Why You Should Pull All Your Extra Cash Out of These Apps ASAP

Mobile payment apps like PayPal, Venmo, and Zelle have made sending and receiving money easier than ever. They allow you to transfer funds from one account to another in just a few taps. It's hard to imagine life without them. However, there's a crucial fact that these apps don't advertise enough -- they are not FDIC insured. What that means is that if something goes wrong, you could lose your money. Here's why you should pull all your extra cash out of these apps ASAP and look for alternatives.

Popularity of digital payment apps

The world is changing, and digital payment apps are becoming more prevalent. It seems like everyone is using these apps to handle their finances. From peer-to-peer payments to mobile banking, these apps offer a quick and easy way to manage money.

In fact, three-quarters of Americans trust digital payment apps at least as much as they trust cash or credit and debit cards. But, there are several things you need to be aware of when using them.

The FDIC insurance safety net

The FDIC (Federal Deposit Insurance Corporation) is an independent government agency that protects depositors in case a bank or savings institution fails. FDIC insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category.

However, mobile payment apps like Cash App, PayPal, Venmo, and Zelle are not always backed by the FDIC. If the app fails, you could lose your money. They function as digital wallets or payment systems, not banks.

They don't hold deposits, and they don't use the traditional banking system. In other words, they are not part of the FDIC-regulated financial system. Additionally, these companies don't have the same regulatory oversight as traditional banks, so there's no guarantee your money is safe.

No interest

Mobile payment apps also don't pay interest on funds held in the app. In contrast, bank accounts offer interest, and with the recent interest rate hikes, high-yield savings accounts are even more appealing for those looking to earn money.

Security risks

When you transfer funds from your bank account to a mobile payment app, you are essentially giving your money to a third-party provider. While these apps offer convenience and speed, most mobile pay apps don't offer the fraud protection banks provide, and can come with other risks.

Mobile payment apps are vulnerable to fraudsters who use social engineering, phishing, and malware to steal your money or personal information. Mobile payment apps are also susceptible to hacks, especially if connected to an unsecured public wifi. If the app's security is breached, your account information and money could be at risk.

Mobile payment apps depend on reliable internet connections, cellphone signals, and software updates. Any disruption in these areas can cause delays, or worse, the loss of your funds.

What you should do instead

Payment apps like Venmo and PayPal are a convenient way to handle your finances, but it's important to be mindful of where you store your extra cash. For optimal financial security and savings, move your excess funds to your FDIC-insured bank account. In other cases, like Cash App, users will need to have a Cash Card or a sponsored account to be insured.

Keep only enough money in these apps to cover your immediate needs. If you have extra cash, transfer it to a traditional bank account. This simple step will safeguard your money, give you prompt access to it, and even earn interest.

While mobile payment apps like Cash App, PayPal, Venmo, and Zelle may seem like a convenient way to send and receive money, they come with significant risks. If something goes wrong, you could lose your money. It's essential to be aware of these risks and take steps to protect yourself. The best way to do that is to pull all your extra cash out of these apps ASAP and look for alternatives that are backed by FDIC insurance or offer better security features. By doing so, you'll have peace of mind knowing that your money is safe.