Person to Person Payments (P2P)

Updated June 14, 2021

What are Person to Person Payments?

Person to person payments allow you to transfer funds from your bank account or credit card to another individual. 

You may also see person to person payments referred to as peer-to-peer payments and P2P.

These are typically done using an app on your phone. Download the P2P app, such as Venmo, set up your profile, and connect your bank account. You can then send money to friends and family who also have the same app. 

You'll look up the person you want to pay on the app, typically with their phone number or email address, and complete the transaction. The money will be removed from your connected bank account and placed in their holding account within the app. They can then transfer the funds from the app into their checking account. 

Person to Person Payment Example

Let's say that you are planning a weekend getaway with your friend. The group plans to stay in a vacation rental together as a home base for your activities. But only one person, Sally, can book the vacation rental on their credit card. 

Instead of awkwardly handing over cash or a check when you see Sally, you can take advantage of the convenience of P2P payments. You can use an app on your phone to send money to Sally through the person to person payment app of your choice. 

You'll just need to choose Sally from your contact list, enter a payment amount, and press send. With some apps, you might have to enter a pin to complete the transaction. When Sally receives the money, she can leave it in her account or transfer it into her bank account. 

It's a win-win. You can easily send your friend the money to split the vacation rental without taking cash out of the bank or hunting down a check. And your friend Sally can easily move the funds into her regular bank account. 

Person to Person Payment Apps

P2P payments can make life easier. With that, it is not surprising that there are quite a few person to person payment apps available. Here are a few of the most commonly used apps. 

Venmo 

Venmo is a P2P app that allows you to send money via a linked bank account, Venmo balance, or credit card. You'll be able to send money to any other Venmo user. Since Venmo had 40 million users as of 2019, it's likely that many of your friends have the app. 

As a somewhat unique feature, you'll have the option to use a free debit card that is connected to your Venmo balance. The major downside is that you'll have to pay a 3% fee for the money you send via credit card. Plus, there are fees for instant cash-out transfers. 

PayPal 

PayPal is more commonly associated with providing online payment services for buyers and merchants. But PayPal also provinces another popular P2P payment app. Through the app, you can send money to any registered user. 

You'll be able to send the funds provided by a debit card, credit card, bank account, or PayPal balance. Additionally, you can send funds through PayPal Credit, which is an individual credit line that can be used to send funds. 

If you send money with PayPal, you'll have to contend with a 2.9% transaction fee unless you are using a linked bank account or PayPal balance. But you may have the opportunity to send up to $60,000 in a single transaction. 

Be sure to choose the "Friends and Family" feature or the receiver of the money will also have to pay a fee. 

Zelle

Zelle is a person to person payment option that is included with many major banks in the United States. As a Zelle user, you can send money to other registered users with the app or directly from your bank account. 

With Zelle, the money will be moved quickly from one account to the other. But you won't be able to use a credit card to transfer funds to other users. 

Person to Person Payments Pros and Cons

Like every other financial service out there, person to person payments have some pros and cons that you should know about. 

Pros

  • Convenience. You won't have to worry about carrying cash just to split a bill with your friends. 

  • Identity protection. Person to person payments require very minimal personal information. This can help to keep your personal details secure. 

  • Multiple payment options. You can link up a debit card, credit card, bank account or use the balance in your app to cover expenses. 

Cons

  • Human error. It is possible to send money to the wrong person accidentally. 

  • Fees. You'll need to watch out for fees on the different apps as you complete transactions. 

Overall, person to person payments offer a way to split expenses without the hassle of finding paper money. If you often leave the house with just your phone and a few cards, then you'll appreciate the convenience that P2P payment options provide. 
 

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All of our content is verified for accuracy by Mark Herman, CFP and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Person to Person Payments (P2P).
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Mark Herman has been helping friends with financial questions since serving as an Army helicopter pilot. Since then, he’s gained valuable experience in the corporate world before moving on to become a Certified Financial Planner™.

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