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How to Avoid Getting Scammed on Peer-to-Peer Apps

peer-to-peer apps

The days of cash may be over. More often, friends are splitting the restaurant tab by sending money via PayPal and parents are Venmoing babysitters their earnings after a night out.

The use of peer-to-peer apps like Venmo, Zelle, and PayPal is booming. One forecast predicts that we’ll spend more than $1 trillion with them in 2023. But wherever there is money, fraud follows. And, according to the Federal Communications Commission, con artists are quickly adapting to our new spending habits.

The scenarios are many. Individuals are posing as businesses and disappear after a customer sends them some cash via an app. Consumer Reports shared the story of one woman who sent $850 via Zelle after seeing an Instagram post about a Goldendoodle who was available for adoption. Once she sent the money, she never heard from the owner again.

Con artists are using a stolen credit card to pay via an app for a computer, car, or other expensive items that are for sale online, the Better Business Bureau reports. They get the item, and the seller soon realizes that the payment didn’t go through. Now the seller is out both the money they would have earned and the item for sale.

In other cases, using spoof emails that look official, fraudsters convince the seller of an online item that they’ve accidentally overpaid for it, perhaps sending $3,000 for a $300 camera, the bureau reports. So, the seller returns the “overpayment,” and the buyer goes silent. Now they’ve lost the cash and the item they sold.

The potential for scams doesn’t mean you shouldn’t use these peer-to-peer apps. In our increasingly cashless society, they provide an easy way to send money back and forth. But it is important you take steps to protect yourself. Here’s how.

Always check on transfers

If you’re selling an item to somebody you don’t know, always make sure the transaction goes through and you’ve moved that money into your own bank account before you send anything to the buyer, the Federal Trade Commission recommends. Better yet, just use the peer-to-peer apps with friends, the Better Business Bureau says.

Think security

Because these apps have access to your sensitive financial information, always turn on the security measures to protect your account. That includes multi-factor authentication, requiring a PIN or using fingerprint recognition, according to the trade commission. Be sure to use strong passwords, the Federal Communications Commission says.

Be aware of social settings

Some apps share details about your transactions. Read the fine print to understand what information will be shared and make changes to the app’s settings if you want to keep things private, the trade commission recommends.

Use your credit card

When spending money, link the app to a credit card, not a debit card or bank account, the Better Business Bureau recommends. Unlike debit cards, credit cards typically come with purchase protection. So, if you fall victim to a fraudster, there’s a better chance that you’ll get your money back if you used a credit card.

Be wary

If a business says they only take payments via peer-to-peer apps, be cautious. That’s a red flag, the communications commission says. If a business owner is asking for payment via an app, Consumer Reports says they should be using apps designed for business owners such as Square Cash for Business or PayPal.

Again, these apps were designed to make it easier to send and receive money between peers like friends and family members with who you already have connections. So, the best policy to avoid a peer-to-peer payment scam may simply be using it only with people you know in real life.

Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today.


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