Money in Your Venmo and PayPal Apps May Be at Risk, CFPB Says
You shouldn't use apps like Cash App, PayPal and Venmo as substitutes for a traditional bank account, the Consumer Financial Protection Bureau advises.
The money stored on payment apps might not be held in accounts with federal deposit insurance. So during financial distress, people who use these apps could lose the funds they keep there.
You may want to move the money you've got stored in your Cash App, PayPal or Venmo app. The Consumer Financial Protection Bureau on Thursday issued a notice highlighting a financial danger digital payment apps pose to consumers.
The money that's stored on these apps might not be held in accounts with federal deposit insurance, coverage that protects your money in the event of a bank failure, the CFPB explained in a press release. So if there's a financial crisis, the more than 75% of US adults who use these apps could lose funds.
"Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe," CFPB Director Rohit Chopra said in the release.
The apps can also hold and invest the funds you store in them, without the same regulatory oversight as insured banks or credit unions, the CFPB said. What's more, the user agreements for these apps tend to lack clarity and specifics about how they handle your money, the agency said.
Neither Cash App, PayPal nor Venmo immediately responded to a request for comment.
In 2022 alone, transaction volume across all digital payment app service providers was around $893 billion, the release says.
Instead of digital payment apps, consider keeping your money in a high-yield savings account that secures your funds and gives you the highest interest rate on your money. Make sure that account is insured by the Federal Deposit Insurance Corp., or FDIC, too.
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