Suze Orman Warns: ‘Don’t Park’ Money in Digital Payments Apps
Written by
Dawn Allcot
Edited by
Nicholas Morine
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Digital payment apps like Venmo, Apple Pay, and Cash App are convenient to make online purchases or transfer money quickly to family and friends.
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But financial expert Suze Orman, via a recent LinkedIn Pulse post, warned readers not to park their money in these apps. Instead, transfer funds in only when you need them.
The Consumer Financial Protection Bureau (CFPB) agrees it’s not a good idea to store your money in most peer-to-peer payment apps. That’s because these companies are not banks or credit unions, so the money held there is not backed by FDIC or NCUA insurance.
Even more concerning is that 85% of Gen Z consumers aged 18 to 29 use these payment apps regularly. They might not be aware that their money is not insured. In 2022, more than $893 billion flowed through payment apps.
While it’s unlikely anything will happen to these platforms, it is safer to keep your funds in a federally insured institution. If your bank or credit union fails, your money is protected for up to $250,000 per account holder, per type of account.
There are a few exceptions, however. If you deposit your money in PayPal Savings to earn 4.3% interest, the money held in savings is backed up to $250,000 by Synchrony Bank. However, unless you transfer your funds to PayPal Savings, you won’t get this protection.
In her LinkedIn post, Orman pointed out that it’s just as easy to transfer money to/from your bank or credit union with just a click or two. In most cases, you can pay people through the app using funds in your linked bank account. This is a better idea than storing money in an app that isn’t FDIC insured.
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