Banking » Guides » What Is Cash App and How Does It Work?
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What Is Cash App and How Does It Work?

Cash App is a P2P or peer to peer app which allows users to quickly send, receive or even invest money. How to send and receive money?
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: June 3, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: June 3, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

Technology within the fintech space seems to be rapidly evolving with more and more services becoming readily available. A great example of this is peer to peer lending, with apps such as Cash App entering the marketplace.

While all this new technology may seem daunting, Cash App has quickly become a go to payment option, allowing customers to send and receive money quickly using their mobile devices. So, here we’ll explore Cash App and how it works in more detail.

what is cash app?
(Photo by Sulastri Sulastri/Shutterstock)

What is Cash App?

Cash App is a P2P or peer to peer app which allows users to quickly send, receive or even invest money.

The company behind the app, Block was previously known as Square launched Cash App in 2013 to compete with PayPal, Venmo and other mobile payment apps.

Cash App provides the following options:

Cash App provides banking services and debit cards, but these are offered via bank partners, since the app is a financial platform, not an actual bank itself.

Any balance in your Cash App account also has FDIC insurance via the partner banks. Using Cash App, you can send and receive money, set up direct deposits and obtain a debit card.

The Cash App investing services are provided through Cash App Investing LLC, which is registered with the SEC as a broker dealer and has FINRA membership status.

This feature allows the Cash App users to invest in stocks with a reasonable $1 minimum, which allows you to buy fractional shares. You can also transfer, buy or sell Bitcoin.

Cash App also has the Cash App Taxes feature, which was formerly Credit Karma Tax. Using this feature, you can file your taxes at no charge.

All of these features combine to create Cash App as a one stop financial services shop.

What is Cash App Used For?

The Cash App platform has been designed to make it easy to pay other users or request funds. In many ways, you can use the platform like a basic traditional bank account.

After you set up your account, you’ll receive a routing and account number. This will allow you to set up direct deposits, deposit cash and get a Cash Card, which is the platform’s version of a debit card.

This means that you can have your salary deposited into your Cash App account and you can then use your debit card to swipe for purchases or pay for online orders, pay your bills and move money.

However, as we touched on earlier, Cash App is not a bank, it is a financial platform. The company currently partners with two banks: Lincoln Savings Bank and Sutton Bank. These partner banks provide the Cash App banking services.

If you own a small business, you can also use the platform to accept payments. The Cash for Business feature allows instant deposits into your bank account with no fee. However, there are fees for some of its services including transaction and credit card fees.

Banking Features: How to Send and Receive Money?

To get started using Cash App, you’ll need to download the app on to your Android or iOS device.

You can also create an account online. Once you open the platform, you’ll see there are tabs for its main features.

1. Sending and Receiving Money

Once you set up a Cash App account, you can link an existing bank account to it. After you connect a payment source, you will be able to send or receive funds via the app.

You can use your Cash App balance or send funds from your linked funding source to send money.

  • Click the Green Tab
  • Enter a dollar amount
  • Tap either “Request” or “Pay” to create your payment.

Each user creates a $Cashtag, which is a unique username. You can find businesses or individuals to request money from or pay by searching for their $Cashtag.

However, you can also search for people using their name, email address or phone number.

2. Transferring Money To Bank Account

When you receive money via Cash App, it accumulates as a balance on your account. You can hold the money within Cash App or transfer funds into your linked bank account.

There are two options for transferring money:

  • Instant transfers: These incur a fee of 0.5% to 1.7% of the transfer amount, with a $0.25 minimum fee. As the name suggests, these transfers take place immediately and the funds should show in your receiving bank account within minutes.
  • Standard transfers: These do not incur a fee, but it will take one to three business days to see your transfer funds in your bank account.

3. Adding Money From Bank Account

The other main Cash App feature is to add money to your account. This is very straightforward:

  • Navigate to the banking tab
  • Click “Add Cash”
  • Select the amount you want to add to your account
  • Tap “Add”

What is the Limit on Cash App?

Cash App does restrict the amount you can send or receive for new account holders. Until you verify your identity, you will only be able to send up to $250 per seven-day period and receive a maximum of $1,000 in a 30-day period.

To fully verify your identity and unlock the Cash App limits, you will need to provide your full name, date of birth and the last four digits of your Social Security Number.

