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Zelle – Convenient or Risk?

Last updated on January 31, 2021

With the increased popularity of Zelle, I wanted to discuss Zelle and cover some important information regarding it.

What is Zelle?

Zelle is a payment app run by Early Warning Systems LLC, a financial services consortium owned by multiple banks. Zelle allows users with a U.S. bank account to send and receive funds. This process only takes minutes and it only requires an email or phone number. Zelle is a free method for sending and receiving money to friends, family, and people you trust.

How does it work?

The process of registering with Zelle will vary between financial institutions but the process is typically quick and easy. Once you are signed up for Zelle, you can send and receive money to and from anyone with a U.S. phone number or email address that is attached to their bank account.

The Risk of Zelle:

Anyone who has used Zelle will be hard pressed to admit that Zelle is nothing but convenient for sending and receiving money. As useful as Zelle is, like anything it has downsides to it as well. Do to the nature of Zelle and how easy it makes sending and receiving money, bad actors are taking advantage of this to steal money.

Once a Zelle transaction has been made, consider it permanent. Treat it like that transaction was made with cash. If something goes wrong then you as the consumer will take the loss, not the financial institute. Only in specific cases such as a user stealing your phone and transferring funds, the financial institute likely will not reimburse you. We are not protected the same way we are with credit cards.

Pay it Safe:

Zelle has launched a program called “Pay it Safe”. This program is designed to bring awareness to the risks of using Zelle. Remember the following when using Zelle:

  • Confirm your recipient’s contact information. Make sure you have the correct U.S. mobile phone number or email address for the person you want to send money to. When in doubt, contact your friend to double check.
  • Beware of payment scams. If an offer sounds too good to be true, it probably is. For example, is a stranger selling online concert tickets at a steep discount and insisting you pay with Zelle? Think twice. Make sure you only send money to people you personally know and trust.
  • Understand your payment options. If you don’t know a person or aren’t sure you’ll get what you paid for, using your credit card may be a better payment option. Many credit card companies offer built-in buyer protections for cardholders. Check the terms and conditions of your credit card to see what’s offered. Unlike a credit card, Zelle does not offer a protection program for any authorized payments made with Zelle – for example, if you do not receive the item or the item is not as described or as you expected.
  • Treat Zelle Like Cash.

I’m not saying to avoid using Zelle, but I am saying to be aware of the risks when using it. You are not protected the same way you are with your credit card. It’s like Cash, once it’s gone it’s gone. Only use Zelle with people you know and trust.

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