Many of us have a tendency to treat the money in our Venmo, Cash App, and PayPal accounts as though it were a $20 bill we found in a jacket we haven't worn since last winter. While it's nice to put little bits of money across several accounts to act surprised about finding them later, the sensible thing is to keep a minimal amount of cash in Venmo and similar accounts. Here are three good reasons
- Most of the money is not FDIC-insured in a Venmo account, so if the firm fails, there is no government assurance that your money will be reimbursed. It's unlikely that an app like Venmo or Cash App would pull a Houdini with your money. But, do you even potentially be part of the trick? (Note: FDIC pass-through insurance is available for direct deposits and cryptocurrency, according to Venmo's conditions.)
- It's more difficult to keep track of your finances if you have them spread out all over the internet. To be able to tell how much money you have in total, get used to transferring your neighbor's utilities payment to your bank account.
- Don't be tempted to misuse your Venmo balance the way you used that $20 bill you found in your jacket, which you were free to spend on small transactions you wouldn't deign to put on your credit card. Moving your money to a normal bank account makes it more difficult to achieve financial objectives.
I wish I could say how you’re missing out on a ton of money if you leave your money in a Venmo or Cash App account, because traditional bank accounts carry decent interest rates - but that's a lie. Since the best high-yield FDIC-insured savings account interest rates are still sub-1%, there’s no argument to be made there. But, until there are higher yield savings accounts readily available, hopefully these three reasons are enough to keep your friends’ repayments out of your Venmo account.