Third-party payment apps have become increasingly popular over the last decade and don’t appear to be going away any time soon. In fact, it is estimated that 75% of all adults have used a payment app to make a transaction.1 Payment apps such as Venmo, PayPal, Cash App and Zelle have become widely popular since their introduction, as they provide convenience to consumers who need to quickly and easily exchange money. However, according to The Consumer Financial Protection Bureau (CFPB) users of these apps should be careful when it comes to leaving money in those accounts as they may not be federally insured.
Usually, when someone receives a payment through these apps the money is not immediately redirected to your financial institution and that money will remain on the app for whenever you need to pay someone else. Making a habit of leaving money sitting on these apps puts your money at risk, since there are no federal protections in place to protect those funds. For instance, if you have received a payment from a friend and you leave that money on the app, you run the risk that if something were to happen to the company that hosts the app, you could lose that money.
As a result of this risk, payment app users are highly encouraged to direct any money that might be sitting in these apps to their trusted financial institution where there are federal insurance protections on those funds. Moving your funds from the payment app to your financial institution shouldn’t require too much effort, but make sure to review your preferred app and see what is required to complete the transaction. Depositing those funds back into your financial institution does not prevent you from using these apps for payments in the future, it just ensures that any money you have received is federally insured and protected.
Please keep the above information in mind when you use third-party payment apps. At CES Credit Union you can trust that your funds are federally insured by the National Credit Union Administration (NCUA). To learn more about the NCUA visit their website at www.ncua.gov.
Source:
1- https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-billions-of-dollars-stored-on-popular-payment-apps-may-lack-federal-insurance/