What Can I Safely Use for Peer-to-Peer Payments?

Money expert Clark Howard believes in protecting consumers, educating people on practical financial matters and repeating himself to make key points memorable.

If you listen to his podcast, you've heard him rail against Zelle. You may have heard him discuss why he generally doesn't like payment apps.

Some apps do a better job of protecting users (PayPal comes to mind). But credit cards offer the greatest consumer protections. Plus, assuming you pay off your balance every month, you can get 2% back on every purchase you make.

With peer-to-peer payment apps, if you get scammed — or pay for something you never receive — you often have little or no recourse.

But the convenience of these apps, and even the safety in certain places of not carrying cash or credit cards, can lead people to use them. How does Clark reconcile that?

How Can I Use Peer-to-Peer Payment Apps Safely?

I want a safe peer-to-peer payment app. Where should I turn?

That’s what a listener recently asked Clark Howard.

Asked Jeff in Nebraska: "I avoid Venmo based on Clark's recommendation. I used Google Pay, which I just read is scheduled to be deleted in the U.S. and changed to Wallet, which does not have peer-to-peer cash payments. What can I safely use on an Android phone?"

Google is sunsetting Google Pay on June 4. But your remaining options for peer-to-peer payments aren't limited or unique to Android.

If you’re going to use a peer-to-peer app for payments, your No. 1 concern is attaching it to your main checking or savings account.

Opening a Separate Account Is Key To Safely Use a Peer-to-Peer Payment App

Clark explained that peer-to-peer payment apps and their user agreements include “cross-default clauses.” Essentially, the money in your linked bank account is at risk if your payment app account gets hacked. Or if you send money to a scammer (or even a company with poor customer service).

What should you do?

Again, Clark is suggesting you open a separate online-only checking account for the express purpose of tying it to your payment app of choice.

Fund that account with a bare minimum amount you only use for peer-to-peer payments. Or leave it virtually empty and transfer money from your main bank account when you need it.

“And put Venmo, CashApp or PayPal on your phone,” Clark says. “And then the only money at risk is whatever you have in that online account.”

Clark Dislikes Google’s Impermanence

In his question, Jeff mentioned Google Pay going away.

Google starts and shuts down new products and services constantly. Google Podcasts is one recent example. Clark isn't a fan of the sort of impermanence that's a hallmark of the Silicon Valley tech scene.

“It’s a marketing problem at Google that Google will get people interested in something, get people signed up for it and then one day Google says, ‘You know, we don’t want to do that anymore,'” Clark says.

“And you just have to scramble and find something else. There’s no sense of permanence with how Google offers services to the public.”

Final Thoughts

Despite Clark’s distaste for peer-to-peer payment apps due to their lack of consumer protections, he knows people will use them. His advice is to open a separate bank account so you avoid linking payment apps to your main bank account.

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