Payment apps like Venmo, Zelle, and Cash App are quickly becoming the new normal for paying friends and family. They’re so popular, in fact, that many people feel like having a bank account is an unnecessary step, and that direct depositing their paychecks into their payment app account is more convenient. While this might seem like a good idea at first, there are some serious drawbacks to direct depositing your paycheck directly to your payment app account.
Payment App Accounts are Not Insured
The biggest drawback with direct depositing your paycheck into an app like Venmo or Cash App is that your money isn’t insured by the FDIC or NCUA. That means if anything happens to Venmo or Cash App, any money you have in your accounts with them will be gone.
Credit union accounts and bank accounts, on the other hand, are insured by the federal government respectively up to $250,000 for single ownership accounts, so you can rest assured that your money will be safe even if something happens to the financial institution where you keep your money.
Payment App Accounts Have Spending Limits
Payment apps also have spending limits. While these limits are admittedly pretty high if you’ve verified your identity, many people might not be comfortable with knowing they can only spend a certain amount of the funds they have in their payment app account each week or each month.
Payment Apps Have no way to Save Money
Payment apps are only for taking in money and sending it out, essentially acting as a checking account alternative. They do not, however, offer you any kind of savings account alternatives. This means that when you get the money in your payment app account, you have more of an incentive to spend it that you do to transfer the money to a savings account, which can ultimately lead to you spending more money on impulse buys and less on the financial goals that really matter to you.
Direct Deposit Your Paycheck at First Alliance Credit Union
Direct depositing your paycheck to a payment app might seem like a good idea, but the disadvantages really aren’t worth it. At the very least, you’ll engage in impulse buying more than you’d like. At worse, if Venmo or Cash App ever fail, all the money in your account could be lost.
If you want to take advantage of a payment app while still getting the traditional financial institution benefits, become a member of First Alliance Credit Union today. Our credit union is insured by CUNA, and we offer many different types of savings accounts to help you meet your financial goals.
Even better, we offer the Zelle cash app which lets you transfer money from your checking account to the account of friends and family. It’s easy to learn, you can access it when you sign up for online banking or use our mobile app, and the money will show up in the recipient’s account in minutes.