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Payment Apps Gaining Favor; Here’s How Best to Use Them

June 27, 2017
Banking, Banking Basics
P2P Payment Apps Harris Poll
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Person-to-person — or P2P — payment apps make it easier to send money than ever before. More than one-third of Americans (35%) use them, and close to two-thirds (63%) would be willing to use them, a NerdWallet survey has found. But many members could be using the apps more wisely.

P2P payment apps — such as Venmo, PayPal or Square Cash — allow a user to transfer money from a bank account or credit card to another person’s account via the internet or a mobile phone.

In the online survey of more than 2,000 U.S. adults, commissioned by NerdWallet and conducted online by Harris Poll in May and June 2017, we also learned:

  • More than half of Americans surveyed (56%) who currently use a P2P payment app link it to a credit card
  • More than 2 in 5 Americans surveyed (44%) believe using a P2P payment app would make it more difficult to accurately monitor spending
  • P2P payments appear to have a generation gap: Younger Americans are more willing to use the apps than older Americans. Seventy-nine percent of the 18- to 34-year-olds surveyed would be willing to use them compared with 55% of those ages 55 to 64 and 37% of those 65 or older.

Use P2P payment apps — but not for everything

Fifty-nine percent of Americans surveyed who would be willing to use a P2P payment app said they would use it to pay for an online purchase through a retailer. More than half (55%) said they would be willing to use one to pay back a friend or family member.

Fewer would be willing to buy something from a stranger via a P2P payment app (39%). Purchases from Craigslist or eBay would fall into this category. Even fewer would be willing to use one to pay rent or make a mortgage payment (32%) or contribute to a group gift (30%).

We recommend using P2P payment apps for transactions such as paying back money you owe family members and splitting the check with friends. Always use caution when sending money to someone you don’t know. If you do use an app to buy something from a stranger, make sure you’ve received the product or service and that it’s legitimate before sending payment.

Know the cost of linking a credit card

More than half of Americans surveyed (56%) who currently use a P2P payment app link it to a credit card, which could be a mistake.

Some P2P payment apps charge a flat fee or a percentage to transfer money from a credit card, but not from a checking or savings account. And credit card issuers sometimes consider these transactions a cash advance, which means they can charge a cash-advance fee and high interest.

“Linking to a credit card can provide an extra layer of security, but that security may come at a cost,” says NerdWallet columnist Liz Weston, author of the book “Your Credit Score.” “Check with the app and your credit card issuer to find out what the fees will be before you decide which account you want to link to.”

Avoid maintaining a balance

When you receive money via a P2P payment app, you can either leave it in your account to use later or transfer all or part of it to your checking or savings account. More than half of Americans surveyed (52%) who currently use a P2P payment app cash out immediately after receiving a payment. But 13% maintain an average account balance of more than $500.

Is it safe to keep all that money in a P2P payment account?

Almost two-thirds of Americans surveyed (65%) think paying with P2P apps is secure, while 35% say it isn’t. There’s some truth to both statements.

P2P payment providers shield users’ financial information, but hacks and scams can affect these apps just like any other financial product. It’s best to regularly transfer your balance to your bank account.

Here’s why: The FDIC insures bank accounts for up to $250,000, but P2P payment accounts are covered only by state laws and the provider’s policies. These might not cover your balance as well as the federal guarantee.

Take advantage of their money management potential

The survey found 44% of Americans believe using a P2P payment app would actually make it more difficult for them to accurately monitor their spending. But they could be missing out on a handy financial tool.

Younger respondents are more likely than older ones to believe that P2P payment apps will make tracking their spending easier: 74% of Americans surveyed ages 35 to 44 say using an app would make easier to monitor spending, while only 38% of those 65 or older say this.

“If you want to avoid overspending and make progress on your financial goals, you need to know where your money is going,” Weston says. “These apps may help you do that.”

It’s much easier to remember how much — or if — you paid your friend for dinner if you use a P2P payment app instead of cash. You can then factor these items into your budget. Some apps, including Venmo, also provide a monthly statement that you can reconcile with your bank account.

Make sure you get paid

P2P payment apps eliminate some of the usual excuses for not repaying money — no more “Sorry, I don’t have any cash on me.” It’s often easier to pay via P2P payment app, but does that mean people feel more obliged to respond to this type of money request than others? Sixty percent of Americans surveyed say no.

Younger Americans are more likely than older ones to say they would feel more obligated to take care of IOUs if they were requested via a P2P payment app instead of another form of payment. Almost 3 in 5 of Americans ages 18 to 34 (59%) who were surveyed say they’d feel more obliged; just 18% of those 65 or older felt the same way.

There’s no substitute for persistence: If the person who owes you money doesn’t reach out with a payment, apps allow you to request money directly, and in some cases you can send a reminder.

The P2P payment landscape continues to evolve. Apple recently announced that its next operating system would include P2P capabilities within iMessage and Zelle — a new P2P app backed by more than 30 banks — is now available to millions of mobile banking customers. As the apps change and grow in popularity, it’s important to use them wisely, so you can safely pay and get paid.

Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @Erin_El_Issa.


This survey was conducted online within the U.S. by Harris Poll on behalf of NerdWallet from May 31 to June 2, 2017, among 2,110 U.S. adults ages 18 and older, among which 671 currently use a P2P payment app. This online survey is not based on a probability sample, and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, contact [email protected]