Not many of us carry a lot of cash anymore, instead, peer-to-peer payment apps like Venmo, PayPal, and Zelle give the convenience of cash on your phone.
Consumer Reports warns you have to take one very important step to protect yourself in case something goes wrong – like getting scammed.
“Once you’ve sent it, you’ve spent it,” said Consumer Reports Money Editor Octavio Blanco.
He says that’s exactly what many electronic payment apps tell users. Yes, they’re speedy and convenient, but Consumer Reports warns their lack of user protections – like those offered with most credit cards – can make these services very attractive to fraudsters and risky for consumers.
“The main risk in using a P2P app is that you have no recourse in getting your money back if you send money to a scammer or to the wrong person or if you send the wrong amount because of a typo,” Blanco explained.
Last year alone, the Federal Trade Commission says there were more than 70,000 reports of fraud and $130 million in losses with mobile payment apps.
FILE A COMPLAINT: Report P2P fraud to the FTC
And the apps are under fire from consumer advocates demanding protection from fraud and errors for users, but until that happens, Consumer Reports says there is one way to protect your payments using P2P apps.
“Link your credit card to the app and fund your payments through the credit card,” said Blanco.
When you link your app, you could benefit from the same purchase protections that your credit card offers. But it might not be free. Many P2P apps charge about 3 percent when you use a credit card.
If you do choose to keep your P2P app linked to your bank account, Consumer Reports offers this word of caution.
“If you are going to be using your P2P account for things like sending money to people you don’t know, you really have to be very careful -- because you have no way if something goes wrong to get that money back and that could be very costly,” Blanco said.
Consumer Reports contacted Cash App, PayPal, Venmo and Zelle. All of them said keeping users informed and educated and protecting them from fraud are top priorities. See full statements at the bottom of this article.
Here’s Consumer Reports’ list of the major P2P apps that can and cannot be linked to a credit card to fund your payments:
- YES: Apple Pay, Cash App, PayPal, Venmo
- NO: Facebook Pay, Google Pay, Zelle
If you do link your app to a credit card, some may charge a fee. However, the experts at Consumer Reports say it could be worth it to have the added protection.
For Consumer Reports’ step-by-step instructions on how to link your apps to your credit card, click here.
Cash App statement:
Preventing fraud is critically important to Cash App. We continue to invest in and bolster fraud-fighting resources by increasing staffing, educating our customers, and adopting new technology. We are constantly improving systems and controls to help prevent, detect, and report bad activity on the platform.
PayPal/Venmo statement:
The security of PayPal and Venmo users and their account information is a top priority, and we take all the necessary steps to protect our customers. We’ve always made preventing bad actors from using our platform a top company priority. We have a zero-tolerance policy for fraudulent activity, and our teams are working tirelessly to protect customers against anyone attempting to defraud well-intentioned individuals.
Zelle statement:
Zelle® and its participating financial institutions monitor payment activity on the network 24/7 for suspicious activity and to help proactively protect consumers. If a consumer believes they have fallen victim to a scam, they are encouraged to contact their bank, credit union or Zelle immediately. We believe that the best protection is prevention, and we offer educational resources on how to effectively use Zelle and how to spot potential fraudsters and scammers.