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It’s impossible to go to dinner with friends without using Venmo or Zelle. But there are a lot of limitations. You need to be cautious and, yes, there are scam artists.
Both apps can be very convenient, and at their best can even make payments fun. But they also have limitations. Here are the pros, cons and everything in between.
Venmo and Zelle Are Contact-Free and Easy
Most people have a good reason to learn how to use the new systems of retail payments, including these two smartphone apps. They help cut out the annoying side-trip to the ATM “to pick up some cash.” They can also be safer in many settings. After all, thieves know where the ATMs are, and know that people coming from them often have newly disbursed cash in their pockets.
The pandemic has also taught us its own lessons, and has created a demand for contact-free ways of closing cash transactions. The QR used by smartphone apps is vastly preferable from an epidemiological view to the use of paper cash, or even plastic cards, passing from hand to hand.
But, unfortunately, Venmo and Zelle do have some cons.
Con 1: Embarrassing Secrets
One con: these apps can lead to the disclosure of embarrassing secrets, if there is anyone in your life (a too-curious child? A parent? Co-workers?) who might pick up your phone and look at it casually. As one insightful writer asked, back in September 2018, do you really want a co-worker “seeing [the] time stamp and knowing that you were out drinking at 3 in the morning?” You might have paid the bartender with the embellishment of a martini glass and flamenco dancer emoji: that also won’t improve how it looks to hypothetical unsympathetic eyes.
Con 2: Unproductive and Uninsured Balances
A second point: it is too easy to settle into using Venmo and Zelle as a substitute for a bank account, and leaving a cash balance overnight, or longer. Please don’t. A recent CNBC story by Nicolas Vega argued that “you should never leave a balance in Venmo.” His reasoning applies to Zelle, too.
Vegas points out that a Venmo cash balance earns no income: whereas a high-yield savings account at present earns rates as high as 0.6% APY.
Perhaps, more importantly, Venmo is not insured. In the unlikely but possible event that a future crisis should render it or its parent corporation insolvent, and the service, no one will be obliged to pay you.
Thirdly: Venmo transfer can take time. Your funds can be stuck in limbo for up to three days.
These three points together make for a single and powerful case: don’t keep balances.
Con 3: Wrong or Untrustworthy Recipients
There may be no way to get the money back if you send it too quickly or to someone you should not trust.
There is also a concern that transactions happen too quickly. “One caveat to using Zelle” one account proceeds, “is that you need to be sure you’re sending funds to the correct recipient—and it’s a person you trust. Because the money moves so quickly, if the person you send money to has a Zelle account, the transfer will be completed in minutes and thus cannot be canceled once it’s sent.”
That means you ought to double-check or triple-check your transfers to be certain ensure that you don’t send funds to the wrong person. The unfortunate reality is there are a lot of people named John Smith. Take the extra five minutes so you don’t make a bad mistake.
Another troubling fact: scam artists know how to use these apps. Be careful. Please only use these apps to transfer money to people and institutions you know and trust.