You may want to move the money you have stored in the Cash App, PayPal, or Venmo. The Consumer Financial Protection Bureau on Thursday issued a notice highlighting the financial danger that digital payment apps pose to consumers.
Money stored in these apps may not be held in federal deposit insurance accounts, coverage that protects your money in the event of a bank failure, the CFPB explained in a press release. So if there is a financial crisis, more than 75% of US adults who use these apps could lose funds.
“Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account, but they lack the same protections to ensure funds are safe,” CFPB Director Rohit Chopra said in the release.
The apps can also hold and invest the funds you keep on them without the same regulatory oversight as insured banks or credit unions, the CFPB said. What’s more, user agreements for these apps tend to lack clarity and specifics about how they handle your money, the agency said.
Neither Cash App, PayPal nor Venmo immediately responded to a request for comment.
In 2022 alone, the transaction volume across all digital payment application service providers was around $893 billion, it said.
Instead of digital payment apps, consider keeping your money in a high-yield savings account that secures your funds and gives you the highest interest rate on your money. Make sure the account is also insured by the Federal Deposit Insurance Corporation, or FDIC.
See also: Best Current Accounts for June 2023