How to Use Peer-to-Peer Payment Services Safely

New technology has the power to simplify our lives – to condense a multi-step process into an easy, one-click solution. Unfortunately, it can also open the door to information security issues, fraud, and scams. Even popular, well-vetted, and widely supported software isn’t impervious to bad actors – which is why you should always approach tech that uses your personal information with an abundance of caution.

That includes peer-to-peer payment services like Zelle®, PayPal, CashApp, and Venmo. While these services are incredible financial resources that allow you to pay a friend back for pizza or send birthday money to your sister, it – like any digital wallet or payment service – isn’t without risks.

Don’t let that scare you, though! With a little bit of knowledge and caution, you can use peer-to-peer services safely and without fear.

Be Aware of What’s at Stake

Services like Zelle and Venmo are connected to your bank account. In the worst-case scenario, a fraudster could gain access to your data and personal financial information.

It can also be very difficult to prove that fraud occurred on these services and recover stolen funds.

Put simply: while these services can be wonderful tools, they can also carry high risks if misused.

So, how can you avoid scams on peer-to-peer payment services?

Keep it Personal

You should only transfer money to people you know and trust when using Zelle, CashApp, Venmo, or another service. You should never transfer money to someone you don’t know well or met online.

By only transferring money to those you know personally, the number of people with access to your personal information and data is small. This makes it easier to verify transfers, spot suspicious activity, and keep an eye on your money.

Keep it Appropriate

Peer-to-peer payment services often have policies saying that they should only be used for money transfers between family and friends – the exception is PayPal, which has an option for online purchases. But you should never use Zelle, Venmo, or CashApp to pay for items bought through online marketplaces.

Scammers may use such transactions to steal your personal information or to put you on the hook for more money than you bargained for. One common scam involves using a stolen card to send you more money than agreed upon. The bad actor will claim it was a mistake and ask that you return the funds to them – putting those funds directly into their pocket and potentially implicating you in the fraud.

Scammers will often dispute a transaction after a sale – taking the item and the money and leaving you high and dry.

Because peer-to-peer services are for person-to-person transfers, they can leave users with little recourse in the event of a scam involving the sale of goods. Zelle and other services often will not restore funds in these cases because the nature of the transfer means the app was not being used as intended.

If you are a victim of fraud or a scam while using these services, it may also be difficult to recoup your lost funds, as peer-to-peer transfers often have to be approved or initiated by the account owner. To put it simply, it may look as if you consented to the transfer, which means it can be difficult to register that loss with your bank or to get your money back.

Practice Good Information Security

Make sure you use a unique username and a strong password when you sign up for a peer-to-peer payment service. Some devices, like iPhones, will auto-generate strong passwords for you and will warn you when login information appears in a data leak.

Make sure your login information is memorable but difficult to guess. You can also use a password manager to keep track of your usernames and passwords for different sites – this can prevent you from reusing the same usernames or e-mails.

Most importantly, remember that a good password is like a toothbrush – don’t share it with anyone, and exchange it for a new one every three to six months.

Keep an Eye Out

Above all, be vigilant.

Check your bank statements regularly, paying particular attention to these services’ listed transfers. Double-check that the amounts match the authorized transfers you have on file.

And don’t forget your credit report! If you use Zelle or other mobile or online payment services, pull your free annual credit report each year to ensure you are still in good standing. A credit report will tell you if anyone has opened a credit card or bank account using your information.

If you suspect you were scammed while using a peer-to-peer payment service, call your credit card companies and bank to place a hold on your account, and contact the credit bureaus to freeze your credit. These steps will prevent anyone from using your name to open unauthorized accounts.

If you think you have been the victim of fraud, you can report it via the U.S. Department of Justice’s website.