Cash App is a peer-to-peer (P2P) payment service that offers a simple way to send money to friends, loved ones, and others. It also allows you to pay small business owners for goods and services, albeit without buyer protections.
If you’re thinking about using Cash App to send or receive money, here’s what you need to know about how the P2P payment platform works and the security features you can expect.
Cash App is a payment platform that offers a mobile and browser application you can use to send and receive money. In addition to cash, you can also transfer bitcoin. The service also allows users to invest in stocks and file tax returns, all with no fees.
Additionally, Cash App offers optional banking features, including a high-yield savings account, prepaid debit card, early direct deposit, and fee-free overdraft coverage. Here’s more about what you can do as a Cash App user.
Cash App’s primary service is P2P payments, allowing you to send and receive money from family members, friends, and even strangers. To get started, you need to download the app and link your bank account, debit card, or credit card.
You’ll then have the option to transfer money to your Cash App account and maintain a balance. You can even deposit cash at select retail locations. If you don’t want to pre-load money to your account, however, Cash App will simply draw the funds from your linked account or card to complete a transfer.
You can identify a recipient using their phone number, email address, or $cashtag. Alternatively, you can scan their unique QR code. Once you complete a transfer, your balance will be automatically updated.
You can also send money to people who don’t yet have Cash App, but they’ll need to sign up in order to receive it.
Cash App also offers business payment services, allowing customers to pay businesses for goods and services. The app will provide a 1099-K tax form for business owners who receive more than $20,000 across more than 200 payments in a year.
However, unlike some other P2P payment platforms such as Venmo and PayPal, Cash App doesn’t provide purchase protection for buyers. So, if you pay for a product or service and don’t receive it, or it arrives damaged, you may have no recourse unless the business owner offers to refund your money.
Read more: What to do if you sent money to the wrong person on Cash App, Zelle, or Venmo
Cash App isn’t a bank, but it partners with banks to provide select banking services, including the following:
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Prepaid debit card: You can use your prepaid debit card anywhere Visa is accepted, as well as withdraw money at any ATM. Keep in mind, though, that ATM withdrawals incur a fee unless you receive $300 or more in monthly direct deposits.
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Early direct deposit: You can opt into receiving your paychecks and even your tax refund in your Cash App bank account. What’s more, you may receive your payments up to two days early.
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Overdraft coverage: If you receive $300 or more in monthly direct deposits, you can get up to $50 in fee-free overdraft coverage.
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High-yield savings: In addition to checking features, Cash App also provides a separate savings account that currently offers a standard 1.50% APY on balances, or 4.50% APY if you receive $300 a month in direct deposits. The minimum balance is $1, and you can set up automatic transfers or even round up prepaid debit card purchases to the nearest dollar and save the difference.
It’s important to note that your Cash App checking and savings balances are separate from your Cash balance, which you can use to send money. However, you can transfer funds between the two instantly.
Read more: Is it safe to store money in apps like Venmo, PayPal, and Cash App?
Bitcoin and stocks
The payment platform allows you to buy, sell, send, and store bitcoin without needing to use a separate cryptocurrency service or wallet. You can even use your prepaid debit card roundups to buy bitcoin instead of moving the funds to your savings account.
What makes this offering unique is that you can send bitcoin anywhere in the world without any fees. Other crypto platforms may charge transaction fees.
You can also buy and sell stocks, with fractional shares starting at just $1. There’s no trading commission, and you can also send stocks to other people.
Since acquiring Credit Karma Tax in 2020, Cash App has provided federal and state tax filing at no cost. The service also includes fee-free audit defense, a maximum refund guarantee, and early deposits of up to five days.
Cash App doesn’t charge any fees to send and receive money, and there’s also no monthly fee for its banking services, bitcoin and stock trades, or tax filing services. Depending on how you plan to use the platform, however, there are some fees to watch out for:
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ATM withdrawals: If you don’t receive at least $300 in monthly direct deposits, you’ll be charged a $2.50 ATM fee in addition to any fees charged by the ATM owner — even at in-network ATMs. With sufficient direct deposit activity, in-network withdrawals are free.
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Cash deposits: If you want to deposit money to your Cash balance, you can do so with participating retailers for a $1 fee (check your mobile app to locate local retailers).
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Instant deposits: If you want to transfer money from your Cash balance to your linked bank account, the transfer typically takes one to three business days. If you want to deposit the funds within minutes, there’s an instant deposit fee of 0.5% to 1.75% of the transfer amount, with a $0.25 minimum.
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Credit card transactions: If you want to send money with a credit card, there’s a 3% fee per transaction.
Read more: How long does a bank transfer take?
Cash App uses a variety of security features to safeguard your personal information and money. However, there are some glaring shortfalls to know about, especially if you plan to pay for goods and services or maintain a Cash balance.
Here are some features to keep in mind:
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Identity verification: You’ll need to verify your identity when setting up your account, which can help prevent fraudulent accounts from being opened in your name.
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Data encryption: Cash App encrypts all the information you send via its servers, regardless of how you’re connected to the internet.
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Fraud measures: If you send money to a profile that isn’t in your contacts, the app will ask you to confirm the payment before completing the transaction. Cash App will also notify you in the event that your PIN or security settings change. You can also use QR codes to send money to avoid the possibility of entering incorrect recipient information.
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Privacy settings: You have some autonomy to control what information you share with other users, as well as who can request money from you.
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Limited reversals: If you send money to the wrong person, you may get it back if they agree to return the money. However, Cash App can’t cancel or refund a payment once you’ve completed the transaction, even if it’s to a business.
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Limited FDIC insurance coverage: If you have the Cash App prepaid debit card, up to $250,000 of your cash and savings balances are insured in the event that the partner bank, Wells Fargo, fails. If you don’t have the debit card, however, none of your money is protected. Also, note that FDIC insurance doesn’t cover you if Cash App goes out of business.
For the most part, Cash App is a safe P2P platform. However, you’ll still need to be on the lookout for scammers, and consider using another payment method to buy goods and services. And unless you plan to apply for the debit card and savings account, avoid maintaining a balance with the platform.
Personal Cash App payments aren’t subject to taxes. However, if you’re a small business owner, payments you receive for goods and services are considered taxable income. The same is true for any interest you earn in a Cash App savings account.
What are the pros and cons of Cash App?
Some of the benefits of using Cash App include no fees on most transactions and access to other features, including banking, bitcoin, and stock investing, and free tax filing.
On the flip side, Cash App doesn’t offer buyer protection on business transactions, and it offers no recourse for scams.
No, it’s not necessary to have a bank account to use Cash App. You can add money to your account using direct deposit or by depositing cash at participating retailers.
Cash App is a popular P2P payment platform because it makes it easy and convenient to send and receive money, and it also offers other valuable services that extend to other areas of your financial life.
