Peer-to-peer (P2P) payment sites let you transfer money from your bank account or credit card account to someone else using an app on your phone. Some of the most popular apps are Cash App, Paypal, Venmo and Zelle.
These apps are convenient and easy to use, but there are risks involved. P2P apps are not federally insured or regulated. This means that there is little protection offered to customers.
Any app can be targeted by scammers and hackers. Scammers can trick you into authorizing and sending payment. If you make a payment, even if you were tricked by a scammer into making the transaction, you can’t cancel the payment once you have sent it. Payments happen instantly and are irrevocable.
Common Payment App Scams
There are four main kinds of payment app scams. I’ll share a brief description of each one so you know the warning signs.
Seller Scams
These can take many different forms, but typically the seller is offering merchandise or some type of service and requests payment through a P2P app. But even though you’ve paid, the merchandise or service is never delivered. Don’t use P2P apps to pay for goods or services. Instead, use another more secure method of payment such as a credit card.
Unauthorized Transfers
This happens when a hacker gains access to your account or device and makes a transaction that you did not approve. They may use phishing to obtain personal information and hack into your P2P or bank account. This can lead to financial and identity theft.
“Accidental” Payment Scams
Has someone sent you money “by mistake” and then requests that you transfer the money back to them? Don’t fall for it! Instead, contact the P2P company directly to report the scam.
Bank Impersonators
An impersonation can occur when a scammer contacts you pretending to be your bank. They may say that there has been suspicious activity related to your account. They may request that you send them money to ensure that your account has not been disabled or to reverse the transaction. Don’t respond! Call your bank directly to confirm your account is in good standing and to report the scam.
Avoiding Payment App Scams
With so many ways for things to go wrong, it’s understandable that you might feel some anxiety anytime you open a payment app. Luckily, there are several easy ways to avoid scams.
- Keep the app updated. Updates provide enhancements to the app and patch security vulnerabilities.
- Open another checking account. Money expert Clark Howard recommends using a fee-free checking account to pair with payment apps. If your account gets hacked, criminals will have access to a limited amount of money instead of your entire financial life.
- Send money only to people you know and trust. Once the money is sent, it’s gone.
- Take your time when sending a payment. Money is transferred quickly using P2P apps. Double-check everything before transferring the money.
- Use a unique password for all accounts. Never use the same password twice, and change the password a few times a year.
- Sign up for alerts. Banks, credit card companies and other financial institutions allow you to set up alerts on your account that can notify you when any unusual activity takes place.
- Monitor your accounts regularly. Log into your online bank and other accounts and make sure there are no charges you do not recognize or anything else that seems unusual.
Tips if You’ve Been Scammed
If you’ve been scammed on a payment app, report the issue as soon as possible. There are three key institutions that you need to contact: the P2P company, your credit card company and your bank.
Then you should change your username, password and security questions on your accounts.
Finally, send information about the scam or fraudulent activity to the Federal Trade Commission and to the Federal Bureau of Investigation.
Have a question about payment apps or scams affecting your wallet? Call Clark’s free Consumer Action Center at 636-492-5275.
