The risks that come with using cash sharing apps
For many people, payment apps have taken the place of cash when it comes to splitting dinner with friends or sending a family member a couple dollars. But how secure is your money in those digital accounts?
Digital expert Kim Commando said that with some of these services, your money doesn’t have the same protections it has while sitting in a bank account.
“Some of these digital payment apps, your money is not FDIC insured, and so if they decide to go out of business, poof, there goes all your cash,” Komando said.
Komando said while some apps and programs like Apple Pay and Apple Cash hold your money in FDIC-insured bank accounts, personal accounts for Venmo and PayPal do not.
Knowing this, Komando recommends not storing money in these accounts and set up reminders to transfer what is being held into your real bank account.
“Drain whatever money that you have left in these digital payment apps. Drain it out and then transfer it to a real bank — an FDIC insured bank,” she said.
Komando said for businesses, PayPal does offer a business account that owners should be using.
“This way, the funds that you add to your account are eligible for FDIC insurance,” she said.
Komando also warned of some of the security risks that can come with using Venmo, which is set up like a social media platform.
“Somebody could actually type in your phone number and then see all the transactions that you’ve made to and from using that app, which is just crazy to me,” Komando said.
Her recommendation for that is to check the privacy settings of the app you use.
- PayPal: Go to Settings > Data & Privacy
- Venmo: Tap the settings gear icon > “Privacy” > Under “Default Privacy Settings,” select the bubble next to “Private”
Komando said on Zelle and Cash App, transactions are private by default.