PayPal also offers a line of credit which comes with a very high interest rate approaching 30%.Īnother service that has become more popular is the "buy now, pay later" installment plan, which gives people the opportunity to pay for their goods using multiple payments over weeks or months with no interest. Many banks have long offered layaway plans but the concept is booming anew as upstart fintechs have rebranded and made layaway more user, and mobile, friendly. Cash App now even allows people to file taxes through Credit Karma Tax. Through Cash App and PayPal, it's possible to buy and hold cryptocurrency. You can now get your paycheck deposited into a mobile payment app. The PayPal cashback Mastercard offers 2% cash back on all purchases, while the Venmo card gives 3% cash back on your top spending category and 2% on your second category. Some, like PayPal and Venmo, offer credit cards. On top of that, many apps are offering more traditional banking-like services. Similarly, payments involving cash - either from a balance in your account or cash from your bank account - are free, but payments using a credit card come with a transaction fee. Cash App charges 0.5% to 1.75% for instant deposits. Instant transfer comes with a 1% fee on PayPal, while Venmo charges a 1.5% fee (with a minimum fee of 25 cents and maximum of $15). When transferring a balance to a bank account, there's a choice to transfer within one to three business days or instantly. Most transactions, such as payments to friends and family, are free, but there are some fees for added services. In their study, Nerdwallet found that two-thirds of mobile payment app users maintain a balance in their mobile payment app accounts, at an average of $287. Increasingly, people are using mobile payment apps as de facto bank accounts. "It's harder to get actual money back than get a line of credit restored," Rossman said. You can request a refund through a P2P network, but it may require much more legwork and persistence compared to a credit card company, which often reverses charges almost immediately and will fight on your behalf directly with a vendor. For one, if you have an underlying account tied to your P2P app, either a credit card or checking account from a bank, there are additional layers of customer service for you to contact. If you do need to initiate a refund request, there are a few important things to know. This can become more important if making a purchase with a vendor you don't know and haven't used before, and it is not coming from a credit card account tied to your P2P app. Venmo offers the opportunity to check a "goods and services" button when paying that requires the seller to pay a small transaction fee. "But using it with a merchant you don't know from experience and just hoping the merchandise shows up, is a bad idea," Rossman said. This is a reason why Zelle recommends only using it with trusted partners.īeyond paying friends and family, there are many trusted vendors in life which P2P apps may be a fine option to use with, such as an electrician or babysitter. A consumer is benefitting from the instantaneous nature of the transaction, but assuming the risk that it can't be reversed. There's a tradeoff being made in the use of P2P apps. There are varying degrees of consumer protections from the P2P companies, and based on his analysis of the options, Rossman says PayPal has better buyer protections than Cash App or Zelle, even though the latter was created by a consortium of major banks to compete with the P2P challengers. Check fraud protection and refund policies Because it's really hard to get that money back," Rossman said. So the first rule of thumb with these peer-to-peer services: "Don't send it to people that you don't know and trust. In most cases, it's very different from a credit card which has more fraud protection in place and, as a line of credit extended by a card company, is easier to refund quickly than money from a personal account already instantaneously transferred to someone else. This doesn't mean that a payment made through a P2P network can't or won't be refunded, but it may prove more difficult, and in the least, it is more important to know the person or vendor with whom you are doing business. In the worst-case scenario, "once it's sent, it's gone," Rossman said. If you've sent money and then goods or services you've received aren't as promised or don't arrive at all, you may be out of luck. Say you buy concert tickets from someone through a P2P app and the tickets never arrive.
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