Federal Watchdog: Move Cash Out of CashApp, PayPal, Venmo or Risk Losing It
A federal consumer watchdog this week warned(Opens in a new window) consumers that money held on digital payment apps like Venmo, Cash App or PayPal could be lost if the companies fail since it’s not automatically insured by the government.
In a statement released Thursday, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra said: “Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe.”
The CFPB added that the failure of a digital payment company like Cash App or PayPal could lead to “money [being] lost or tied up in a long bankruptcy process.” As a result, the CFPB advised consumers to move money held on digital payment apps to traditional banks and credit union accounts which guarantee federal deposit insurance.
The consumer watchdog pointed to the failure of Silicon Valley Bank, Signature Bank, and First Republic Bank this year, stating: “These banks experienced a run, but insured depositors could have confidence their money was safe.
However, similar protection would not be guaranteed to customers that store money on nonbank payment apps.” As the Washington Post notes(Opens in a new window), however, the vast majority of Silicon Valley Bank’s deposits were not insured because they were over the $250,000 limit on federal deposit insurance coverage; the depositors were only covered because the government decided to step in.
The warning comes as more Americans than ever opt to use digital payment to hold their cash. According to an October 2022 Pew Research Center survey(Opens in a new window), 76% of American adults have used a digital payment app at least once, while the CFPB’s own
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