How mother and father can defend teenagers from issues when paying with cell apps

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As new peer-to-peer payment app options emerge for teens, experts see them as an opportunity for parents to teach their kids to use these financial tools wisely — and teach them how to avoid common pitfalls.

Venmo on Monday unveiled a new linked teen account that parents can open with select features for kids ages 13-17. While some teens are already using Venmo, the app’s user agreement requires individual account holders to be at least 18 years old or of legal age in their state.

This isn’t the first peer-to-peer payment app to be extended to teenage users. Cash App, Square Cash, and Apple Wallet also offer features for teens, albeit under parental supervision. PayPalVenmo’s parent company, continues to require users to be at least 18 years of age or the age of majority in their state.

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The Venmo Teen Account includes a debit card and can be funded through any associated source through a parent’s Venmo Account. Parents can monitor their teens’ payments and friend requests, and control privacy settings.

Apps are “convenient” but problems can be “hard to fix”.

Peer-to-peer payment apps, also known as P2P apps, are widespread across the United States. According to a 2022 Consumer Reports report, they are used by 64% of adults, including 81% of 18-29 year olds.

Teresa Murray, consumer advocate at the US Public Interest Research Group, urges caution when using P2P apps. “There are real consequences when something goes wrong,” she said.

US PIRG investigated nearly 9,300 complaints received by the Consumer Financial Protection Bureau between April 2017 and April 2021 and uncovered a pattern of issues across multiple P2P apps involving digital wallets, fraud and customer service.

“People use these P2P apps because they’re convenient and easy,” Murray said. “But it’s very uncomfortable when something goes wrong.”

“It’s difficult to fix and people just don’t realize it up front,” she added.

According to a 2022 survey by LendingTree, nearly a quarter of users said they sent money to the wrong person, while 15% were victims of fraud.

“We have a zero-tolerance policy on our platform for attempted fraudulent activity, and our teams work tirelessly to protect our customers,” a PayPal spokesperson told CNBC. “We encourage customers to always be vigilant online and to contact customer service directly if they suspect they are the target of fraud.”

Protecting teens from common P2P payment problems

Whether your teen is using Venmo or another P2P app, Murray says it’s important that both parent and child are aware of the potential risks.

She suggested, for example, that users should fund P2P accounts with a credit card rather than a checking account because the Truth In Lending Act and Fair Credit Billing Act offer greater protections should things go wrong. And if you link it to your bank account or a teenager’s, you’ll keep most of your cash elsewhere.

Murray also suggested only paying “people you know well” through P2P apps and asking them to send you a request through the app before making your first payment. “Once you complete a transaction, it’s done,” she warned. “You won’t get your money back.”

Teens should also make transactions private, add extra authentication to access the app from their phone, and be vigilant when sharing their device with others, she said. They can also stop scammers by never sharing authentication codes with third parties.

Talk to your teenagers about money

If your teen is learning about budgeting and payment apps, experts recommend parents discuss these topics with them at home.

“The best tip I can give is to keep communicating with your teen about money,” said Desiree Kaul, a board-certified financial planner at Main Street Planning in Satellite Beach, Fla. “As long as your child is comfortable asking you questions, they will always have someone to turn to when they need an answer.”

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