The Washington Post has a story today about payment apps like Venmo and PayPal. The gist of the piece is that they're inconsistently regulated and potentially not safe.
I know I'm an old dinosaur, but I don't really get the appeal of payment apps. Oh, if you use them solely to transfer small amounts to friends or for occasional eBay purchases, then sure. I suppose they're convenient. For everything else, though, I continue to recommend two things:
- Use credit cards. Tapping a credit card is about the easiest possible way of paying for things, and they're the only form of payment protected by federal law. You're never responsible for more than $50 in fraudulent charges, and dispute procedures are built in. No other payment method is safer or more convenient.
- For anything more than a few hundred dollars, keep your money in an ordinary bank. It's safe and insured. Anything else is a pointless risk.
I suppose I must be missing something here. I'm just not sure what.
I continue to be astonished by the number of people who use debit cards...for anything. There is zero protection, nada, unlike credit cards. If someone grabs your pin # and empties your bank account, that's a you problem not the bank's problem.
Untrue. Reg E very much makes funds stolen via a debit card a bank problem. The bank’s liability is just as much as it is for a credit card, if not more.
The limit is higher, but yeah.
Also, many credit card give cash back rewards, which can be significant if you put most of your purchases onto the card. I normally get between 500 and 1000 back per year on my primary card. That's tax free cash money that I otherwise wouldn't get. Alternatively, you can collect air miles on many cards.
Of course, the advantage of using credit cards assumes that you pay off your full balance every month, preferably through a direct automatic payment from your bank account. If you use the card to run up debt, the advantages disappear quickly.
That amazes me too. You could get 1-2% back and you just opt out? Admittedly some people can't get credit cards.
When I opened my bank account, they insisted on giving me a debit card. When they asked what spending limit to put on it, I said "zero". And that's what I have.
The only thing you need a debit card for is getting cash from ATM machines. You shouldn't use credit cards for this, you'll be hit with a "cash advance" fee.
I have a couple of debit cards, but they stay home in a drawer unless I am travelling somewhere where I will need to get cash from an ATM (including outside U.S.).
There were times in Europe where I needed a debit card with a PIN and a chip to buy tickets from an automated ticket dispensing machine.
I think it depends on state regs but I use my debit card as a credit card. When I check out the scanner asks debit or credit and I always pick credit. This gives me that protection credit cards have.
I use PayPal, but it in turn uses my credit card, rather than being linked to my bank account. I put as many of my recurring payments on PayPal as well. The advantage is that if the card has to be canceled and replaced, I only have to update it in one place.
Yes, the same reason I use PayPal often for online purchases.
I use PayPal for online purchases as it means only one vendor, PayPal, has my credit card information. PayPal is in the payment business, so my feeling is their security is probably better than your average small to medium plumbing supply or gourmet kitchen supply stores. The only time my credit card information got hacked was years ago when I was dealing with an online gourmet sea salt store.
I think that if you use Apple Pay, the vendor just gets a transaction ID, not your credit card info. That's a big improvement over using a regular credit card.
Is there a pass-through charge by PayPal with that configuration?
Not to the consumer.
And I wouldn't underestimate the value of keeping my credit card info out of the hands of every Tome, Dick, and Harry who sells something online.
Thanks. I am very restrictive in giving my credit card number to online retailers.
Ding!
I live in Germany, so things may work differently, but there are often various options - the best of which is the opportunity to pay on invoice (you have to be registered with the firm so they trust you) so you don't pay until you receive the goods. The next best is by Credit Card, and they DO NOT KEEP your credit card details (not allowed by law).
I don't use Paypal, because of the historic connection to Musk and Peter Thiel, and also because it is basically a monopoly, and because of repeated phishing emails.
For automatic payments (both deposit and debits) from a bank account, we find it convenient to have an account separate from our main one, and only keep as much money in it as we need for the monthly bills, and then transfer in and out of it. Very often hidden in the fine print of the auto pay agreements, you are giving them permission to "correct" mistakes by withdrawing from your account without asking. We've never had any of them overdraw, but you never know. So, we have no idea what it would take to clear up a dispute over an autopayment, but if it ever comes to that we'd like to limit the amount that could be at issue.
And the separate account should be at another institution, not an additional account at the same institution.
I buy lots of things online. I would never pay anyone but a long-trusted seller with anything but PayPal, which in turn charges a credit card. The reason is that PayPal is absolutely ruthless with sellers who try to stall when goods are not delivered. Provide a tracking number showing proof of delivery within seven days, or the sale price is refunded.
Get an Apple Watch. Most places accept it and the easiest way to pay, simply click twice on the side of the watch.
