Without a doubt, the risks of P2P platforms are scary, but that doesn’t diminish their incredible versatility and potential. So, what should we do to maximize our safety on P2P platforms?

The first and probably most obvious method is to send money to only people you know and trust. This prevents the possibility of a scammer walking away with your money, but never actually giving you the product. If you must send a transaction to someone unknown, it is always best to verify the contact through their email or cell phone. After this initial verification, you should always send a small payment such as $1, to make sure you are sending money to the correct account.

Next, when online shopping you should always use a credit card instead of P2P platforms, even if there is an option such as pay with Pay Pal or Venmo. Using a credit card provides fraud liability protection and they are not directly linked to your bank unlike debit cards or P2P platforms.

As another deterrent method, you should always enhance the cybersecurity of your P2P platforms. There are simple ways of doing this such as creating stronger and less guessable passwords. Moreover, you should always be sure to shut down accounts that you are no longer using, especially if it is connected to a debit card, credit card, or potentially your bank directly. Another essential step is to prevent linking your P2P platform to any social media. This is to prevent someone from having access to your financials, in the case that your social media account is hacked.