BBB Tip: Know your rights (and responsibilities) when it comes to payment types

You bought something online, and the seller wants you to pay through Cash App. Is that okay? You got a new job, and your new employer sends you a check for more than your salary. Is it okay to deposit? Your water bill is overdue, and the “utility company” demands payment through a pre-paid debit card. Is that a problem? In all three cases, it’s a scam!  

Knowing the ins and outs of payment types is one of the best ways to spot a scam.  Peer-to-peer (P2P) payment apps, such as Zelle, Cash App (a BBB Accredited Business), and Venmo, are becoming increasingly popular. But digital wallets aren’t the only way to transfer funds without using a debit or credit card. Checks, prepaid debit cards, gift cards, and cryptocurrencies can all transfer money from one person to another.

How safe are these payment methods? And when should you use or avoid them?  BBB offers the following advice to help you understand how each payment method works, make payments safely, and avoid falling victim to scams.

P2P payment apps

• Know how P2P payment apps work. P2P payment apps allow users to send money to each other using a mobile app, usually as a smartphone app. To use a P2P payment app, you must first set up an account, after which you can link your bank account directly or a credit or debit card to provide the funds sent to other users. Once your account is set up, you can search for other users with phone numbers, usernames, or emails. Sending money is relatively easy. You simply choose the recipient, select an amount, designate the reason for the payment if you wish, and then submit the payment. Depending on the app and your payment method, it can take anywhere from a few seconds to a few business days to complete the transaction.
  
  
• Know your rights. Unlike traditional banking systems, most P2P apps won’t cover your funds in case of fraud. If you sent money to a scammer and later realize your error, it’s unlikely you’ll have any success getting the company to reimburse you. The best way to protect yourself from scammers is to think carefully about who you send money to using this payment method.
  
  
• Use P2P payment apps wisely. Keep in mind that some digital wallet apps take a few days to process a transaction. Scammers take advantage of the system to “send funds” that they know will never go through. Enable additional security features such as two-factor authentication, pins, and biometric verifications. Get to know other digital wallet scam tactics too, so you’ll be quick to notice when something is fishy. Avoid businesses or individual sellers who only allow you to pay with P2P payment apps. Instead, use these apps to transfer funds to your friends, family, and other people you already know and trust. Make sure to double-check the recipient details before hitting send. Link your credit card (instead of your debit card or bank account) for an added layer of protection and enable any additional security settings the app offers, like multi-factor authentication. If you need tech support or assistance, double-check that you are calling or visiting the website of the official company, not an impostor’s hotline.

Checks

• Know how checks work. Federal banking rules require banks to make the funds available within a day or two when someone deposits a check. The problem is, funds may not truly be transferred from the payer’s account for several business days. If it turns out the check is a fake or if it bounces, the bank has the right to recover the amount they deposited into your account. Cashier’s checks are checks guaranteed by a bank, not an account holder, while a person or business generally prepays money orders. Both are treated as guaranteed funds, but it’s important to make sure they are legitimate, as scammers are skilled at forging them.
  
  
• Know your rights. If a check is suspicious, the bank may put a hold on it before crediting your account. However, if the check passes inspection, your bank will credit your account in the amount written on the check. The check must then go from your bank to a clearinghouse and from there to the bank where it originated. Because there are several parties involved, it can take up to two weeks to determine if a check is legitimate. If you spend the money the bank credited to your account in the meantime, and it turns out the check was a fake, you’ll be responsible for returning the funds. If the fraudulent check appears to come from a specific company, the company will not be held liable as long as they didn’t know about the fraud.
  
  
• Use checks wisely. If a stranger sends you a check, cashier’s check, or money order, think twice before you deposit it and use the funds. Some scammers send checks for large amounts and ask you to return part of the funds via wire transfers or prepaid debit cards. This is a scam! Unless you already know and trust the person or company who sent you the check, always wait for the funds to clear before you spend the money. Look carefully at any check you receive, keeping an eye out for misspellings, flimsy or suspicious check paper, and missing routing numbers or MICR codes. All of these are red flags for a fake check. Make sure the payer is who you would expect it to be, too. If someone claims you’ve won the lottery, for example, the check should come from the state lottery commission, not a private company. Review this BBB study for more ways to avoid falling victim to check scams.

Prepaid debit cards

• Know how prepaid debit cards work. Prepaid debit cards function like a regular debit card, and you can use them at ATMs. Prepaid debit cards may cost a few dollars to buy, but are reloadable. They may also come with periodic fees that can subtract from the balance.
  
