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Splitting bills with friends and family has always been tricky since rarely do people have exact change. However, the process has become even more complicated as many people have decided to go cashless. To get around this problem, apps have been developed to help you instantly send cash to others.
What’s interesting is that some apps also allow you to send money via your credit card. This can be an appealing option since it could allow you to earn points. That said, the fees and potential interest charges may not be worth it, so you need to know the details before clicking send.
Best Ways To Pay a Friend With a Credit Card
Although paying a friend with a credit card may sound like a straightforward process, it’s not that simple. While many payment apps allow you to connect your debit card or bank account, only a handful give you the option to use your credit card.
Venmo
With more than 90 million accounts, Venmo is often viewed as the most popular peer-to-peer payment platform. It’s really no surprise since it only takes a few taps to have funds sent from your bank account to another Venmo user.
Venmo allows you to send money for free from your bank account, but if you use a credit card to fund your transfers, a 3% charge applies. For example, if you send $100 and pay with your credit card, a fee of $3 would apply.
Many credit card providers also consider Venmo transactions as cash advances. That means you could pay significant interest charges in addition to the card fees.
It’s worth noting that eligible American Express cardholders can send fee-free Venmo credit card payments via the Amex App. To do this, you first need to link your Venmo account to your American Express account. You can then send or split bills by tapping the option under the Payment section of your account. In lieu of earning rewards, standard credit card fees are waived.
PayPal
PayPal is another popular payment platform. While most people use PayPal for online purchases, you can also use the platform to send person-to-person money transfers to friends and family.
Once you have added a credit card to your PayPal account, you can use it to pay your friends and family. This can be convenient for anyone that already has an account, but a fee of 2.90% plus $0.30 applies. Again, cash advance charges may apply depending on what company issued your credit card.
As with Venmo transactions, eligible American Express cardholders can avoid the above PayPal credit card transaction costs by using Amex Send. You won’t earn rewards on these payments, but you won’t pay any fees either.
Cash App
Another peer-to-peer payment app that many people use is Cash App. After you’ve downloaded the app and have created an account, you can send money instantly to other Cash App users.
Similar to Venmo and PayPal, you have the option to use a credit card as your payment method. However, a 3% fee does apply and your credit card provider may code the transaction as a cash advance.
How Long Will It Take for Funds To Arrive?
Generally speaking, all of the above apps allow you to send money with a credit card in one to three business days. That said, each app also has an instant service where you can pay an additional fee to send money almost instantly.
The same timeline applies if you’re paying via your linked bank account.
How Much Does It Cost?
The cost to send money with a credit card depends on the app:
- Venmo: 3%
- PayPal: 2.90% plus $0.30
- Cash App: 3%
In addition, many credit card providers consider Venmo, PayPal and Cash App transfers as cash advances. That means you would incur instant interest charges of close to 30%.
How Much Can You Send?
The amount of money you can send with a credit card depends on the app:
- Venmo: A weekly spending limit of $299.99 applies if you haven’t verified your identity. After you’ve gone through identity verification, you can send up to $60,000 per week.
- PayPal: Verified users can send up to $60,000 in a single transaction. That said, PayPal may limit you to $10,000. Anyone who hasn’t verified their identity will have a lower limit, which is shown in their account.
- Cash App: You can send and receive up to $1,000 during any 30-day period. That limit will increase if you verify your identity.
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Is It Worth Sending Money With a Credit Card?
Many people might consider sending money via their credit card because it gives them an opportunity to earn cash back or travel rewards.
While the reasoning is sound on the surface, after you factor in the fees and potential charges, it’s usually not worth it. The most popular peer-to-peer payment apps typically charge a processing fee around 3%, which is higher than the rewards offered by most credit cards.
More importantly, most credit card providers charge interest of close to 30% for cash advances and interest on cash advances begins accruing immediately. You simply won’t earn enough rewards to offset your costs.
As an expert in personal finance and digital payment systems, it's evident that the landscape of financial transactions is constantly evolving, especially with the increasing trend towards cashless transactions. My in-depth knowledge extends to various peer-to-peer payment platforms and the nuances of using credit cards for such transactions. Allow me to break down the concepts used in the article you provided.
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Peer-to-Peer Payment Platforms:
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Venmo: With over 90 million accounts, Venmo is a leading peer-to-peer payment platform. Users can send funds from their bank accounts for free, but a 3% charge applies when using a credit card. Some credit card providers may treat Venmo transactions as cash advances, incurring additional fees and interest charges.
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PayPal: A widely used payment platform for online purchases, PayPal allows person-to-person transfers. Users can link their credit cards to pay friends and family, but a fee of 2.90% plus $0.30 applies. Similar to Venmo, credit card transactions on PayPal might be considered cash advances, incurring extra charges.
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Cash App: This app allows instant money transfers between users. Like Venmo and PayPal, using a credit card incurs a 3% fee, and the transaction might be treated as a cash advance by the credit card provider.
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Eligible American Express Cardholders:
- The article highlights that eligible American Express cardholders can send fee-free credit card payments through Venmo and PayPal via the Amex App. This exemption is a crucial detail for readers with American Express cards, demonstrating the importance of understanding specific credit card partnerships and benefits.
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Transaction Processing Time:
- Generally, all the mentioned apps allow users to send money with a credit card within one to three business days. Instant services are available for an additional fee. Understanding the timing of fund transfers is essential for users expecting prompt transactions.
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Cost of Credit Card Transactions:
- Each app incurs different fees for credit card transactions: Venmo charges 3%, PayPal charges 2.90% plus $0.30, and Cash App charges 3%. Additionally, the article highlights that many credit card providers consider these transactions as cash advances, incurring instant interest charges of close to 30%.
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Transaction Limits:
- The amount of money users can send with a credit card varies:
- Venmo: Weekly spending limits and increased limits after identity verification.
- PayPal: Verified users can send up to $60,000 in a single transaction, but limits may vary.
- Cash App: Limits increase with identity verification, allowing users to send and receive larger amounts.
- The amount of money users can send with a credit card varies:
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Is It Worth Sending Money With a Credit Card?
- The article advises caution when using credit cards for peer-to-peer payments. While the idea of earning cash back or travel rewards is appealing, the high processing fees (around 3%) on popular payment apps often outweigh the rewards. The article emphasizes that credit card providers typically charge close to 30% interest for cash advances, making it financially impractical to use credit cards for these transactions.
In conclusion, my expertise in personal finance and digital payments allows me to provide comprehensive insights into the complexities of using credit cards for peer-to-peer transactions, considering fees, interest charges, and specific cardholder benefits.
