Why Not Keep Your Money in PayPal…or Starbucks Gift Cards
MARSHFIELD, WI (OnFocus) – If you’re one of the more than 50 million people who use popular peer-to-peer (P2P) payment services like Venmo or PayPal, you might want to consider how much money you have in these services. While it’s easy to pay a friend or split the bill, it’s important to keep an eye on your balance so it doesn’t get too high.
In 2020, nearly $160 billion was sent using Venmo alone. According to LogicaSearch, Americans keep more than twice as much cash in their PayPal accounts as they do in their wallets, and most of those who keep cash in their PayPal accounts do so to maintain a balance for transactional purposes. Americans with PayPal accounts in our study report having an average of $485 in their PayPal accounts.
People have also started keeping more funds in various apps, such as Starbucks, to pay for goods and services and earn rewards. Starbucks recently revealed that billion dollars is sitting on unused Starbucks gift cards, for example.
“There are many reasons why you don’t want money sitting in a Venmo or Paypal account,” said David Murphy, president of MMCCU at Marshfield.
If you have money in your Venmo or PayPal account, or another service, here’s why you should always transfer that balance to your Credit Union account:
- Your money earns no interest with these services
Unlike money in your savings account or investments, money stored in Venmo, PayPal, or other P2P services does not earn you any interest. These funds will not increase over time.
- Your money is not insured by these services
Unlike your money at the credit union, where your savings are federally insured to at least $250,000 and backed by the full faith and credit of the United States government, money in P2P accounts is not NOT insured. If these services were to be discontinued, you may not get your money back. Although these services are unlikely to crash, it is best to be on the safe side and mitigate the risk by leaving smaller sums in these accounts.
- Money transfers via these services take time
Venmo, for example, reviews all of its transfers. This means that you may be unable to pay a bill because your funds are “in limbo”. Although transfers usually take 1-3 days, if there is a delay, you may not have access to the funds you need to pay rent or buy groceries.
- You might forget your money
For example, if you load $20 into your Starbucks app and don’t stop at Starbucks for a while, the money could sit idle forever, going to the business instead of back in your pocket.
“While these services are convenient and usable for small cash transfers, it’s best to keep your money in accounts that work for you,” Murphy said. “MMCCU will launch a P2P service later this year. Members will be able to access services similar to Venmo and PayPal, while keeping their funds safe and earning interest.
Your stories are welcome! Contact us at [email protected]!