The Consumer Financial Protection Bureau (CFPB) recently published information regarding the potential lack of insurance coverage on money stored in peer-to-peer (P2P) payment applications. If you or someone you know is currently using a P2P payment app as a “savings account,” now may be the time to move that money to a federally insured credit union or bank.

For those who aren’t familiar, P2P payments are payments that can be transferred from one bank account to another via a digital medium, like the internet or a mobile phone. Well-known examples of P2P payment apps include Venmo, Zelle®, Cash App and PayPal. Payment apps have become very popular in the last decade – according to a Consumer Reports survey conducted in 2022, 64% of Americans were using P2P apps, with 81% of those users between the ages of 18 and 29. It’s no surprise that these apps are so popular, as they are seen as an easy and convenient way to send money.

What most P2P app users don’t know, however, is that funds stored in these apps may be subject to loss if the app goes under. When depositing money in a bank that is a member of the FDIC or a credit union that is NCUA insured, funds up to $250,000 are protected and can be accessed, even if the financial institution should fail. According to the CFPB report, apps may invest users’ stored funds in loans and bonds to gain additional profit, and since user agreements within these apps tend to be vague, users most likely don’t know where their money is being invested. If the app itself were to fold, the user’s money is not insured and could be lost.

P2P apps are very convenient when it comes to receiving payment for things like group dinners, babysitting or rent, but take caution when keeping a balance in any of these apps.

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