Cash App is a rapidly growing peer-to-peer payment service. Cash App grossed $ 385 million in 2020, which is a 212% increase in profits over the previous year.
“Cash App is a relatively powerful option for sharing money and its other features. It’s not much different from Zelle, Paypal or Venmo, ”says Ray Kimble, founder and CEO of security firm Kuma LLC.
More and more Americans are using computers and smartphones for our banking needs. About 65% of Americans are expected to bank online by 2022. If you’re looking for a new payments app, Cash App could do the trick, but there are a few downsides. Here’s what you need to know about Cash App before signing up.
What is the Cash application?
Cash App is a money transfer service focused on mobile applications. You can send and receive funds directly and quickly, just like you would with PayPal or Venmo. But Cash App also offers a few other functions.
In addition to transferring money, Cash App will provide you with a bank account and debit card, which you can use at any ATM. You can even invest in stocks and Bitcoin through the app. Some of these services are free, while others are chargeable. There is one major downside here though: your Cash App balance is not FDIC insured. It is protection for your money, so there is no guarantee that you will get your money back if something goes wrong.
Cash App has been around since 2013. It was originally called Square Cash, in reference to Square Inc., the parent company of Cash App. Square Inc. was co-founded by Jack Dorsey of Twitter.
How to register for the Cash application
You can create a Cash App account quickly.
All you need to create an account is your name, zip code, and an email or phone number. You don’t need to link your bank account to open a Cash App account, but you may need to do so to use most of the app’s features.
You can increase your monthly sending and receiving limits by fully verifying your Cash App account.
Once you have opened your account, you will create your “cashtag” ($ Cashtag), which is your unique username. Your $ Cashtag is how people find your account in the app. With your username, you will be able to send and receive payments. You also have the option of getting a free Cash App debit card, which the company will mail to you.
The Cash App debit card is connected to your balance, and the card can be used anywhere that accepts Visa. If you use your debit card at an ATM, Cash App charges a fee of $ 2. However, Cash App also facilitates direct deposits. If you have a paycheck direct deposit of at least $ 300 per month, Cash App reimburses the $ 2 fee at the ATM. Remember though, your money is not FDIC insured, so if something goes wrong you will be out of luck.
How to send and receive money
The Cash App user interface is incredibly simple, making it easy to send and receive money. To send money, you will find the recipient by name, phone number or $ Cashtag in the app.
You send the money, then the person you send to will get an alert via email or text. The recipient chooses the speed at which the transfer takes place.
To receive money, you can send a payment request. The request can be sent via person’s name, $ Cashtag, email or phone number. The app will notify you once the payment is complete and then you will choose the speed at which you will receive the money.
Cash App gives you the option to deposit the money you receive into your linked bank account or debit card. The money is instantly deposited to your debit card, but it can take up to 3 days for a deposit to arrive in your account. However, both of these deposits are free.
If you want an instant deposit to your account, the deposit is subject to a fee of 1.5% of the total amount, with a minimum fee of $ 0.25.
You can send up to $ 250 over a 7-day period and receive up to $ 1,000 over a 30-day period. If you want to increase your sending and receiving limits, you will need to further verify your identity on the service.
To fully verify your identity, Cash App asks for your full name, date of birth and the last 4 digits of your social security number.
You can open an account with no minimum balance and Cash App does not advertise the maximum balance your account can have. The minimum amount you can send and receive is $ 1. There are no service fees or monthly fees to have a Cash App balance.
How secure is the Cash application?
“Cash App uses PCI-DSS, the same protocol used by the major credit card companies. Payments are encrypted on both sides. It’s no less secure than using a credit card, ”explains Farah Sattar, computer engineer and founder of DCRYPTD.
Despite the solid security, remember that your Cash App balance is not FDIC insured. This is definitely a strike against the service and something to keep in mind when opening an account.
Cash App also allows you to invest in stocks and Bitcoin. If you are using Cash App for investment purposes, this might amplify your concerns. Cash App is a registered broker, member of FINRA and SIPC.
“Cash App can make sense for a new investor looking to get started,” says Ryan Shuchman, investment advisor and partner at Cornerstone Financial Services.
However, Shuchman notes that Cash App also has drawbacks for investors.
“The platform does not offer mutual funds. You also cannot trade options or other advanced investment products. Cash App has very limited analysis and research functionality. It’s probably not a suitable platform for larger, more sophisticated investors, ”says Shuchman.
Should you buy Bitcoin on the Cash app?
Apps like Cash App, Venmo, and Robinhood are making it easier than ever to buy Bitcoin and other cryptocurrencies, but there are good reasons to proceed with caution before doing so.
For starters, cryptocurrency is a relatively young asset class compared to conventional stocks, which contributes to its highly volatile value and large day-to-day and even hourly price swings. Experts say it’s a good idea to limit crypto investments to less than 5% of your portfolio and make sure it doesn’t hamper emergency saving and paying off high-interest debt.
And while apps like Cash App tend to be easier to use, traditional cryptocurrency exchanges come with more advanced features and security measures that keep crypto safe from investors.
Cash App payments are encrypted, most payments are made instantly, and generally payments cannot be canceled once money is sent. This definitely leaves room for fraud and other social engineering crimes.
“Third-party applications like this, while they may be PCI-DSS compliant and encrypt all of their data, still place the responsibility on the user to ensure they are using strong security practices and confidentiality to protect his account, ”explains Kimble.
Sattar also notes that Cash App users may be exposed to certain forms of cybercrime, due to the digital nature of the payment service:
“As with any Internet-based technology, Cash App is susceptible to sniffing attacks. For example, if someone claiming to be helping you asks you to share your screen, don’t. Anyone qualified to help you walk you through the steps without ever asking for screen sharing or login credentials, ”says Sattar.
Cash App is a convenient service for sending and receiving money. Transfers are quick and easy, and the added benefit of being able to invest and use a debit card with the service makes it a great tool in the digital age.
However, your balance on Cash App is not FDIC insured, which means there is no guarantee that you will get your money back if the business is hacked and things go wrong. Cash App is probably not a good idea to replace a bank. But it’s useful for transferring small amounts instantly and securely.