Top Tips for Money App Users: Learn how to keep your cash safe!

Apps like Venmo, Chime, or CashApp are not the same as a bank account — even if you can use them for many everyday purchases. If you rely on these FinTech (financial technology) apps instead of a checking account, you need to understand the risks and options for other ways to manage your money. Check out these top tips and action steps from our latest workshop with BankOZK.

key takeaways

• FinTech apps are not covered by federal deposit insurance and lack many consumer protections that banks provide. If the FinTech company goes out of business, your balance on the app could disappear with no way to get it back. And if you run into any issues with your account, they provide very limited customer support and no way to recover funds lost to scams (e.g., via “friends and family” payments).
• Banks offer superior security and support. Bank balances are insured by the Federal Deposit Insurance Corporation (FDIC) to up $250,000 per account holder — meaning that even if your bank goes out of business, you will always be able to get your money back. Banks with local branches also excel at customer service, with many options for in-person help, same-day debit card replacement, and fraud resolution.
• FinTech credit products are easy to get, but come at a high cost. Apps often provide easy access to credit lines with interest rates of 30–35%, much higher than typical credit card rates. These credit products can easily harm a user’s credit score and lead to more debt rather than providing a way for users to build credit effectively.
• “Bank On” accounts provide a second chance to establish good financial habits. These low-cost, no-overdraft accounts help consumers with past banking issues rebuild their financial standing. After a period of about 12 months, these accounts can often be converted to standard checking accounts. Bank On-certified accounts are offered at a number of banks and credit unions throughout Arkansas — more information is available on the Bank On Arkansas website.

Relying on FinTech apps, prepaid cards, or check cashing and money orders may seem easier or less risky than using a bank account (especially if you’ve had trouble with a bank in the past). But the truth is that these alternative financial products come at a high cost! Even if individual transaction fees are small, the data shows that being unbanked costs about $500 annually — adding up to more than $25,000 over a working lifetime.

Next Steps

• Consumers with past banking issues: Check out your options online and visit a local branch to inquire about a “Bank On” account.
• Consumers using FinTech credit: Review statements to understand interest rates and repayment terms.
• Consumers paying bills with cards: Use bank account auto-drafts or online BillPay service to avoid monthly transaction fees.
• All consumers: Use Zelle within your bank’s app for secure, instant, fee-free money transfers to friends and family.