Peer-to-peer payment

What It Means

A peer-to-peer (P2P) payment is money one person sends straight to another through a payment app or their bank's app, such as Zelle, Venmo or Cash App. People use them to split a bill, pay back a friend or send money to family. The FTC compares a payment sent this way to handing over cash: once it's gone, getting it back is very hard.

How It Sounds at Home

• "Just Venmo me your half."
• "I'll Zelle you for the groceries tonight."
• "Did the money come through? It says sent on my end."

The Breakdown

An example. Maya shares an apartment with Theo. Theo pays the $90 internet bill each month, and Maya sends him $45 through a payment app after checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more his name in the app. That part works well, month after month. In the spring Maya finds two concert tickets for $180 on a social media page and pays the seller through the same app. Nothing ever arrives, and the seller's account disappears.

Where it goes wrong. Maya knows the person she pays for internet. The ticket payment went to a stranger, and because Maya sent it herself, the FTC's comparison applies: it's like handing over cash, and it's very hard to get back. Maya also kept $300 sitting in the app's balance for weeks, which the CFPB says may not have deposit insurance.

What to watch for

• Pay people you know and trust. The FTC calls that the safest way to use these apps.
• Check the name, phone number or username before you tap send.
• When someone you know asks for money out of the blue, or from a new number, contact them on a number you know is right first.
• Move money out of the app's balance into an insured bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more account.

Good to Know

The FTC's advice on payment apps is to treat a payment like cash: use them with people you know, and confirm any request by contacting the person on a number you know is right. Money kept in a payment app's balance may not have deposit insurance, the Consumer Financial Protection Bureau warns, and it suggests moving that money into an insured bank or credit union account. Regulation E, the federal rule for electronic fund transfers, covers transfers you didn't authorize, which it defines as ones someone else starts without your authority and that you get no benefit from, as the CFPB's Electronic Fund Transfers FAQs quote it. If a payment shows up that you didn't make, contact your bank and the app.

Related Terms and Categories

• Household bill split

  Dividing a household's shared bills, such as rent, utilities and internet, among the people who live there, and settling up who owes whom.

• Shared expenses

  Costs two or more people agree to split, such as rent, utilities, groceries or a shared subscription, as opposed to costs each person covers alone.

• Digital wallet

  An app, such as Apple Pay or Google Wallet, that stores your payment cards on your phone so you can pay by tapping it or choosing a card at checkout.

• Phishing

  A scam where someone sends an email or text that looks like it's from a company you trust, to trick you into giving up passwords, account numbers or other details.

Household money and budgeting