Avoid scams on payment apps

It's never been easier to split the dinner bill, divvy up vacation expenses, or pay your dog walker thanks to apps like Venmo, Zelle, and Cash App.

These peer-to-peer (P2P) transactions — online money transfers — are enabled by a third-party app or website, allowing you to send money with a few taps.

Unfortunately, if a scammer breaks into your account or convinces you to send them a payment, it can be just as easy to lose your money. 

How scams on payment apps happen 

According to a Federal Trade Commission (FTC) report, Americans lost a whopping $210 million to payment app fraud last year. Government leaders have also expressed concerns about Venmo scams and Cash App scams.

Kelli Starks, Senior Restoration Specialist at Allstate Identity Protection, has helped members manage payment app fraud firsthand.

According to Starks, a member accidentally revealed his personal information to scammers, who then used his details to break into an old PayPal account — one he hadn’t used in over a decade. “From there, the fraudsters were able to access his bank account,” Starks says.

In other cases, victims are tricked into transferring money directly to a scammer. Sending money this way is like sending cash, which makes this fraud type particularly devastating.

“If you’re scammed on a P2P app — or even if you accidentally send money to the wrong person — it can be difficult to get the money back,” says Starks. “Ultimately, the best way to protect yourself from payment scams is to know what you’re up against before it happens. Some simple actions can do a lot to keep you safe.”

Common payment app scams

Here’s what to watch out for:    

• Imposter scams: In common imposter scams — including grandparent scams and romance scams — fraudsters are now requesting that victims pay via a payment app, rather than by wire transfer or gift card. When someone reaches out unexpectedly and pressures you to send money via a payment app,  assume it’s a scam. 

• Account takeover scams: In some cases, scammers use your stolen personal information to hack into a payment account and steal money. If you can't access an account using your legitimate credentials or money suddenly disappears from your account, a scammer may be to blame. 

• Phishing messages: In a phishing scam, payment app users are sent a phony invoice and are then prompted to call a number to dispute the charge. But instead of the payment app's customer service, they’re connected with a scammer who then talks them into sharing information or access that can lead to identity fraud. Always think twice if you see an unexpected bill from a payment app. 

• Reimbursement scams: In this scam, you "accidentally" receive money via a payment app — then the sender requests you send it back. But the original payment was connected to a fraudulent account, and by the time the service provider catches the issue, the scammer has made off with your cash.  

Avoid sending money to a scammer via a payment app

Take these precautions before sending money via a payment app. 

• Only send payments to those you know and trust. First, verify the contact information — such as the phone number or email address that’s associated with the account — to ensure you’re paying the right person. Then, send a test payment. “When I’m sending money to someone new, I like to send a small amount, like $1, to be sure I have the right account before sending a larger payment,” says Starks. 

• Link your payment apps to a credit card rather than your bank account. Credit cards typically offer stronger consumer protection against money lost to fraud, even if they were linked to a peer-to-peer platform. 

• Avoid using a payment app to shop online. If an online retailer only accepts payment through an app, consider it a red flag. “Credit cards are the safest way to purchase goods online,” recommends Starks. 

Secure your payment accounts

Then, add extra layers of security to your accounts to help keep out hackers and thieves. 

• Close any unused payment accounts. If you no longer use an account that is connected to your debit or credit card, be sure to close it.

• Activate a personal identifying number (PIN) on all payment apps and use strong passwords. This will make your account harder to hack, even if your phone falls into the wrong hands.

• Don’t connect your payment app account to social media. Some social media platforms make it easy to connect your payment accounts to pay for in-app purchases. However, if an identity thief gains access to your social media account, they might also be able to access your payment app account and any associated bank accounts or credit cards.

What to do if you’ve been scammed through a payment app

Money lost to payment app scams is typically not covered by banks, the apps themselves, or your identity protection plan. However, that doesn’t mean that you have to face this type of scam alone.

If you’re an Allstate Identity Protection member, our customer care team is on call 24/7 to help guide you through what’s next. And if you suspect that money has been stolen from your payment app as part of a larger identity theft and fraud attack, we’re here for you.

Whatever the case, you should contact the financial institution immediately if you suspect any kind of unauthorized activity.