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How parents can protect teens from mobile app payment issues

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With new peer-to-peer payment app options emerging for teens, experts say it’s an opportunity for parents to teach their kids how to use these financial tools wisely — and educate them on how to avoid common pitfalls.

Venmo on Monday unveiled a new teen account that allows parents to open an account with select features for teens ages 13 to 17. While some teens already use Venmo, individual account holders must be at least 18 years old (or the age of majority in their state), per the app’s user agreement.

This isn’t the first peer-to-peer payment app to be expanded to teen users. The Cash App, Square Cash, and Apple Wallet also offer teen features, albeit with parental supervision. PayPalInc., Venmo’s parent company, still requires users to be at least 18 years old (or the age of majority in their state).

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A teen’s Venmo account includes a debit card and can be funded through the parent’s Venmo account through any associated sources. Parents can monitor teens’ payments and friend requests, as well as control privacy settings.

“We have a zero-tolerance policy on our platform regarding 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 have been the target of fraud.”

Apps ‘convenient’, but problems can be ‘hard to fix’

Peer-to-peer payment apps, also known as P2P apps, are widely used across the US, and used by 64% of adults, including 81% of those ages 18 to 29, according to a 2022 report from Consumer Reports.

Teresa Murray, a consumer watchdog with the American Public Interest Research Group, urges caution when using P2P apps. “There are real consequences if something goes wrong,” she said.

US PIRG examined nearly 9,300 complaints received by the Consumer Financial Protection Bureau between April 2017 and April 2021, revealing a pattern of problems among several P2P applications with digital wallets, scams, and customer service.

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

Nearly a quarter of users report sending money to the wrong person, according to a 2022 survey from LendingTree.

“It’s hard to fix, and people don’t realize that in advance,” she added.

Protecting teens from common P2P payment issues

Whether your teen is using Venmo or another P2P app, Murray said it’s important for both parent and child to be aware of the potential risks.

For example, it suggests that users fund P2P accounts with a credit card instead of a checking account since there are more protections under the Truth In Lending and Fair Credit Billing Acts if something goes wrong. And if you link your bank account or a teen’s account, keep most of your money elsewhere.

Murray also suggests paying only “people you know well” via P2P apps and asking them to send you a request through the app before making a payment for the first time. “Once a deal is done, it’s done,” she warned. “You don’t get your money back.”

She said teens should also make transactions private, add extra authentication to access the app from their phones, and be careful when sharing their devices with others. They can also thwart scammers by not sharing authentication codes with anyone.

Talk to your teens about money

As your teen learns about budgeting and payment apps, experts urge parents to discuss these topics at home.

“The best advice I can give is to keep that communication going with your teen about money,” said certified financial planner Desiree Cole of Main Street Planning in Satellite Beach, Florida. “As long as your child feels comfortable asking you questions, he will always have someone to turn to when he wants an answer.”



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