P2P payment apps — or mobile apps that allow peer-to-peer money transfers using a bank account or credit card — make sending money to your friends and family easier. But can you count on them to keep your money safe?
According to a recent NerdWallet survey, almost two-thirds of survey respondents think paying with P2P apps is secure. And they can be pretty safe — if you use them correctly. Use these tips to keep your money secure with P2P apps such as Venmo, PayPal or Square Cash.
[See: 10 Dangers of Mobile Banking.]
Know who’ll get your money. P2P apps are a quick way to pay someone for goods or services, but it’s not wise to use them to send money to strangers.
Almost 2 in 5 survey respondents said they’d be willing to use a P2P payment app to buy something from a stranger. What they might not realize is that if you send money to someone, and that person doesn’t come through with the goods, you may not be able to get your money back.
For example, Venmo doesn’t protect any purchase or sale you make through the app. Check your P2P app’s policies to see what happens if your money goes to someone who doesn’t fulfill his or her part of the bargain. And avoid sending money to strangers, unless you get the item upfront and pay for it after.
[See: 10 Ways to Protect Yourself From Online Fraud.]
Avoid carrying a balance. Among survey respondents, 52 percent transfer money to their bank accounts immediately, never carrying a balance in their P2P payment apps, but 13 percent of respondents maintain an average balance of $500 or more. Of these two options, immediate transfers are the way to go. Your money is safer in a bank account.
Balances left in a P2P account are covered by the app’s policies and state laws; money in a checking account is insured by the Federal Deposit Insurance Corp., which means it’s protected by federal law.
But there are new rules coming to P2P apps that may make carrying a balance safer. In 2018, federal regulations will provide protections against unauthorized transactions and give users the right to dispute errors. Some P2P apps already offer similar protections, but for those that don’t, this could go a long way toward making P2P apps more secure.
Consider linking a credit card. Although linking a bank account to your P2P app is a good idea for transferring money out, you may want to consider also linking a credit card for secure payment. As a general rule, credit card transactions are safer than debit card transactions.
If you get scammed, a credit card company will be more invested in getting the funds back because it’s the company’s money. If you use your debit card or bank account, you’re the one invested in getting it back. Your maximum liability for credit card transactions is $50. For debit card transactions, your liability could be the entire contents of your account.
Understand, however, that most P2P payment apps will charge a fee around 3 percent for paying with a credit card, so you’ll have to determine whether it’s worth it to pay the fee for the added layer of security.
[See: 8 Easy Ways to Organize Your Financial Life.]
Opt into transaction notifications and add a PIN. P2P apps are encrypted, but hacks happen. Set up mobile or email notifications, so you’ll be alerted when money leaves or enters your account. If money you didn’t authorize exits your account, you can report it immediately. And if you receive money from someone you don’t know, you can send it back.
You should also add a PIN to your account and your mobile device, so no one can send money from your account, even if you lose your phone.
P2P payment apps may not be as secure as bank accounts, but you don’t have to give up their convenience to keep your money safe. Follow the tips above to increase the security of your P2P payments and transfers.
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4 Ways to Use Venmo, PayPal and Other Payment Apps More Wisely originally appeared on usnews.com