Clark Howard: 3 Big Risks of Keeping Cash in Payment Apps

Needing to have cash on hand is no longer a thing. In 2025, 5 billion people worldwide used digital wallets, according to Juniper Research.

This can be a game-changer for things like splitting the bill with friends at restaurants, shopping at a local farmer’s market and even gifting money to loved ones. However, some people have made a habit of leaving cash in payment apps, which probably isn’t advisable.

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Clark Howard, consumer finance expert, recently wrote a blog post explaining why you shouldn’t leave cash sitting idle in payment apps. Keep reading to find out what he had to say, along with other reasons supporting his case.

No FDIC Insurance

Storing money in a third-party payment app puts your funds at risk, Howard said. This is because they don’t have the same safeguards as traditional banks.

Money in a bank account protected by the Federal Deposit Insurance Corp., is ensured up to a minimum of $250,000, according to the FDIC. Similarly, individual accounts in a credit union are insured up to $250,000, according to the National Credit Union Share Insurance Fund.

However, non-bank companies are not insured by the FDIC or NCUA. If the company declares bankruptcy or otherwise fails, your money isn’t protected.

Given this, Howard said quick transfers — where money is immediately moved to an FDIC-insured bank account — are the best way to use payment apps. Given the prominence of digital wallets, he said you might also keep a small amount of money in a payment app for convenience, but only a sum you’d be comfortable losing.

No Interest Payments

When your money is sitting in a payment app, it isn’t earning interest. This can keep you from growing your funds, without lifting a finger.

As of July 22, 2026, the average interest rate on a traditional savings account is 0.38%, according to the Federal Reserve Bank of St. Louis. This rate can be much higher, depending on the type of account.

Lack of Liquidity

When your money is in a bank account, it’s only a quick withdrawal away. However, this isn’t the typically case with payment apps — except for those that make you pay for easy access.

For example, money can be transferred from Cash App to a standard bank account via instant transfer, but may incur a 0.5% to 2.5% fee. Standard transfers are free, but take one to three business days to arrive in your bank account.

Similarly, Venmo has an instant transfer fee of 0.25% to $25. Standard bank transfers are free, but you’ll wait one to three days for the money to land in your account.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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