The only payment app I use is Zelle, because I make rent payments through it to my father. I couldn't find another way to pay him, and giving him a check meant he had to go to the bank which is hard for him.
Zelle is the worst. It's owned by the monster mega banks, and has virtually no consumer protections.
Agreed but if the original commenter is just using Zelle to send money to their father, it’s unlikely they’ll need consumer protections. Presumably their father isn’t going to scam them, and even if he does, they know where their father lives to go after him in court.
Zelle is great for instantly moving money to someone else without any fees, and as long as you trust the “someone else,” it really doesn’t have any additional risks over standard ACH payments that existed for decades between “monster mega” and small banks. (Zelle basically just opened up the ACH payment process to everyone.) YMMV on the “trust” thing, but then just don’t use Zelle if you don’t have any trustworthy people or entities in your life you owe money to.
I 100% percent agree about the desirability of using credit cards over debit cards. That said, there’s a difference between “payment platforms” and “US payment platforms.” America is a highly advanced society in myriad technological sectors. But cashless payment is not one of those sectors.
But the companies make more money this way.
For sure.
But what are the swipe fees?
Credit card companies raised their swipe fees...well, because they could. The make more income when things cost more, and now they get a higher percentage.
I use PayPal, particularily to deal with on-off sites that I don't trust with my credit card number. PayPal handles the credit card info - the merchant gets paid, and I don't have to trust the security of the merchant's credit card handling - which should be tokenized under modern PCI guidelines, but with PayPal, I know it is handled well.
I used to do a lot of PCI security work a decade ago. Tokenization was definitely the way to go, but I trust PayPal and I don't know what tokenization provider arbitrary merchants are using.
I hired a company this week to do a bunch of work trimming the trees at my house. It cost $1500. I asked if they'd take a credit card and they said sure, but company policy is to tack on a 3% fee, which is absolutely fair enough, since the credit card companies are charging them through the nose.
Zelle? No fee. Easy call, saved $45. (And yes, I have a rewards credit card, so if I'd used it, part of that extra $45 would have come back to me as a credit card reward... but I think most of it would go to Visa.)
Visa/MC/Amex are getting to be expensive enough that banks and other financial institutions have a pretty big incentive to try and cut out the middleman. Zelle is one example of that, done by the banks. There are (and will be in the future) lots more of them.
That 3% fee has rather suddenly become very common. I wonder about the longer-term effects of this. Will it sufficiently disincentive credit card use so that the credit card companies notice? Some time down the road will CC companies reduce their fees to try to recapture business? Fees in Europe are much lower, so they can easily reduce the fees and remain profitable.
I use Google Wallet for point-of-sale purchases wherever it's accepted. Also many carry-out restaurants accept it for purchases made with my phone and picked up later.
A word of warning: Never use a credit card at a gas pump unless it's contactless. I've had my card hacked TWICE at gas pumps. If you absolutely have to, check the slot very carefully before you put your card in. This also goes for ATM machines and anyplace you use your card on an unattended device.
Dude, don't use weird stations that don't have appropriate seals on them?
Kevin, you're missing a few things:
1. Some people cannot qualify for a credit card. Or, if they can, it's only a $500 limit credit card (or lower) which doesn't work too well to pay for a $505 item.
2. Some people are hopeless when it comes to paying off the full balance of their credit card bill on time, every month. Setting up your credit card for automatic monthly full balance payments helps, but then some people are hopeless when it comes to leaving enough money in their checking account to pay their credit card bill. Late payment fees and interest kill the deal for credit cards.
3. Some legitimate merchants charge extra to accept credit card payments, or they don't accept them at all. (Although you seem to have allowed for these exceptions.)
4. There are some individuals such as undocumented migrants, ex-felons, cryptocurrency enthusiasts, and Americans working overseas who find it difficult to obtain most common financial services. Financial institutions have no legal obligation to provide even basic banking services to customers. In fact, they're encouraged to close accounts (or not to open them) when their risk models (now AI-powered and opaque) grow suspicious for any reason. The law only prohibits discrimination on the basis of certain protected categories. But if a financial institution wants to close an account because (for example) their risk model hates the fact you might've bought cannabis or 0.3 Bitcoin, they can do that. The FI won't tell you why you're on their blacklist, and there's nothing you can do about it. This is happening a lot already, and it's a growing problem.
For a "financial institution" to cancel somebody for buying 0.3 Bitcoin is a public service and should be praised to the Heavens. "Cryptocurrencies" are "useful" only for money laundering, hiding the proceeds of speculation, and directly paying for criminal "services". People who own them are inherently suspect.
PayPal for EBAY and that's about it except for some obscure vendor (like for laser printer hardware).
I do not give out my credit card information except to reliable establishments like Amazon.
Accepting credit cards is super-expensive for occasional use.
