Do This One Thing to Protect Your Peer-to-Peer Payments

Fraud is rampant—and mistakes happen. But there’s a way to protect your money when using Cash App, PayPal, Venmo, and other peer-to-peer payment methods.

People sending money to one another through an app on their phones. Photo: Oscar Wong/Getty Images

Peer-to-peer (P2P) apps like Cash App, PayPal, Venmo, and Zelle are convenient, delivering payments quickly and easily. But that speed and convenience—plus the apps’ general lack of user protections—are precisely what can make these services attractive to fraudsters and risky for consumers. 

When you use a P2P payment app, there’s little you can do if, for example, you pay for a product or service that turns out to be unsatisfactory or that you never receive, or if you make a mistake, like sending $400 instead of $40 because of a typo. 

The payment apps acknowledge this. Once money is sent, it’s spent, they tell users. They recommend sending payments only to friends and family to avoid problems.

More On Digital Banking

But in the real world, it’s not always possible to abide by these P2P warnings. Sophisticated scams using P2P to relieve you of money are becoming more and more common. Plus, it’s not hard to find yourself in a situation where someone you don’t know well—say, a plumber or another service provider—asks to be paid by one of these methods. And of course, sometimes you just screw up by mistyping a single digit of the ID phone number, sending funds to who knows whom and where. 

On the fraud front alone, in 2021 there were more than 70,000 reports of fraud in mobile payment apps and $130 million in losses, according to the Federal Trade Commission—a sharp increase from the 60,000 fraud reports and $87 million in losses reported the year prior. 

For these reasons, P2P apps are increasingly under fire from consumer advocates, who are demanding that providers protect consumers from fraud and errors. “P2P companies should take the same responsibility that credit card companies do for the safety of their systems and for keeping scammers out,” says Lauren Saunders, associate director of the National Consumer Law Center.

Regulators are paying attention, too. Last October the Consumer Financial Protection Bureau began collecting information on the business practices of these payment technology companies, with the aim of ultimately ensuring better consumer protections.

In the meantime, consumers who use mobile payments can be left on the hook. According to a March 2022 Consumer Reports nationally representative survey (PDF) of 2,116 U.S. adults, 22 percent of Americans who have ever used one or more P2P services have had an issue with them. Of those, 9 percent didn’t try to resolve the issue—and among those who did try, 21 percent were unsuccessful.

A Possible Fix

Fortunately, there is a way to protect yourself, although it’s an imperfect solution. 

That fix: Connect your P2P service to a credit card instead of your bank account. In this way your payments are as protected as they would be with any credit card transaction. Credit cards are subject to the Electronic Fund Transfers rule (Regulation E), which requires that users be held liable for no more than $50 in the event of fraud or a payment made in error. Only 9 percent of P2P users say the money in their P2P accounts is linked to a credit card, CR’s survey found. 

Major credit card companies reached by CR, including American Express, Discover, and Mastercard, all confirm that their payment protections extend to any transactions made with P2P apps, even those made to an individual. Visa didn’t respond to CR’s inquiry.

The catch? Some of the apps don’t let you pay this way. And some of those that do allow it require you to pay a 3 percent fee. 

Is the cost worth it for the extra protection? For some people, it may be, says Syed Ejaz, a financial policy analyst at Consumer Reports. “While Regulation E needs to change to include protections for transactions made with P2P apps,” he says, until that happens using a credit card can bring peace of mind. And he advises using extra precaution whenever using a P2P service not connected to your credit card.

Here’s a rundown of the policies of the major payment apps:

P2P ServiceCan You Link a Credit Card to Fund Payments?Fee?More Details
Apple PayYesYou and the recipient must use a compatible Apple device.
Cash AppYes3%
PayPalYes3%You can ask the person you’re paying to cover the fee, though the recipient can refuse.

You can link to a prepaid “Amex Send” account, with credit-card type protections, for no fee.
VenmoYes3%Has a business version with extra protection for bank-linked transactions at no additional fee, but can only be used with businesses registered with the app.
Facebook PayNo
Google PayNo
ZelleNo

Apple Pay

From a Mac or an iPad: Open “Wallet” settings on your device. 
• On your Mac model with Touch ID, go to System Preferences >> Wallet & Apple Pay.
• On your iPad, go to Settings >> Wallet & Apple Pay.

Tap Add Card >> Follow on-screen directions to add a card. >> Verify your information with your bank or card issuer, who may require more information.

From an iPhone: Open the “Wallet” app, tap the “plus” button. >> Tap “Debit or Credit Card.” >> Tap “Continue.” >> Follow the steps on the screen to add a new card. If prompted, choose your bank or card issuer from the list or find them using the search bar. >> Verify your information with your bank or card issuer, which may require more information or may ask you to download an app before approving your card. >> If you have a paired Apple Watch, you have the option to also add the card to your watch.

Cash App

From a computer: Not possible. 

From a smartphone: Open Cash App. >> Tap the “Profile” icon in the top right corner of the Cash App home screen. >> Then under options, tap “Linked Banks.” >>Tap “Link Credit Card” and enter the requested information. >> Then tap “Add Card” and the card will be on file.

PayPal

From a computer: From the PayPal home page, log in to your account. >> Then click “wallet” at the top of the page. >> Then, on left side of the page, click “Link a debit or credit card.” >> Then follow the instructions on the page to link your card. 

From a smartphone: Log in to your account. >> Tap “wallet.” >> Then tap the plus symbol (+) to the right of “Banks and Cards.” >> Tap Debit and Credit Cards. >> Then link your card manually or connect your PayPal account to your bank.

Venmo

From a computer: From the Venmo home page, click “Edit payment methods.” >> Then click on “Add Debit or Credit Card” and add your card information.

From a smartphone: Open the Venmo app >> Go to the “You” tab by selecting the single person icon. >> Tap the Settings gear in the top right, then tap “Payment Methods.” >> Tap “Add bank or card,” then tap “Card.” >> Add your card information manually or with your phone’s camera.

P2P Still Linked to Your Bank? Take These Precautions.

  • Send money only to people you know. Many peer-to-peer transactions are instantaneous and irreversible, a fact that scammers know and exploit.
  • Avoid P2P services for purchasing goods or services from strangers on the internet. If you do use the apps to pay a service provider or to buy something, make sure you know them and trust them. Also, the terms of service for most apps prohibit the use for purchasing goods and services. Ask the retailer or service provider if they would use an app specifically created for business users, like Venmo for Business, Square Cash for Business, or PayPal (though not the Friends and Family option).
  • Search the app for customer service contacts and procedures before you use it. That way you’ll know where to go and what to expect when you need help.
  • Keep your app up to date. If you have old software, you’re missing the latest security patches.
  • File a complaint. Companies accredited by the Better Business Bureau, including Venmo and Zelle’s operator, Early Warning Service, are required to respond to consumer complaints, says Sandra Guile, a spokesperson for the bureau. You also can lodge a complaint with the Consumer Financial Protection Bureau’s Consumer Complaint Database. The organization’s policy has been to report problems to companies for them to resolve.

Image of Octavio Blanco, editor at CR with Money CIA

Octavio Blanco

My mission: To write stories that broaden readers' horizons and offer new solutions they can apply to their lives. Who I write for: My family, my friends, my neighbors, myself, and—most important—you. My passions: Music, art, coffee, cheese, good TV, and riding my electric bike (for now). Find me on Twitter: @octavionyc