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Here’s how to avoid unexpected fees with payment apps


Close up of a woman’s hand paying with her smartphone in a cafe, scan and pay a bill on a card machine making a quick and easy contactless payment. 

D3sign | Moment | Getty Images

Payment apps have come under scrutiny by lawmakers and regulators as their usage skyrockets.

It only takes a tap to instantly send money to friends and family. Customers also use them to quickly buy goods online.

That ease of use has 80% of Americans using mobile payment apps, according to a recent survey by NerdWallet. What’s more, 50% of those respondents said they use these apps at least once a week. 

Transaction volume across all payment app service providers in 2022 was estimated at about $893 billion, according to the Consumer Financial Protection Bureau.

That agency also estimates tap-to-pay transactions from digital wallets will soar by 150% between now and 2028.

Meanwhile, there are growing concerns about financial safety for consumers.

The CFPB is focused on “erecting guardrails and some requirements and obligations for non-traditional players who are offering services very similar to a bank-based product,” said Amy Zirkle, the CFPB’s senior program manager for payments.   

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To that point, greater oversight of mobile payment apps may be coming.

Democratic lawmakers on Capitol Hill are supporting a proposed rule by the CFPB that would require federal oversight of digital wallets and payments, forcing them to comply with federal funds transfer, privacy and other consumer protection laws that they are not currently required to follow. 

Lawmakers are also calling on payment app companies to clarify their reimbursement policy if consumers get scammed and to make it easier for users to report fraud. 

“People lose their money because payment apps and banks don’t put enough measures in place to protect their customers,” said Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, at a hearing earlier this month on scams in the banking industry. 

Still, new regulations take time to be put in place. In the meantime, experts say that consumers need to understand how these apps work, the fees that may be charged and the risks involved in storing money in a mobile payment app. 

How payment apps work 

Payment app fees can be costly 

Payment apps sometimes charge fees for the convenience of instantly transferring money or linking credit cards to the app if they use Cash App, PayPal, or Venmo. 

Cash App doesn’t charge to send money that is processed within one to three business days, but instant payments have fees ranging between 0.5% and 1.75%. PayPal and Venmo, which PayPal owns, charge a fee of 1.75% of the transfer value or up to $25 for instant transfers. 

With PayPal and Venmo, the user will not pay a fee if they send money to people using your PayPal or Venmo balance from your bank account or debit card. However, if you send a payment that is funded by your credit card, you’ll be charged a 3% fee for the total amount of the transaction. CashApp also charges 3% for payments tied to credit cards.

Zelle does not charge an extra fee for an instant transfer. However, Zelle recommends confirming with your bank or credit union that there are no fees for Zelle transactions.

About 33% of mobile payment app users link their apps to a credit card, and 24% usually pay the fee to get instant transfers from the payment app to their bank account, according to the NerdWallet survey. Those fees can add up quickly. 

Money sitting in most payment apps is at risk 

Protect yourself from payment app scams

 Payment apps aren’t regulated as heavily as debit and credit cards, so you might still be on the hook for unauthorized payments if a scammer gets control of your account. 

“If you get tricked and send money to a thief, you’ve authorized that transaction,” said Scott Talbot, executive vice president of the Electronic Transactions Association, representing the payments industry. “The industry is focused on educating consumers to prevent them from getting tricked in the first place.”

The Federal Trade Commission advises consumers to never give out their access codes, protect accounts with a PIN or multifactor authentication and to double-check the recipients information before sending money. 

If you get an unexpected request for money from someone you recognize, speak with them to make sure the request is from them — and not a hacker who got access to their account. If you think you may have been scammed, contact the payment app directly and also file a report with the FTC at reportfraud.ftc.gov.

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This story originally appeared on CNBC

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