What Is Cash App and How Does It Work? - NerdWallet (2024)

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As more people embrace the convenience of cashlessness and contactless payment, tech companies have made it easier to send and receive money instantaneously from a smartphone. Cash App, one of these services, offers some unique functions compared with other money transfer options, such as investing in stocks, getting special savings with certain merchants and restaurants and buying and selling bitcoin.

Read on to learn more about Cash App and its features, benefits and possible drawbacks.

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What is Cash App and how does it work?

Cash App is a peer-to-peer money transfer service from Block Inc. that allows users to send and receive money. This service can help you send your share of utilities to your roommates, pay friends back for coffee, split the cost of a trip or any other money-sending task you want to accomplish with other Cash App users. The way Cash App works is also similar to a bank account: Users can get a debit card — called a “Cash Card” — that allows them to make purchases using the funds in their Cash App account. The app also allows users to invest their money in stocks and buy and sell bitcoin.

How to add money to Cash App

To use Cash App to send payments, you need a bank account, debit card, credit card or prepaid card. You load money on Cash App by tapping the Money tab in the app’s home screen, tapping “Add Cash” and inputting how much cash you’d like to add from your linked account. You’ll then need to confirm the transaction by entering your PIN for the app or by using Touch ID.

How to send money with Cash App

First, you’ll need to have an external funding source (typically a bank account or debit card, but you can also use a credit card or prepaid card) so that you can fund your Cash App account as well as have a place where Cash App funds you withdraw will go. Then you’ll download Cash App on your smartphone. The app will walk you through enrollment, where you’ll create a user account and link your bank account or other funding source.

You’ll be able to use your linked bank account, debit card or other funding source to send money to other Cash App users as well as to transfer money from your Cash App account into your bank account. This is similar to services like Venmo and PayPal, which also allow you to link a bank account to send money; you can also hold any received funds in the app until you’re ready to withdraw them.

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To send a payment:

  1. Open the Cash App mobile app.

  2. Enter the amount you want to send.

  3. Tap “Pay.”

  4. Enter the email address, phone number or “$Cashtag” (another person’s username in the app).

  5. Enter what you are sending the payment for.

  6. Tap “Pay.”

How to receive or deposit money with Cash App

To view the details of a received payment, tap the “Activity” button. You’ll also see the total amount of your Cash App balance at the bottom left of the app home screen.

You can also fill out a form to get your paycheck directly deposited into your Cash App account and deposit physical cash into your account at participating retailers for a fee.

Benefits of Cash App

There are no fees on basic services. Cash App doesn’t charge monthly fees, fees to send or receive money (unless you’re sending from a credit card), inactivity fees or foreign transaction fees.

Cash App comes with an optional free debit card. The “Cash Card” allows users to make transactions and withdraw the money that they have in their Cash App account. The card is issued by Sutton Bank and is unique to a user’s Cash App account. It isn’t connected to a personal bank account or another debit card.

You’ll get free ATM withdrawals if you set up direct deposit. Otherwise the fee is $2.50 to use an ATM with a Cash Card.

Cash App offers help you save money when using the debit card. Users who have the Cash Card can choose offers in their account that allow them to save money on a purchase with a particular vendor (for example, a certain amount off your total bill at a restaurant). Only one offer is allowed to be active at a time, but you can swap offers as often as you want.

You receive a cash bonus for friends who join using your referral code. If you send a referral code to your friends and they sign up for Cash App using your link, then you receive a cash bonus per friend who signs up.

Cash App offers the ability to invest. Cash App allows users to buy stock in specific companies with as little or as much money as they want to invest. Stocks can be purchased with the funds in your Cash App account; if you don’t have enough funds in the app, then the remaining amount will be taken from your linked bank account.

Cash App is Bitcoin compatible (but with fees). Cash App users can buy and sell bitcoin, but Cash App might charge a fee, which you’ll see before you complete the transaction. Depending on how quickly you choose to receive deposits of Bitcoin you withdraw, you may be charged a fee for withdrawals, too.

» ALSO SEE: Our guide to Bitcoin for beginners

Things to consider about Cash App

Your funds aren’t FDIC-insured unless you have a Cash Card or a sponsored account. (See below for more details on sponsored accounts.) Cash App’s functionality may walk and talk a bit like a bank, but there is a clear distinction between the app and a bona fide, bank-chartered financial institution.

Having FDIC insurance means that if your bank were to suddenly go under, your funds would be federally insured, usually up to $250,000. Your Cash App funds have FDIC insurance only if you also have a Cash Card or if you have a sponsored account. (For example, Cash App users ages 13 to 17 must have an adult sponsor their account in order to use some features. The sponsor’s account and the teen’s account are both FDIC-insured).

Customers’ funds in Cash App are never transferred or held with Sutton Bank and therefore don’t receive FDIC insurance. So if you don’t have a Cash Card or a sponsored account, it’s safer to transfer your Cash App balance to your FDIC-insured bank account.

Using a credit card is not free. Cash App charges 3% of the transaction to send money via linked credit card. This is a fairly standard fee compared with other money transfer apps; Venmo, for example, also charges 3% to send money with a linked credit card. To avoid this fee altogether, use your linked bank account or the funds in your Cash App account to send money.

There are spending limits on the Cash Card. The maximum that can be spent on your Cash Card is $7,000 per transaction and per day and $10,000 per week. The maximum that can be spent per month is $25,000.

There are withdrawal limits on the Cash Card. The maximum amount that can be withdrawn at an ATM or store register cash-back transaction is $1,000 per transaction, $1,000 per day, and $1,000 per week.

