Here's Why You Shouldn't Use a Credit Card for Payments Made Through Payment Apps Like Venmo

Payment apps make it easy to pay others -- but watch out for extra fees.

Mobile apps make it easier to handle day-to-day life. Many people use payment apps to pay friends and family. When using these apps, how you pay matters. You'll pay extra fees if you use credit cards to send money to other people through these apps. Here's how to keep more of your money.

Payment apps are a convenient payment solution

Whether you're paying a friend back for lunch or are sending money to your cousin as a congratulations for a recent accomplishment, payment apps make it easy to send money quickly, even if you live far away. It eliminates the need to snail mail a check or wait forever until you see them in person to pay them back.

Payment apps are convenient and easy to use. But make sure that you're not paying unnecessary additional fees. Every time you pay extra fees, you waste money and may find it takes you longer to reach your personal finance goals.

Avoid paying people with a credit card

When using payment apps like Venmo, it's best to make payments from money in your bank account. No fees are charged when you pay someone with funds from your account balance, a linked debit card, or a linked checking account.

However, fees accrue when you use funds from a credit card to pay someone else through payment apps. Venmo charges a 3% fee for this. These fees add up and impact your finances. Let's imagine you're sending a $500 payment to a friend. You'll pay an extra $15 if you use a credit card. You can keep more money in your pocket by paying another way.

Your credit card issuer may charge fees, too

In addition to the fees charged by payment apps, your credit card issuer may charge you fees for using your credit card to send money to others. That's because some card issuers treat cash-like transactions as cash advances and charge cash advance fees.

If you're unsure whether you'll be charged a cash advance fee, it's best to avoid transactions that may put you at risk of paying extra fees. You can review the details of your cardmember agreement to see if this applies to the card in your wallet.

Four payment app tips

If you find payments apps make your life easier, you can keep using them. Here are a few tips that may help you have a better experience when using mobile apps to send money to other people:

1. Only pay people you know: When sending money through payment apps, ensure you're only sending payments to people you know and trust. If you send a payment to someone you don't know, such as a payment for an item they plan to sell you, it may be hard to get your money back if something goes wrong.
2. Don't stash money in your payment app account: It's also recommended that you don't keep money sitting in your account balance. You won't earn interest while it sits there, and your money isn't insured. Storing your money in an FDIC-insured bank account is the best move.
3. Protect your account: To avoid potential fraud, take extra steps to protect your account. You can better protect yourself and your money by using a strong password and enabling multi-factor authentication to make it easier to keep unwanted people out of your account.
4. Verify payment details: Before sending a payment, always verify the details to ensure you're sending the right amount of money to the right person. You should also double-check the payment method to avoid surprise fees.

Looking for additional money management tips? Check out our personal finance resources.