Payment Apps: What are they and I should I know about them?

4/22/2022 Katie Salogga

The convenience of credit cards and debit cards has really changed the way we make purchases but it also has an effect on how we pay or friends and family. It’s not often that we carry cash anymore. If you don’t have money on hand how do you pay someone? That’s where Payment Apps come into play. A payment app is like having your wallet built into your phone. If you and the person you’re paying both have the same payment app - you can pay them for anything! Babysitting, repaying for show tickets, splitting the dinner bill, etc. In this post we’ll break down some of the most popular apps and help you decide which is the best for you.


What is a Payment App?

A payment app is a tool to pay for goods and services and send money to vendors, friends, and family. People tend not to carry as much cash nowadays, so a payment app can be a quick way to reimburse a friend for a concert ticket, help a family member out with a bill, or even pay for something at a store without having your wallet with you. It’s like having a digital wallet with you on your phone.

How Does a Payment App Work?

A payment app works like a digital wallet. You link your bank account information and credit cards to the app, and it securely stores it so you can use it to send and receive money directly on the app. You don’t need to have your wallet physically with you, and you can even use some apps internationally. It’s a quick and convenient way to send and receive money and pay for things online and in stores.

How Much Does a Payment App Cost?

Some payment apps are completely free, while others have free aspects like receiving money or sending money between friends and family. Some payment apps may charge fees to receive money quicker than the standard time, currency exchange and processing fees, and credit card fees. These fees vary based on the type, amount, and location of the transaction.

You may be charged between 2.5% to 3% for credit card processing fees when using some payment apps. If you’re a small business, you can add these fees into the cost of your goods and services or charge an additional fee for customers to pay with a credit card.

  Safety Tips for Payment Apps

When selecting and downloading your payment app always double check to make sure the app is legitimate. Verify the name, the developers name, when the app was published, and take a look at the reviews and app screenshots. If the app was published recently, if the app name isn't spelled correctly, or the screenshots seem off - it could likely be a spam app.

Do not send money to someone you don't know. Sending money to a scammer could be very difficult, if not impossible, to reverse. If you're purchasing something from and individual or vendor, verify their credibility or wait to make the payment until you can see what you're purchasing in person.

Along those same lines, double check the username, name, or phone number that you're sending funds to. You always want to be certain that your payment makes it to the person you intended it to. 

Lastly, keep your devices secure! Add a passcode/word, a fingerprint ID, or a face ID to lock your devices. Use strong passwords for your apps and don't reuse passwords for your accounts. 

How We Chose the Best Payment Apps

We chose the 6 best payment apps by first reviewing and researching multiple payment apps and then selecting the top choices. We chose the best options based on their reputation, functions, ease of use, what platforms they work on, how you can send and receive money, and more.

PayPal

Pros

  • Its mobile application is extremely user-friendly
  • It is simple (and free) to set up a PayPal account
  • If you send money to a family member, there are no fees
  • PayPal's strong encryption technology keeps accounts secure

Cons

  • PayPal charges business owners a fee for using its service to receive payments
  • PayPal has the ability to freeze your account

PayPal is the granddaddy of payment companies, with a history going back to 1998. It made its name as the preferred digital wallet and payment provider for eBay transactions but has since grown to be one of the most dominant names in online payments.

PayPal offers the ability to transfer money to and from any U.S.-based bank account and many foreign accounts. There is no fee to transfer funds to family or friends from a PayPal balance or bank account balance, but PayPal does charge fees to send from a credit card or convert currencies.


Venmo

Pros

  • Venmo is designed to work from your smartphone
  • An easy way to split the bill with friends and family
  • Instant transfers option

Cons

  • You can only send money via mobile platforms
  • Users are hit with a 3% fee if they send money using a credit card
  • You have to change your settings (privacy default is public view) if you want actual privacy

Venmo is actually owned by PayPal, however, Venmo is a very different app than PayPal. Venmo is an app designed primarily to send money to friends, with an embedded social aspect. And, while you can sign in and access your account on traditional computers, you can only send money from the app or mobile browsers.

Venmo has 80 million users. That's a lot of restaurant checks split. Venmo can also be used to pay for transactions at many businesses as well. It is free to send money using your linked debit card or bank account.


Cash App

Pros

  • Easy to link your bank account via a debit card
  • Offers users a digital wallet
  • You can sell and buy Bitcoin via the app

Cons

  • Cash App charges users a fee to send money via a credit card
  • Can only send $250 every 7 days and receive $1,000 every 30 days without verification

Cash App is the answer of mobile credit card processor Square’s parent company, Block Inc., to the growing popularity of peer-to-peer payments. Cash App does pretty much the same thing as Venmo, but without the social features. You can send money to, or request from, anyone with a Cash account, and funds are drawn from a linked bank account or debit card at no cost.

Cash App has a wallet feature, like PayPal, or the ability to send from a linked account without holding funds in your digital wallet. In 2018, Cash App added the ability to buy and sell Bitcoin as well, which gives it a unique feature compared to other popular payment apps.


Zelle®

Pros

  • Most large banks like Chase and Wells Fargo offer Zelle®
  • You can send money from your laptop via banking websites or your smartphone
  • Offers same-day transfers
  • There are no fees for sending or receiving money via Zelle®

Cons

  • You can't transfer funds from a credit card
  • You can only send funds via Zelle® from one designated bank account

Zelle® offers a unique way to pay friends or family right from your bank. If you have an account at a participating bank, you can send cash with same-day transfers to anyone else with a Zelle® account. The growing list of participating banks includes titans such as Chase, Bank of America, Citi, Wells Fargo, and online banking leaders, Ally and Capital One.

If your bank doesn't partner with Zelle®, you can still use it by downloading their app and linking your debit card. If your bank does participate, you have the option of using Zelle's® service through your bank's website or mobile app in addition to the Zelle® app.

It is free to send and receive. You can only connect one bank account to your Zelle® profile at this time, so if you sign up, make sure it is with your primary account.


Google Pay

Pros

  • No fees to send money to friends and family on Google Pay
  • Integrates easily with Google products, like Gmail
  • Easy to use from a laptop or smartphone

Cons

  • Less popular than other competitors for sending money to family and friends
  • 3 to 5 days for the money to arrive when transacting using a bank account

Google offers a tool to do almost everything one can do online, and sending money is no exception. Google Pay is unique in its integrations with other Google products, including Gmail. Using Google Pay, you can send and receive money pay entering someone's Gmail address. If you have a Google account, you are essentially already signed up for Google Pay.

Like most Google products, it is well designed and easy to use. It works with the dedicated Google Pay app or through other integrated Google services. There are currently no fees to use Google Pay except when transferring money out to a debit card.


Meta Messenger

Pros

  • Meta account users can send money easily to businesses and friends who are on Meta
  • Your payment information is kept private unlike some other apps that have a public option
  • Easy to use from your Meta chat experience

Cons

  • It takes up to five business days to receive payment into your bank account once it is accepted and transferred
  • You need to have a Meta profile to use it
  • You have to link your debit card or PayPal account to your Meta account

Meta already knows everything about you, so why not hand over your debit card and integrate sending money with your chat experience? Because almost everyone is already on Facebook, you can send them money without waiting for them to sign up for an account elsewhere. They just need to add a debit card or PayPal account to be paid.

Payment information is private. When you send money, the transactions are private and the activity is not shared on your feed. Once a payment is accepted, it shows up in the bank within five business days. It’s as simple as that.


Information based on and used from The Best Payment Apps | The Balance.