Once you’ve done this, your limits will be increased to a maximum of $7,500 in a seven day period  and a maximum of $17,500 within a 30 day period.

Cash App does not have any minimum balance requirements, so you can open your account with any amount with no advertised balance limits.

Cash App Pros and Cons

As with any financial platform or product, Cash App is not perfect. There are both pros and cons that you’ll need to consider.

Pros
Cons
Easy to Make and Receive Payments
First 30 Day Limits
You can Make Bitcoin Trades
No International Use
No Fee Options
Makes Splitting Bills Easy
No Commission Investing

Cash App is one of the quickest ways to send money on your mobile device. 

Once you open the app, you simply need to enter the recipient name and an amount. Once you click “confirm”, the funds will be completed in seconds.

Within Cash App, you can buy and sell Bitcoin. The transaction fees for Bitcoin are currently 1.76%, which is competitive with many of the crypto trading platforms.

Although the 1.7% maximum instant transfer fee is reasonable, if you’re short on cash, it is nice to have fee free options. The standard transfer options carry no fees and are typically completed in one to three days.

Cash App makes it simple to reimburse friends or split bills. For example, if you're dining out with friends, one of you can pay the bill and the others can reimburse that person via Cash App.

In fact, in most cases, you can send the payment and the person can have the funds in their account before they pay the bill using their Cash App debit card. The app makes it simple to see when you’ve received funds and who they are from.

Cash App allows you to buy and sell stocks with no trading commission. You can even purchase fractional shares. This means that you don’t need to sign up for a second app to perform your basic stock trades.

For the first 30 days, you are limited to sending and receiving a maximum of $1,000. After this point, you can verify your ID and have your limits increased.

However, if you want to get started with some major transactions, these initial limits will be frustrating.

You cannot use Cash App outside the U.S or U.K. So, if you tend to travel abroad, this app is not the best choice for you.

Cash App Fees

One of the attractive features of Cash App is that it is quite cheap to use.

  • There are no minimum balance requirements and the minimum amount that you can send or receive is $1. You can pay a fee for the instant transfer feature or standard transfers are free of charge. However, if you send money with a credit card, you’ll incur a 3% transaction fee.
  • There are no monthly fees or service charges for holding a Cash App account. Furthermore, there are no costs when you use the Cash App investing platform, but small fees do apply if you buy or sell Bitcoin.
Cash App Fee
How Much?
ATM withdrawals
$2-$2.50 per withdrawal
Send money with credit card
3%
Transfer Money
0.5%-1.75% (minimum of $0.25)
Buying/selling crypto
Usually 2% to 3%

The main charges for Cash App relate to the Cash App card. If you want to access cash and use an ATM, you’ll incur a $2 – $2.5 ATM withdrawal fee. This is in addition to any fees that the ATM owner imposes.

However, it may be possible to have some of your ATM fees reimbursed. If you receive $300 or more in direct deposit payments into your Cash App account, you can be reimbursed three ATM fees per 31 day period.

What Type of Cash is the Cash App Card?

After you open your Cash App account and create your $Cashtag user name, you have the option to request a Cash App card. This is a debit card that Cash App will send to you in the mail.

This is a Visa debit card that is connected to your Cash App balance. You can use the card in bricks and mortar stores or with online merchants providing they accept Visa. You can also use your Cash App card at ATMs, but you will incur a fee. However, Cash App reimburses the ATM fee if you’ve had a paycheck direct deposit of $300 or more per month.

While the Cash App card is a fairly standard Visa debit card, you can customize your card to make it a real feature in your wallet. You can choose custom colors, materials and designs to make your Cash App card truly unique.

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How to Sign Up for Cash App

Signing up for Cash App is remarkably easy.

  1. Download the app from Google Play or the Apple Store. The app is available for both Android devices and iPhones.
  2. Launch the Cash App on your device
  3. Create your Cash App account with your email address or phone number
  4. You’ll receive a Cash App verification code
  5. Connect your bank account by entering your debit card information
  6. Choose your unique $Cashtag
  7. Enter your zip code
  8. Fund your account by clicking the “Add Cash” button that you’ll find under the banking tab.