Instant deposits of Cash App funds to your bank account cost a fee. You’ll pay 0.50% to 1.75% to have your funds transferred immediately. There’s no fee to deposit your Cash App funds to your linked account with a standard transfer, which takes one to three business days.

Frequently asked questions about Cash App

Here are answers to some common questions about using Cash App.

What is Cash App?

Cash App is a peer-to-peer money transfer service that lets users send and receive money. Cash App also functions similarly to a bank account, giving users a debit card — called a “Cash Card” — that allows them to make purchases using the funds in their Cash App account. Cash App users can also invest their money in stocks and buy and sell bitcoin with the app.

How does Cash App work?

Cash App is a mobile application, so in order to use it you’ll first need to download the app to your mobile phone. Then you’ll need to create a Cash App account, which requires linking to your bank account or another external funding source. To pay someone or request a payment through Cash App, you must enter the other person’s $Cashtag, email address or phone number after you tap “Pay” or “Request.”

Is Cash App safe?

Cash App is safe to use to send and receive money to and from people you know. Information you send on the app is encrypted, and the app uses fraud detection technology.

You can help keep your Cash App use safe by following best practices, including only using it to send and receive money to friends and family. Other precautions you can take include turning on the security feature that requires your passcode, fingerprint or face recognition to make a Cash App payment, and enabling email or text notifications so you’re alerted of every Cash payment. (Learn more about how to avoid peer-to-peer payment app scams.)

Do you need a bank account to use Cash App?

No, you don’t need to have a bank account to use Cash App. The app also lets you link a debit, credit or prepaid card.

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FAQs

What Is Cash App and How Does It Work? - NerdWallet? ›

The “Cash App Card” allows users to make transactions. The card is issued by Sutton Bank and is unique to a user's Cash App account. It isn't connected to a personal bank account or another debit card. Free ATM withdrawals with direct deposit.

What is Cash App and how does it work? ›

Cash App offers the following services and features: Money transfers: Users can send and receive money, as well as transfer the money they have in their Cash App account to a linked bank account. Sending and receiving money is free. Standard transfers also charge no fees and take one to three business days to complete.

What are the disadvantages of the Cash App? ›

Payment Limits

Cash App initially limits the amount you can send and receive to $250 in a week and $1,000 per month, although you can increase this by going through an additional verification process. You can also not withdraw more than $1, 000 per week via an ATM or cash back using your debit card.

Do you need a bank account for Cash App? ›

Do I need a bank account to use Cash App? No, you don't need a bank account to create a Cash App account or add money to your Cash App balance. There are a number of ways to send and receive money through Cash App if you don't have or want to link your bank account.

What are the requirements for Cash App? ›

Eligibility. Using the Cash App requires you open an account. You'll need to be a U.S. resident and at least 18 years old. If you want to use your account balance to send money to another Cash App user, then you'll need to give us some more information about you, and we'll need to be able to verify your identity.

Is Cash App good or bad? ›

Cash App earned its reputation as a top money transfer app, but it has added more traditional banking features, including a high-yield savings account (HYSA) and VISA-branded debit card, as well as giving users the ability to invest in stocks and buy and sell bitcoin.

Is it safe to use Cash App as a savings account? ›

Cash App uses cutting-edge encryption and fraud detection technology to make sure your data and money is secure.

What fees does Cash App charge? ›

Withdrawal Transfer Speed Options

Standard transfers are free and arrive within 1-3 business days. Instant transfers are subject to a 0.5% -1.75% fee (with a minimum fee of $0.25) and arrive instantly to your debit card.

Can you withdraw money from Cash App without a bank account? ›

Cash App Card: Another option is to obtain a Cash App Card, which is a physical debit card linked to your Cash App account. With this card, you can make purchases and withdraw cash from ATMs without the need for a traditional bank account.

Do you need a SSN for Cash App? ›

Trouble Signing Up. To receive a Cash App Card, you will need to verify your account using your full name, date of birth, the last 4 digits of your SSN, and your mailing address. We may request additional information if we are unable to verify your account using this information.

Do you have to pay a fee to receive $3,000 on Cash App? ›

Sending and receiving money is totally free and fast, and most payments are deposited directly to your bank account in minutes.

Does the Cash App report to IRS? ›

The short answer is yes. Above a certain threshold, the money you receive from Cash App and other payment processing apps counts as income if used for business. And like any income, it is subjected to income taxes.

What is the Cash App fee for $100? ›

If you're sending $100 funded by a credit card, the fee is 3% for either account type. Cash out is free unless you select instant deposit which is 1.5% 0.5% - 1.75%, with a minimum fee of $0.25. This applies to personal and business accounts.

Does Cash App put money in your account? ›

Cash App offers standard deposits to your bank account and Instant Deposits to your linked debit card. Standard deposits are free and arrive within 1-3 business days. Instant Deposits are subject to a 0.5% -1.75% fee (with a minimum fee of $0.25) and arrive instantly to your debit card.

How much does it cost to use Cash App? ›

Basically, there are no Cash App fees for sending money if you stick to standard transfers that are processed within 1-3 business days. For instant payments, though, you'll have to pay fees ranging between 0.5%-1.75%. Transfers supported by credit cards will also cost you 3% per transaction.

Can you use Cash App without a debit card? ›

If you don't have or don't carry the card, though, you can still use Cash App. One way is to add Cash App to your Apple Pay or Google Pay wallet so you can use your Cash App balance as a funding source for in-person and online purchases.

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