Venmo, PayPal, and Cash App are all ever-present in our society today. According to the Consumer Financial Protection Bureau, more than 75 percent of adults in the United States have used one of these popular apps. Their prevalence raises questions about how people split dinner bills or group activities before Venmo came along. They make it incredibly easy to transact amongst friends and family.
Why am I, a millennial (and) financial advisor, writing about Venmo?
Have I got some news for you! At the beginning of June this year, the Consumer Financial Protection Bureau issued a warning that billions, you read that right: billions of dollars are remaining in these popular nonbank payment apps, and there is no federal insurance covering them. Lowkey now would be a good time to check those digital payment apps.
If you see a balance in those apps, look at transferring it to your bank account as soon as possible, and here’s why:
Apps like Venmo, PayPal, Cash App, etc., typically lack deposit insurance, unlike what you experience at a bank or federal credit union. This means if the payment app fails and lacks the funds for transferring your money, you could lose that money. Scary! Who here really wants to see their money disappear into the interwebs? Not me!
There are no beneficiaries on your digital payment apps! I’m not trying to be too much of a downer here, but if something were to happen to you, who would receive/inherit the balance in your Venmo or other apps? Does that money just disappear? This lack of clarity can be scary, and if you have a significant balance in there, you do not want that money to go into the app’s pocket.
You’re missing out on interest-earning potential! With the Fed hiking interest rates over the past few months, savings accounts, CDs (Certificates of Deposit), and High Yield Savings accounts are giving you enticing interest on your savings! These apps are not giving you interest to maintain your funds in them. Don’t give up that free money!
Venmo & PayPal, and the other nonbank apps, make it very convenient and free to transfer your remaining balance to your bank account within 1-3 business days. You can still plan that group vacation or split the lunch bill with your office colleagues. Just take a couple of seconds every now and then to move your balance.
July 2023
