We Need to Talk About Peer to Peer Apps
We need to talk about peer to peer apps. They have become a way of life it seems and people are using them daily, not just to pay each other but at times for payments for their side business. And as convenient as they can be, there can be some drawbacks or things to be careful of.
For those of you that don’t know, let’s start with, “what is a peer to peer payment app”?
It’s a way in which the user can transfer funds from their bank account or credit card to another persons account via a digital medium like the internet or a mobile device. So, you can send money or you can receive money.
Why would one use this kind of app? It’s great to pay someone back. For example, if a group buys something together, each person can pay their share. You can pay someone back for concert tickets, movie tickets or really anything. You could pay your babysitter or send your child money when they are at school or college.
There are several peer to peer apps available.
1. Zelle – great for instant payments. The caveat is there is a daily limit for instant payment. Over that amount will 2-4 days to go through.
It’s compatible with many banks and credit unions and in fact the option to use it is most likely part of your mobile app at your financial institution. First Pioneers offers Zelle.
It doesn’t allow you to connect a credit card and you typically have to use it through a smart phone. And it only works with domestic banks.
2. Venmo –can use a bank account, a credit card or Venmo balance. When someone pays you, it goes into your Venmo account and then you decide how you want transfer it to another account.
There is a Venmo debit card option, where you can actually use the card with retailers and the money is withdrawn from your Venmo balance.
There is a fee to use a credit card and if you want to transfer money from your venmo account to your bank account instantly there is a fee. But if you are willing to wait 1-3 days, the transfer is free.
3. Cash app – similar to Venmo in that you can send via your cash app balance, your bank account or your credit or debit card.
Cash app offers an optional debit card as well as cash boosts which offers discounts at certain retailers when they using the cash app card. One unique feature is users can invest in individual stocks or buy and sell bitcoin through the app.
Like Venmo, there is fee to use a credit card or receive an instant deposit.
Cash app is one that offers a business account which can be great for small business owners. It may offer the purchaser a bit more protection as well when paying a business versus an individual.
4. Paypal –is often used in e-commerce, online purchases or money transfers.
For peer to peer transactions, you can send money via bank account or debit or credit card. Like others, you can also use your Paypal balance. Paypal has higher transfer limits of up to $60,000. The amount may vary depending on your account.
There are fees to use credit cards like the others and Paypal also offers Paypal credit. Similar interest rates to other credit cards will apply there. And again, there are fees for instant transfers.
Paypal is another that offers a business option for an account.
5. Google pay – this is a digital wallet that can be used with the app on your phone. It can be used for peer to peer transactions and shopping. It can be downloaded to an apple or android device. But, it can only be used in the US and you can’t link a credit card.
6. Apple pay – this is similar to google pay – used very much the same way, as far as peer to peer and shopping but you can only put it on an apple device.
7. Social media - There is an option in Facebook messenger to pay someone. This is linked to a bank account, debit card or Paypal account. Payment is usually instant so very convenient and it allows you to send money internationally.
This one seems to be particularly susceptable to scams by accounts getting hacked, etc.
With this and with all of them really, know who you are sending money to and be careful and sure before you do.
If you are using the app to send money to a friend or family member that you know, they are generally safe.
But I want to talk for a minute about fraud and scams.
What’s the difference?
Fraud is when someone accesses your account without your permission
o This is something a financial institution can most likely help you with.
· A scam is where someone tricks you into paying them money.
o This is something like an authorized transaction and payments on a peer to peer apps that can’t be reversed. So in this instance you are out the money.
Lets go over a few common peer to peer scams
· Seller scams – these could be literally anything that someone claims to have and wants to sell. You send the money but the item never arrives.
· Buyers scams – even though it sounds odd it’s real. In this instance the scammer offers to pay you over your asking price with a check and they ask you to send them back the over payment but the check they paid with is not good. So, you are now out the money and the product you sold.
· Money mule scam- this can actually cause legal trouble as this is used to launder money. These often involve things like work from home schemes or phony prizes. You are sent money and asked to send it to someone else but the money is stolen.
And these are just a few examples…
How to avoid scams
· Don’t send money to anyone you don’t know or trust with a peer to peer app.
· If someone is pushing you to hurry, this is a major red flag. Take your time.
· Make sure the info is correct before you hit send. The transaction is almost instant and can’t be reversed so make sure you have the correct person before sending.
· Use your security settings on your account.
· If your credit union or bank offers fraud alerts, use them. It could help something fishy be caught. If something does concern you, contact your financial institution immediately.
· Be aware of links sent through email or text. They may not be safe. It’s Best to contact your financial institution directly if you get a message you are unsure of.
· Protect your personal information and your passwords always! Never give them out. When the person you are dealing with says the transaction isn’t working and they say, “just give me your log in info and I’ll go in and take care of it”. Again, trusting people who don’t see how people can do such a thing often do it.
My bonus tip today is, if it sounds too good to be true, it probably is. Do your research. Ask questions. Be cautious. If it doesn’t feel right, don’t do it.
You can always contact your credit union or bank with questions. It can help keep you and your money safe.