Even if you don’t use Peer-to-Peer (P2P) payment services, chances are that you know someone who does. P2P cash transfer services have become an important part of the online banking landscape. They combine our love for convenience with the growing distaste for traditional banking services to provide some of the services of an actual bank via our phones and the internet. They’re so convenient that it’s easy to fall into the trap of signing up for any number of apps and websites that provide P2P services without actually knowing what you’re getting yourself into. So, let’s start with the basics:

1) What are Peer-to-Peer or P2P payment services anyways? Can’t I just use cash?

Peer-to-peer payment services are apps or websites that allow you to send money to friends, family or strangers with only a few touches of a button. You could use cash, but if you’re anything like my peers, cash is usually the last thing on your mind. I use them because it’s much more convenient than scrounging for cash every time I want to go to dinner without splitting the check, split a Lyft fee, or have a friend pick up a pint of ice cream from the store. It’s also much easier to keep track of your purchases via an app instead of keeping track of every nickel and dime that falls to the floor when you’re going through your wallet. I make lots of little purchases in college and using P2P apps helps keep every cent accounted for.

if you’re anything like my peers, cash is usually the last thing on your mind Click To Tweet

2) Ok, what are my choices?

Luckily the P2P market has exploded over the last five years. You have lots of choices about what to do with your money and who to trust it with. For most apps, a couple of things remain true: money received via the app can be held in your app account or transferred to your bank account within 1-3 days. The balance stored in your app account can usually be used to make purchases whether through online transactions or a physical card. Transactions to and from a debit card or bank account are free, but transactions with a credit card incur a small fee. I’ll talk about a couple of the most popular choices, and you can decide for yourself which P2P app is the way to go.

PayPal – the “Tried and True”

PayPal is the friend that you’ve had forever that seems to keep getting better with time. Long established as the preferred payment method of eBay and other online vendors, PayPal has been a staple of online shopping for years. Unlike nearly every other service on this list, PayPal works in the United States and many foreign nations making it an invaluable addition to your overseas checklist. It can even convert currency, but it does charge a small fee to do so. The biggest downside to using PayPal is that it acts like a bank without any of the regulation. It isn’t FDIC insured (which means your money isn’t protected if PayPal fails), and its capacity for security, customer service, and troubleshooting are much lower than a traditional bank.

Venmo – the “Social Butterfly”

Venmo is owned by PayPal, and although it can be used via the web, it’s optimized for smartphones. You can choose to connect the app to Facebook to keep all of your friends and family updated on what you’re doing via your transfer history. It’s this feature that makes Venmo unique from every other app on this list – it’s designed to be a social experience. One of the downsides to using Venmo is that to receive money, you must have an account. Just like PayPal, Venmo isn’t FDIC insured, and its capacity for security and customer service is severely limited compared to a bank.

Square Cash – the “Friend of Convenience”

Just like Venmo, Cash App is accessible via your laptop, but it’s designed to be used by smartphones. You can transfer and receive money via the app, Siri, web browser, iMessage and even Snapchat with Snapcash. This app keeps innovating new features faster than we can learn how to use them. Now, you can buy and sell bitcoin via the app and send your direct deposits straight to your Square Cash account. Unlike Venmo, your friend doesn’t need to have an account to receive money. Instead of using your number or email for transactions, you can preserve your privacy with a $Cashtag that you create. Square Cash has all the same downsides as Venmo but all things considered, it’s a more than worthy competitor in the P2P market.

Zelle – the “Industry Favorite”

Unlike every other app on this list, you don’t need an account or the app to use Zelle because it’s built directly into the mobile app of participating banks. Currently, those banks are Chase, Bank of America, Citi Bank, Wells Fargo and Capital One. It’s instant, and because it’s coming straight from your bank account, that money is FDIC insured. Although you’d think Zelle would be the clear winner for security, the software has proved surprisingly vulnerable to fraud. If you choose to use Zelle, be warned that you are only protected against fraudulent charges that you didn’t authorize, not scammers.

Well, there you have it! If none of those apps meet your cash transfer needs, I’d also recommend looking into Apple Pay for the Apple junkie like myself and Google Wallet for Android users. Although all of these apps differ in some way, knowing how to protect yourself and use these apps safely is universal. My recommendations are:

knowing how to protect yourself and use these apps safely is universal Click To Tweet
  1. Use the ones your peers are using. If you don’t like their choices, do some research and encourage them to make the switch with you.
  2. Read the app’s terms of service and make sure you’re comfortable with them. If not, there are plenty of other options to try.
  3. Don’t just go with the default privacy settings. Most apps offer privacy options that go beyond the default setting.
  4. If you’re using Venmo, use it on private. Your bank account and Facebook friends will thank you.
  5. Don’t carry a balance. It can be tempting to use cash transfer apps like a bank account but stay on the safe side and immediately deposit any money received via the apps.
  6. Finally, only use these apps with people that you know and trust. Established online vendors that use PayPal are the exception, not the rule. If you know that Sally’s end of the check will never make it back into your bank account, ask for split checks instead. Don’t casually loan money just because these apps make it easier. Because these apps are so convenient, a little caution goes a long way towards protecting yourself.

As long as you use the same common sense that you would use with cash or a check, you’ll be well prepared to use cash transfer apps.

As long as you use the same common sense that you would use with cash or a check, you’ll be well prepared to use cash transfer apps. Click To Tweet
What’s your favorite P2P App? Let us know in the comments below! 

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