How to Choose the Right Payment App

Using PayPal, Venmo, Zelle and other apps is convenient, but there are pros and cons to each.

Screenshot of Paypal website
(Image credit: Zara Picken)

Whether splitting a restaurant bill with friends, paying the pet sitter or tipping your barber, there’s a good chance you’ve found yourself using a peer-to-peer payment app—or at least considering it. In mid 2021, PayPal reported a 41% increase in payment volume over the past year for its peer-to-peer transfer businesses. One of them is Venmo, which saw a 58% increase on its own platform.

PayPal, Venmo, Zelle, Cash App and others make it easy to send and receive money. You link your bank account, debit card or credit card to the app, so you don’t have to swap sensitive financial-account information with the other person in a transaction. Instead, you share details such as a user name, an e-mail address or a phone number. Usually, transfers arrive quickly in the recipient’s app balance, though moving the funds from the app to a bank account fee-free may take a few days.

But peer-to-peer (or “P2P”) apps can also leave you more vulnerable to fraud. They’re an increasingly popular target for scammers who, for instance, trick users into sending money for goods or services that never materialize. Or a crook may pose as someone you know and request funds from you. Unfortunately, you may never get back money lost in such scams because you made the payment yourself. The app companies “take the position that you are not protected,” says Lauren Saunders, associate director of the National Consumer Law Center. But, she says, it’s worth asking the company to reverse the transfer if you’ve been scammed.

However, if a criminal hacks your P2P account (say, by stealing your username and password and logging in from his or her device) and makes unauthorized transactions, you have legal protections. If the transfer came from your bank account, debit card or a cash balance stored within an app, you generally have zero liability as long as you notify the app or financial institution within 60 days of your statement being sent. The rules are a bit different if your phone or other device is lost or stolen and a crook uses it to make transfers. Your liability is no more than $50 if you notify the app or financial institution within two business days of learning about the theft. Your liability could be as much as $500 if you wait up to 60 days or unlimited after 60 days. With any P2P platform, you have the right to dispute erroneous charges (say, a single authorized transfer that is mistakenly posted to your account twice).

Credit cards have more-robust protections, capping your liability at $50 for unauthorized charges through a lost or stolen device or at zero if your account is hacked. But P2P apps typically require a fee of about 3% for a transfer using a credit card. And your card issuer may treat money sent through such apps as a cash advance, which typically comes with an additional fee of 3% to 5% and accrues interest immediately at a high rate. Along with credit card fees, watch for other potential charges, such as a fee for instant transfers from the balance held in the app to your bank account.

To help you sort through the options, we’ve listed details for several major P2P services, including fees and dollar limits for peer transfers and how long it takes to move funds from the app to a bank account. We’ve also highlighted the types of transfers or users for which each app is best suited and additional features the apps offer, such as cryptocurrency trading or rewards credit cards.

Lisa Gerstner
Contributing Editor, Kiplinger's Personal Finance

Lisa has spent 15 years with Kiplinger’s Personal Finance and heads up the magazine’s annual rankings of the best banks, best rewards credit cards, and financial-services firms with the best customer service. She reports on a variety of other topics, too, from retirement to health care to money concerns for millennials. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.