  
• Know your rights. According to Consumer Reports, some reloadable prepaid cards may offer some protection against fraud loss if you report unauthorized use within two days of discovering it. That said, liability is generally limited to $50. If you load a prepaid debit card and send the card numbers to a scammer as a form of payment, they will likely withdraw all the cash from an ATM and then try to stall you by explaining a supposed delay in the delivery of their product or service. By the time you realize what’s happened, you may have no legal recourse to get your money back and no way to identify the scammer. Keep in mind that The FTC’s Telemarketing Sales Rule (TSR) prohibits several payment methods in telemarketing transactions in the U.S., including reloadable prepaid cards. Of course, this rule may not stop a scammer from asking you to pay this way.
  
  
• Use prepaid debit wisely. Don’t trust any company or individual who demands payment with a prepaid debit card. Legitimate business transactions should allow you to use other payment methods. Prepaid debit cards are a good way to give a gift or help your teenager learn about money management, but they are not a good way to pay for services or products.

Credit cards

• Know how credit cards work. Credit cards let you borrow money from the card issuer up to an approved limit, with the expectation that you’ll pay it back either in full or over time with interest. You can use credit cards at most retail locations, online, or for recurring payments. You’ll receive a monthly statement showing your purchases and the amount due. Minimum payments are required, but carrying a balance can lead to interest charges.
  
  
• Know your rights. Credit cards come with strong consumer protections. Under federal law, you're generally not responsible for more than $50 in unauthorized charges, and most issuers offer zero-liability policies. If your card is lost or stolen, report it right away. Keep receipts and monitor your statements to catch errors or suspicious activity. You also have the right to dispute billing errors or charges for goods and services that weren’t delivered as promised.

• Use credit cards wisely. Only charge what you can afford to pay off. Carrying high balances or missing payments can lead to costly interest charges and damage your credit score. Avoid sharing your credit card number with anyone you don’t know or trust. And never make payments to someone who demands a credit card number over the phone, email, or text—it’s likely a scam. Credit cards can be a useful tool for building credit and earning rewards, but only when used responsibly.

Gift cards

• Know how gift cards work. Closed-loop gift cards can only be used at a specific store or chain of stores. Open-loop gift cards are valid at most retail locations. To use a gift card, you must first load funds onto the card via another payment method. Once the funds are loaded, you may need to activate the card and create a PIN to use it in-store.
  
  
• Know your rights. It’s wise to hold on to the gift card and save your receipt after you purchase and activate it. If any issue comes up later, the company will want proof that you are the one who purchased and activated the card. That said, providing someone with the numbers on the back of a gift card is just like sending them cash. Gift cards don’t offer the same protection as a credit card or debit card, and it’s nearly impossible to get your money back if you send the numbers to someone who turns out to be a scammer.
  
  
• Use gift cards wisely. Never do business with anyone who insists on payment with gift cards. It’s a scam! Before you buy a gift card, make sure it hasn’t been tampered with. Some scammers steal the numbers while a card is still in the store, so they can access the funds as soon as the card is activated. It’s best to use gift cards for their intended purpose, as gifts for friends, family, or others you know and trust. Read this BBB gift card study to find out more about gift cards and related scams.

Cryptocurrency

• Know how cryptocurrency works. Cryptocurrency is a digital form of payment that uses encryption for security and operates on decentralized networks like blockchain. Popular cryptocurrencies include Bitcoin, Ethereum, and Litecoin. You typically buy crypto through exchanges using traditional currency, and it’s stored in a digital wallet. Once a transaction is made, it’s usually irreversible, unlike with credit or debit cards.
  
  
• Know your rights. Cryptocurrency offers limited consumer protections. Transactions are final, and there's no central authority to dispute a charge or reverse a payment. If your crypto wallet is hacked or you send coins to the wrong address, there’s often no way to recover your funds. Be cautious and use reputable wallets and exchanges. Scammers often exploit the anonymous nature of crypto to target victims, so double-check who you're dealing with before sending any payment.
  
  
• Use cryptocurrency wisely. Never do business with anyone who insists on payment in cryptocurrency—it’s a common scam tactic. Scammers may pose as government officials, law enforcement, or tech support and pressure you to transfer crypto to "resolve an issue." Keep your wallet secure with strong passwords and two-factor authentication. Cryptocurrency can be an investment or a payment method, but it comes with risks. Educate yourself before diving in and avoid using crypto for transactions with unknown individuals or businesses.

For more information

Learn how to spot more scams on BBB.org/spot-a-scam.

Learn more about how scammers use gift cards in this BBB study on gift cards and this tip about gift cons. Learn more about avoiding scams while using peer-to-peer payment apps. Also, read BBB’s check scams study and cryptocurrency scams study for more details about how these scams work. Learn more about how to store and secure cryptocurrencies. 

Go to BBB.org/ScamTracker to report a scam.