Why Keeping Cash in Payment Apps Might Not Be Smart

Connor Tomasko from Chicago is a money management enthusiast who's urging people to be cautious about keeping money in payment apps. While these apps, like Venmo and Cash App, are easy to use, they don't offer the same protections as banks. For instance, funds in these apps aren't usually insured by the FDIC, which means if something goes wrong, you could lose your money. The Consumer Financial Protection Bureau (CFPB) has warned that using these apps as a substitute for a bank account can put your money at higher risk. In 2022 alone, people made $893 billion worth of transactions on these apps. By 2027, that number is expected to reach $1. 6 trillion. Courtney Alev from Credit Karma advises against leaving money in these apps. Instead, she recommends transferring the funds to a high-yield savings account. This way, your money can earn interest, growing over time. Some payment apps do offer insured savings products, but the CFPB still suggests moving your balance to a federally insured account to be safe. Tomasko always transfers money out of Venmo within 1-3 business days to avoid fees. She uses Cash App's automatic transfer setting to route money back to her bank. She believes there's room for improvement in these apps to make them safer for users. The Financial Technology Association claims these apps are safe, convenient, and transparent. However, users should be aware of the potential risks and make informed decisions.