It's great to have the convenience of person-to-person (P2P) payment services, but any time there's money involved, fraudsters are not far behind. That's why it's important to know how to use them wisely.
How They Work
There are many P2P payment services on the market today. They use a technology allowing you to transfer money from your bank account or credit card to another person's account using their email address or cell phone number. When you need to pay your babysitter or split the lunch tab with a friend, you input their name and the dollar amount and hit send. It's that simple.
Guarding Against Scammers
While P2P payment services make transferring money to family and friends a breeze, many of them aren't safe to use with people you don't know or trust. For instance, Zelle®, a free payment service lets you transfer money to friends and family who live in the U.S. However, Zelle and some other services like it don't have a payment protection program, so you shouldn't use them for transactions such as selling or buying goods and services to or from strangers. For example, if you buy something like concert tickets and then pay a scammer, they can take the money, close their account and you never get your tickets.
Sometimes scammers will buy merchandise from sellers using hacked credit cards or bank accounts. Although the sellers will wait until the payment posts to their accounts before mailing purchases, thieves will then reverse the payments and steal the victims' cash and merchandise.
If you are a regular online shopper and want to use a P2P payment solution for buying and selling, look for one that offers payment protections. Make sure you read the terms of service that explains these consumer protections, as well as fees, privacy policies and dispute resolution services. And if you download P2P apps, get them from trusted sources such as the Apple App Store or Google Play.
Account Takeovers
Another way fraudsters are exploiting P2P payment services is via account takeovers. They gain access to accounts by stealing personal information, then changing passwords and transferring funds out. That's why it's important to safeguard your accounts with strong passwords and enhanced security. Never share passwords, PINs or codes with anyone.
Watch the Fees
Although some consumers feel more comfortable using a credit card with P2P payments because it lowers their liability if fraud occurs, many free P2P payment solutions don't offer this option. If you use a credit card, make sure you understand the fees associated with it. In most instances, the cost is around 3% per transaction.
Knowledge is Power
The Federal Trade Commission provides scam alerts that help you recognize the warning signs and avoid becoming a victim of fraud and identity theft.