Mobile apps have made it easier to handle everyday life. Many people use payment apps to make payments to friends and family. When using these apps, the way you pay is important. If you use a credit card to send money to someone else through these apps, you will pay additional fees. Here’s how to keep more of your money.
Payment apps are a convenient payment solution
Whether you’re giving back to a friend for lunch or sending money to your cousin to congratulate them on their latest accomplishment, payment apps make it easy and fast to send money even if you live far away. It eliminates the need to snail mail checks or wait forever until you see them in person to pay them back.
The Payments app is convenient and easy to use. But make sure you’re not paying unnecessary extra fees. Every time you pay an extra fee, you’re wasting money and may find that it takes longer to reach your personal finance goals.
Save: This credit card has one of the longest introductory 0% interest periods
More: Save when paying off debt with one of these top balance transfer credit cards
Avoid paying people with your credit card
When using payment apps like Venmo, it’s best to pay with funds in your bank account. When you pay someone using funds from your account balance, an associated debit card or an associated checking account, no fees are charged.
However, when you use funds from your credit card to make a payment to someone else through the payment app, a fee is incurred, for which Venmo charges a 3% fee. These fees can add up and affect your financial situation. Let’s say you want to send $500 to a friend. If you use a credit card, you will pay an additional $15. You can pay more money in other ways.
Your credit card issuer may also charge fees
In addition to the fees charged by the payment app, your credit card issuer may charge you a fee for using your credit card to send money to someone else. This is because some card issuers treat cash-like transactions as cash advances and charge cash advance fees.
If you are unsure whether you need to pay a cash advance fee, it is best to avoid transactions that may put you at risk of paying additional fees. You can check the details of your cardholder agreement to see if this applies to the card in your wallet.
Four payment app tips
If you find that payment apps make your life easier, you can continue to use them. Here are some tips to help you have a better experience when using mobile apps to send money to others.
Pay only to people you know: When sending money through payment apps, make sure you only send to people you know and trust. If you pay someone you don’t know, for example for an item they plan to sell you, it may be difficult to get your money back if something goes wrong.
Do not deposit money into your payment app account: It is also recommended that you do not deposit money into your account balance. You will not earn interest while it sits there, and your money is not insured. Keeping your funds in an FDIC-insured bank account is the best move.
Protect your account: To avoid potential fraud, take extra steps to protect your account. You can better protect yourself and your funds by using strong passwords and enabling multiple identity verification, making it easier to keep unwanted people out.
Verify payment details: Always verify details before sending a payment to ensure you are sending the right amount to the right person. You should also double check the payment method to avoid unexpected fees.
