Is Zelle safe??
If you don’t use Venmo, then what can you use? In my post last week, “Venmo Transactions - taxable or Not?” I mentioned Zelle as an alternative. This week I’ll share a bit more about Zelle, and, most importantly, how to use it SAFELY.
What is Zelle and how does it work?
Zelle is a bank to bank money transfer app that you can use to send funds to anyone that participates. Most banks in the US are partnered with Zelle and the option is built right within your online banking platform.
You can check if your bank participates, enroll using your cell or email address, and then start sending and receiving money right away. There are no fees, but there are daily limits on how much you can send each day. That depends on your bank and your account status.
What I like about Zelle
CLARITY: When the Zelle transactions appear on your bank statement and ultimately in your bookkeeping app (such as QuickBooks Online) it clearly states the person you sent or received money from. ApplePay and Venmo do not offer this level of detail unless you log into the apps separately. Zelle is very transparent, making financial clarity simpler.
NO IRS REPORTING: Because Zelle is a bank to bank direct funds transfer system, and does not rely on a separate payment processor, the transactions sent and received via Zelle are not reported to the IRS and you will not receive a Form 1099-K at the end of each year, as you will if you use Venmo (starting in 2022) as I covered last week. Obviously, you need to report all taxable income and expenses regardless of how they are processed, but less reporting to the IRS is always a good thing .
PRIVACY and SECURITY: Zelle is private (no social feeds on who you paid and for what) and generally as secure as your online banking platform. Transactions are processed directly through your bank’s Zelle integration. No need to sign-on to another platform or set up new credentials. However, as with all online platforms, there are scams you need to be aware of as follows.
Is Zelle Safe?
As online systems evolve to help make your life easier, so do the scammers! This is the golden era of online fraud, but if you know what to look for, and take a moment to validate the request, you can protect yourself.
This article, Using Zelle Safely, covers five things to consider to ensure you are sending money safely and securely. There are excellent tips and even videos on how the platform works and what you need to be aware of. Please review it even if you are already a Zelle user.
There are obvious tips such as confirming the details of the person or business you are sending money to. If you are not 100% sure, send a small amount such as $1 to validate the account and make sure the intended person receives the funds.
One insidious (and fairly new) scam is the “Pay Yourself” scam. This is when you “supposedly” receive a text fraud alert on your phone, the alert asks for your Zelle confirmation code, and then asks you to send yourself a payment (to your own bank account) to validate your account. THIS IS A TOTAL SCAM. The funds will be re-routed to the scammers account and you are out of luck.
I highly recommend watching this short video, How to Spot a Pay Yourself Scam to see how it works so you can make sure you don’t become a victim. Also, if you ever receive a request for a passcode or fraud validation code, it is better to call the bank directly (don’t just answer a call thinking it is from your bank) so you can make sure it is valid.
Final Thoughts
There are many advantages to using Zelle, but it is just like handing cash over to the person or business you send it to. There are very few protections if you make a mistake or are scammed. If you are not 100% sure and comfortable with this, it may be better to use a credit card with built-in fraud protection.
I hope this has been helpful! Feel free to reach out with any questions as Julia and I will be doing a Q+A video on this topic (in addition to more) and would love to feature any specific questions you have.