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- Cash App is relatively safe due to its encrypted transactions, and the app has certain security features and protections.
- You should enable the app's security features and be aware of the potential for scams and fraudulent transactions.
- You should also avoid using Cash App as a replacement for a bank account as your balance is not federally insured.
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Cash App is one of several popular peer-to-peer transaction services, similar in many ways to PayPal, Venmo, and others.
Cash App tries to differentiate itself from other apps by serving as a potential alternative to a traditional bank account; it can even receive direct deposits, for example.
The app is simple to set up and use, but you might wonder: Is Cash App safe and secure enough for regular use?
Cash App is relatively safe to use
Like Cash App's peers, it's a relatively safe way to pay for products and send money to friends, family, and co-workers. Cash App encrypts all data in transit and can claim PCI-DSS level 1 certification – the highest level of compliance with a set of standards designed to ensure companies store, transmit, and process credit card data to the highest standards. The app also offers fraud protection for unauthorized charges.
Cash App also features security built into the app to prevent unauthorized users from gaining access to the app if they should get physical possession of your phone; these include Touch ID and PIN code security, depending upon which phone you have.
Even so, the weakest link in Cash App is often the user, so you need to be vigilant. "Cash App payments are instant and cannot be canceled," said tech expert and media personality Kim Komando. "If something goes wrong, such as you sent it to the wrong John Smith in your contacts, then hopefully that person is honest and sends it back to you. But there has been a surge of payment app scams. More people are using Cash App and scammers are getting very bold."
It's worth noting, though, that Cash App positions itself as a possible alternative to a traditional bank account, but this is an area in which its safety is lacking; your balance is not FDIC insured. "This could be a big problem if the company is hacked, if it were to go out of business, or if it were to experience some other catastrophe," said Ted Rossman, senior industry analyst at Bankrate.com.
Advantages of Cash App
You might start using Cash App because your group of friends, family or colleagues is already using it; alternatively, you might be interested in using it on your own. Regardless of what brings you to Cash App, there are many reasons to be attracted to this app:
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- In addition to simple peer-to-peer cash transfers, you can use Cash App as a bank account. Cash App gives you a routing and account number to enable direct deposits, so your paycheck can be sent directly to Cash App. Likewise, you can make payments (such as utilities) from Cash App.
- A debit card is available for making purchases at brick-and-mortar stores using your Cash App account.
- There are no fees for making payments when you connect Cash App to a bank account or debit card.
- If you are so inclined, you can invest in both stocks and cryptocurrency using your Cash App account.
- Cash App transactions are encrypted and safe.
Disadvantages of Cash App
While Cash App can take the place of a traditional bank account, you should be aware of the service's primary shortcomings:
- First and foremost, money held in your Cash App account is not FDIC insured, which means that your entire balance is vulnerable if Cash App were to lose your money or shut down unexpectedly.
- Unlike traditional bank accounts, Cash App balances do not earn interest.
- If you use a credit card to make a transaction, you're charged a 3% fee.
- The Cash App's debit card can be used at ATMs, though there is a $2 transaction fee.
- There are some limits on Cash App transactions - you can only withdraw up to $310 per transaction from an ATM, for example, and no more than $1,000 in a seven-day period.
How Cash App protections compare to other payment apps
Cash App has a lot in common with other peer-to-peer payment services like PayPal, Venmo, and Zelle. They all allow you to easily send payments to friends, family, colleagues, and businesses, and none of them charge fees when you're using a payment source other than a credit card. In addition, they're all highly secure with encryption to protect your transaction and various security tools like Face or Touch ID and PIN codes to prevent other people from gaining access.
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However, there are significant differences in how Cash App works compared to these other apps, specifically regarding how money in your account is protected and insured.
Fraud protection: Cash App and Zelle do not offer fraud protection for authorized payments. While you can file a claim on Cash App for purchases which you can prove you did not authorize, if you don't receive the goods on an authorized payment, you don't have recourse like you do with PayPal and Venmo.
FDIC insurance: Cash App positions itself as a bank account alternative, though your balance isn't federally insured. That's not true of other peer-to-peer apps. Both Zelle and Venmo offer varying degrees of protection, for example. Zelle has the best protection because the money never leaves your bank account, which itself has FDIC protection. Venmo comes in somewhere in between; generally, any balance you carry in Venmo has no FDIC protection, but if you use Venmo's direct deposit feature, that money is protected using FDIC pass-through insurance up to the maximum amount allowed by law (currently $250,000).