Clark Howard: Three Major Drawbacks of Holding Money in Payment Apps

Carrying cash is no longer essential. In 2025, 5 billion people around the world used digital wallets, according to Juniper Research.

That convenience can make it easier to split a dinner tab, pay at a farmers market, or send money to friends and family. Still, some users leave cash parked inside payment apps, and that may not be the wisest move.

Consumer finance expert Clark Howard recently explained in a blog post why money should not be left sitting in payment apps. Here are the main reasons behind his advice.

Not Covered by FDIC Insurance

Howard says keeping money in a third-party payment app exposes it to risk because these services do not offer the same protections as banks.

Funds held in an FDIC-insured bank account are protected up to at least $250,000, according to the FDIC. In the same way, credit union accounts are insured up to $250,000 through the National Credit Union Share Insurance Fund.

Nonbank companies, however, are not covered by the FDIC or NCUA. If the company fails or goes bankrupt, your money may not be protected.

For that reason, Howard recommends moving money quickly into an FDIC-insured bank account. He also says it can make sense to keep only a small balance in a payment app for convenience, and only an amount you would be willing to lose.

No Interest Earned

Money left in a payment app does not earn interest, so it misses the chance to grow without any effort on your part.

The average interest rate on a traditional savings account is 0.38%, according to the Federal Reserve Bank of St. Louis. Depending on the account type, the rate can be significantly higher.

Less Access to Your Money

Cash in a bank account is usually easy to withdraw. That is not always the case with payment apps, unless you are willing to pay for faster access.

For instance, money sent from Cash App to a standard bank account can be transferred instantly, but that option may come with a fee of 0.5% to 2.5%. Standard transfers do not cost anything, but they can take one to three business days to reach your bank account.

Venmo works similarly. Its instant transfer fee is 0.25% to $25, while standard bank transfers are free and typically take one to three days to arrive.