Once you have funded your Cash App account, you’ll be able to send and receive money, pay for items, trade stocks and buy or sell Bitcoin.

Is Cash App Safe?

Although Cash App is not a bank, it does take security very seriously. The platform uses PCI-DSS protocols which are also used by many of the major credit card companies. The payments are also encrypted at both ends, which makes it no less secure than when you use a credit card.

Cash App is also a registered broker dealer and member of SIPC and FINRA, which means that you can feel confident about the data security of your trades and investments.

Cash App Alternatives

Cash App is a solid platform, particularly for new investors, but if you’re looking for peer to peer money transfers, there are some decent alternatives. If Cash App does not appeal, you may want to consider:

 PayPal has been the go to for sending and receiving money online for almost 25 years. This platform offers more functionality compared to Cash App, as you can make international payments, pay for your purchases in installments and even create and send business invoices.

PayPal has also recently launched its own debit card. However, PayPal does have far more fees and charges compared to Cash App, so you’ll need to carefully calculate whether it works out better for you.

Although it is a completely separate platform, Venmo is owned by PayPal. It works in a similar way to Cash app, allowing you to pay and request money, set up direct deposits, use a debit card and make payments.

The key difference is that Venmo has a social media aspect to the platform. You can like and comment on payments and interact with the Venmo community. However, unlike PayPal, Venmo is only available in the United States.

Zelle has a direct working relationship with many of the major banks including Bank of America, Wells Fargo and Chase. It offers the ability to process same day payments between platform users.

If you bank with a Zelle partner, you can make direct payments from your online banking or banking app without needing to download the Zelle app.

How to Avoid Cash App Scams

One of the reasons why many people are wary of using P2P apps or platforms is scams. Fortunately, there are some tips and tricks to recognize scams and avoid them to keep your account secure.

The main potential area for concern is that Cash App payments are instant and typically they can’t be canceled. So, there are some recommendations you’ll need to consider:

When sending money via Cash App:

  • Only send funds to accounts you trust
  • Double check and verify all the recipient details before you hit send to ensure it reaches the correct person
  • Double check the recipient’s profile to make sure it is the person you think.
  • Don’t send money for something promised in response. For example, don’t fall for the scam of sending money now and getting more next month.

What To Do If You've Been Scammed?

If you do feel like there may be a scam operating on Cash app, you can report it.

The procedure for reporting a potential scam involves:

  • Tapping the profile icon
  • Tap support
  • Select the “Report a Payment Issue” option
  • You can then select the payment and you’ll need to follow the prompts.

If the issue relates to a potential scam account rather than a specific payment, you can report and block the account.

  • Search for the appropriate profile
  • Click “Report” or “Block” on the bottom of the profile
  • Follow the prompts

You can also contact the Cash Support team via the app or using the toll free helpline.

FAQs

You can use your Cash App card with any Visa ATM, but you will incur fees for the transaction. However, Cash App will cover some or all of your ATM fees if you receive $300 or more in direct deposited paychecks each month.

Each qualifying $300+ deposit will add a further 31 days of reimbursements for your ATM fees.

You can organize a payment to another Cash App user in a few simple steps and the funds will be instantly available in the recipient’s balance.

If you opt for a standard transfer, there is no fee regardless of the amount.

However, if you want an instant transfer, there is a percentage fee of 0.5% to 1.7%. This means that a $500 instant transfer would cost $2.50 to $8.75 in fees.

Unlike savings accounts that earns interest, Cash Appt doesn't provide interest on deposits.

When you create your account and choose a $Cashtag, you will be allocated an account and routing number.

If you want to find out your routing number, you’ll need to tap the Money tab on the home screen and you can then tap “Routing number” which features below your balance. There are then options to copy both the account and routing numbers.

Cash App is very similar to Venmo, but it lacks Venmo’s social features. With Venmo, you can still send and request funds, and you can connect a linked bank account or debit card with no additional cost.

PayPal is a more comprehensive platform than Venmo. You can create and send invoices, split payments and send or receive funds internationally. However, PayPal does tend to have more fees.

Cash App is available for people aged 13 and older. However, if you’re under 18, you will need parental or guardian approval to be able to access the Cash App features including direct deposit, Cash Card and P2P transactions.

You will only be able to use the other platform features including investing if you’re 18 or older.

Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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