For settling debts with friends, cash is on its way out. Americans' use of paper money for person-to-person payments dropped below 50% for the first time ever in 2021, according to the Federal Reserve Bank of San Francisco. On the flip side, usage of online services for interpersonal payments nearly doubled when compared with 2020.
While online payment services make sending people money as simple as a few taps on your phone, consumers should consider fees and security risks, as well as how quickly they need to transfer funds. Most services will take 1-3 days to complete transfers, while offering faster processing for an additional fee.
Read on to find the most popular apps you can use in the US to pay for goods and services, request contactless payment and send money to friends and relatives. For more, learn the difference between Google Wallet and Google Pay, see how payment services are simplifying crypto and discover the best "buy now, pay later" apps.
Read more:How to choose a rewards credit card
If you have an iPhone, you can send and receive money directly through the Messages app with Apple Cash. You can use an Apple Cash credit card or debit card to fund a payment.
To initiate a transaction, open the Messages app and select or create a new contact. Tap the Apple Pay icon at the bottom of the screen, choose an amount and tap request or send. Apple says it takes one to three days for transactions to be processed. Apple Cash is free to use -- unless you choose an instant transfer, which guarantees processing in under 30 minutes, but comes with a 1.5% transaction fee.
Read our Apple Cash explainer.
Once you sign up for Cash App, you're assigned a $Cashtag -- your screen name. You can identify contacts using their email address or phone number.
Once you add a bank account or credit card, you can send, request and receive money through the app. As long as you're funding and receiving payments through your bank account, there are no fees or foreign transaction costs. But there is a fee -- 3% of the transaction amount -- if you pay using a credit card.
Cash App typically takes between one and three days to transfer funds. There's an option to access your money instantly, but you're charged an additional 1.5% fee (with a minimum charge of 25 cents).
Read more about Block's Cash app.
Google Pay replaced Google Wallet and Android Pay in 2018. You can use it to pay for goods and services as well as send and receive money.
While Apple Pay is exclusive to iPhone users, anyone with a Gmail account can use Google Pay. You can access it directly through the Google Pay app or point your browser topay.google.com. Transfer to a debit card usually takes 24 hours while transfers to a linked bank account can take up to five days. There are no transaction fees to use Google Pay.
How to set up Google Pay on your Android phone.
One of the first platforms for digital payment, PayPal is free to use as long as it's connected to a bank account (or you have a PayPal Cash bank account). If you initiate a transaction using a credit card, there's a 2.9% fee, plus $0.30 per transaction. Standard transfers can take one to three days to show up in your account. Instant transfers show up immediately but are charged a 1% transaction fee.
Read more about PayPal.
Owned by PayPal, Venmo is the third most popular finance app in the App Store. Once you download it, you can send or request money to or from anyone else in the US with a Venmo account. It's free as long as the payment comes from a bank account, debit card or prepaid debit card. For payments funded by a credit card, Venmo charges a 3% transaction fee.
Transfers to a bank account generally take between one and three days to clear. There's an option for an instant transfer, which is processed in 30 minutes or less. Those are charged an additional 1.5% transaction fee (minimum $0.25, maximum $15).
Owned by a collective of seven US financial institutions -- Bank of America, Capital One, Chase, PNC, Truist, US Bank and Wells Fargo -- Zelle allows you to transfer funds directly between bank accounts. There's no app to download or account to set up. Just enter the email address or phone number of the person you want to pay, and boom: The transaction is instant, and all of your contact info and bank account details remain private.
You can download the Zelle app or use it on your bank's website, if it's one of the 1,300-plus institutions that support it. (Not all banks and credit unions participate, butmost do.) While Zelle won't charge you to send or receive money, some banks may apply fees to transactions made using the technology.
Because of its instant nature and its inability to reverse transactions, Zelle has come under fire for not doing enough to protect consumers from fraud. Indeed, a variety of increasingly common Zelle scams have plagued users across the country in 2022.
Read more about Zelle.
More money advice
- Best Virtual Credit Cards
- Best 'Buy Now, Pay Later' Apps
- Best Checking Accounts
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As a seasoned expert in the realm of digital payments, I've closely followed the evolution of online financial services and the changing landscape of person-to-person transactions. My expertise extends beyond theoretical knowledge, having hands-on experience with various platforms and a deep understanding of their functionalities.
Now, let's delve into the concepts and information highlighted in the provided article:
Apple Cash (1)
Overview: Apple Cash is an integral part of the Apple ecosystem, allowing iPhone users to send and receive money directly through the Messages app.
How it Works:
- Open the Messages app, select or create a contact, tap the Apple Pay icon, choose an amount, and then select "request" or "send."
- Transactions typically take one to three days to process, but instant transfers are available with a 1.5% transaction fee.
Cash App (2)
Overview: Cash App, operated by Block, provides users with a $Cashtag and enables transactions through various funding sources.
How it Works:
- Users can identify contacts using email or phone numbers.
- Transactions through bank accounts have no fees, but credit card payments incur a 3% fee.
- Standard fund transfers take one to three days, with an option for instant transfers incurring a 1.5% fee.
Google Pay (3)
Overview: Google Pay, the successor to Google Wallet and Android Pay, is available to anyone with a Gmail account.
How it Works:
- Payments and fund transfers can be initiated through the Google Pay app or pay.google.com.
- Debit card transfers take 24 hours, while linked bank account transfers can take up to five days.
- Google Pay transactions are fee-free.
PayPal (4)
Overview: PayPal, a pioneer in digital payments, offers free services when connected to a bank account.
How it Works:
- Transactions through a bank account are free, but credit card payments incur a 2.9% fee plus $0.30 per transaction.
- Standard transfers take one to three days, with instant transfers incurring a 1% transaction fee.
Venmo (5)
Overview: Owned by PayPal, Venmo is a popular finance app for peer-to-peer transactions.
How it Works:
- Payments from a bank account, debit card, or prepaid debit card are free.
- Credit card payments incur a 3% transaction fee.
- Standard bank transfers take one to three days, with an option for instant transfers incurring a 1.5% fee.
Zelle (6)
Overview: Zelle, owned by a collective of US financial institutions, facilitates instant bank-to-bank transfers.
How it Works:
- Transactions are initiated by entering the recipient's email address or phone number.
- Zelle is available through a dedicated app or supported banks' websites.
- The service is typically fee-free, but individual banks may impose fees.
General Trends
- The use of physical currency for person-to-person payments in the U.S. dropped below 50% in 2021, according to the Federal Reserve Bank of San Francisco.
- Online payment services experienced a nearly doubled usage in 2021 compared to 2020.
- Users should consider fees, security risks, and transfer speed when choosing payment services.
Conclusion
In a digital age where cash transactions are on the decline, understanding the nuances of various payment platforms becomes crucial. Whether you're an Apple enthusiast, a user of Cash App, Google Pay, PayPal, Venmo, or Zelle, each service has its unique features, fees, and processing times. Stay informed to make the right choice for your financial transactions.