Are you living in the Stone Age? Contactless via phone's NFC of your credit or debit card.
Don't really see the point of using a smartphone to pay contactless by credit card. A credit card is much smaller, lighter, and easier to carry than a smartphone.
Do you always carry your smartphone? Do you just carry your credit card or do you have a wallet?
I always carry my smartphone and I now rarely carry my wallet.
Google Wallet allows people in some states to store their DLs on their phones. When that becomes widely supported by states, there won't be a point to carrying a wallet.
I stopped carrying a wallet a few years ago. I have a phone case with a small compartment that's big enough to hold my driver's license and a credit card. Before long I won't need the DL as this will be carried on my phone.
You really have no fear that your phone will ever be about to die when you really need it to show your ID or pay for something?
His physical driver's license isn't going to die just because his phone does. I use the same system—no wallet for me—just a hard protective case for my phone that provides a small compartment where I keep my passport card and work ID.
Maybe, but I still find a wallet easier to carry than a smartphone. A smartphone doesn't fit easily in a pocket, so I have to use a belt holster which can be awkward. Plus you don't have to remember to recharge your wallet regularly.
So where do you carry your driver's license and medical insurance cards? Not everyone does, but I also have a printed DNR card with contact numbers.
Vennmo and PayPal and the rest mean the guy who delivers my wood doesn't have to pay a credit card service for his September to November business.
It means garage sale deals can be settled immediately whether $5 or $500 (we Venmo'd a couch set last month).
I means you can quickly send cash to your kid when they're sitting at a gas pump with nothing in their account.
Or text them:
Too bad.
So sad.
Your Dad.
I'm in the US frequently enough that I have occasion to use Venmo (it's unavoidable). But boy oh boy is that one of the freakiest pieces of software I've laid eyes on. Imagine combining the concept of a payments platform—the one area where you really want to maintain privacy and anonymity—with a social network that trumpets do the world what you're spending money on!
I still see "payments memos" bubble on my Venmo feed from people I barely knew a decade ago ("Josh $43 to Rick for beers and pizza"). How they got there (Google contacts? Gmail? Apple?) I have no idea.
Venmo is mind-bogglingly craptastic.
I would just like to second your advice about being careful with Venmo or other payment apps like Venmo. I paid a vendor with Venmo and there was a problem with Venmo accessing my checking account for reimbursement and I began to get dunning emails. When I tried to call Venmo to straighten things out I found it was near impossible to speak to a human there. I suspect that in an effort to minimize overhead they have automated everything but if the automation doesn't work you're stuck. It took over a month of telephone calls and emails to straighten things out. I cancelled Venmo and switched to Zelle which is a service of my bank, Chase. If I need to I can always walk over to my local Chase branch 5 minutes away.
Lucky, getting through to my credit card is like pulling teeth.
Vemo sucks bigtime. See my comment above.
On a side note, how many use Patreon on a regular basis? I do transactions there once every couple of weeks, minimum, more around the holidays.
Regularly use Patreon, but as a buyer (patron?) not a seller. Not sure how different that is.
I think the biggest thing Kevin is missing is ease of use. Splitting a bill with some friends? Making (or accepting) donations for a charity project? Sending/receiving money from kids? Those are all trivial with something like Venmo, and a big otherwise.
Yeah, Venmo (and its ilk) isn't the best for retail purchases. But there are many transactions that aren't retail purchases.
This. For someone who travels abroad a lot, Kevin really does have remarkably provincial views on the topic of payment systems.
Also, "something like" Venmo is needed for these other transactions you mention—agreed, but, there are much better, more secure and more convenient options available outside the US.
FWIW when I was in India earlier this year I noticed that Google Pay was everywhere. I expected to need cash for all the small businesses, but everyone seemed to prefer Google Pay.
This was in Hyderabad, a big city with a lot of tech businesses. Outside of the city it may have been different.
I try to use one credit card just for all online transactions.
And my spouse carries a card that I don't have and vice versa, in case one of us gets pick pocketed, we still have a usable card.
And my Apple card (among others) automatically notifies me when my card gets used (and tells me the price in USD), so if someone steals my card I would know instanter.
I paid all my expenses with my credit card in the past & paid also the debts on time when wanted to increase my credit score, I even started doing if after I read this article which helped a lot with informing https://1firstcashadvance.org/articles/what-credit-score-do-you-start-with/
but know its ok for me to cover them with paypal, in case of bad products they can recover the money quickly, its proved by these studies here
https://www.investopedia.com/articles/personal-finance/011215/which-safer-paypal-or-credit-card.asp
well everybody can choose what works for them, but I suggest paypall instead of credit cards, cuz if you dont make on time payments, you can decrease your score!