BBB Tip: Exercise Caution When Using Online Payment Systems or Apps

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The increasing popularity of payment apps, such as PayPal, Venmo and Zelle, make it simple for people to send money to one another through their phones for various reasons.

For some, it provides a convenient method to split expenses among a group when planning to travel or attend an event. For others, it is a method of payment accepted by small businesses for services or products. While payment apps have been in use for over two decades, the percentage of Americans who have used one has increased by over 25% since 2016. According to Pew Research Center, 76% of Americans have used at least one of the four leading payment apps. However, the technology has also come to the attention of scammers and hackers, with nearly 1-in-10 payment app users either sending money and later realizing it was a scam (13%) or reporting their account has been hacked (11%).

Better Business Bureau’s 2021 Scam Tracker Risk Report found that out of all victims who lost money to a scam in 2021, 32% sent money through an online payment system or app with a median loss of $200. Consumers report a wide range of scams facilitated by payment apps, including fraudulent, canceled or overpaid transactions that ultimately result in the victim losing money or not being paid for a product they sold. Nearly 50,000 fraud reports to the FTC in 2022 indicate that payment apps are a preferred method of scammers, with almost $125 million lost.

While some payment apps have policies designed to protect consumers from fraudulent transactions, scammers identify and exploit loopholes to their benefit. For example, PayPal’s buyer protection policy helps consumers have confidence they are protected in case of a fraudulent purchase. However, many scammers convince their victims to make transactions on PayPal through a ‘friends and family’ or personal payment, which PayPal Purchase Protection does not cover. Multiple reports to BBB demonstrate how convincing scammers can be when asking buyers to use this method, even though PayPal’s policies explicitly state it should not be used when purchasing goods or services.

To help consumers confidently use payment apps and avoid scam tactics, BBB recommends:

Only send money to people you know and trust. Avoid using payment apps to purchase goods and services, especially from an online seller you do not know. If the only payment method the seller will accept is through a payment app, it may be best to walk away and find another seller.

Use multi-factor protection measures. Many payment apps give the option of enabling an additional security measure when accessing the account. These may be a time-sensitive code emailed or texted to the account holder, biometric data or push notifications. Multi-factor authentication provides an extra layer of security if your password is compromised, and BBB strongly encourages enabling these systems on any online accounts containing financial or sensitive information.

Be cautious when accepting payment app transactions. As a business owner or individual seller, payment apps can seem to be a quick and convenient way to carry out a transaction. However, like a deposited check, it can take a few days for some payments to be verified, and other unethical buyers may cancel the transaction shortly after receiving the item. If selling an item online, it is best to wait a few days to confirm the money has been transferred before shipping.

Do not fall for an overpayment scam. Some buyers may ‘accidentally’ add an extra zero to a payment and ask for the extra money to be returned. For example, you may receive a spoofed email that a pending transaction for $3,000 is submitted for an item listed at $300, which the buyer demands to be returned immediately. They may threaten legal action if a refund is not provided, while in reality, the entire interaction is fabricated, and the buyer made no payment.

Link payment apps to credit cards rather than debit or bank accounts. Linking payments to and from payment apps to a credit card will allow users greater flexibility to dispute charges than drawing directly from a bank account or debit card.

For more information about how to confidently use payment apps, or to report a payment app scam, visit

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