Credit Card, PayPal or Cash App? How You Pay Matters

Buyers have more ways to pay for things than ever before: Apple Pay, Venmo, credit cards and dozens of other options. What you choose might matter as much as the purchase itself.

Each of the different payment methods provides various conveniences, perks and protections from fraud. Credit cards have long been the default option of choice. But higher interest rates have now raised the cost of carrying a credit-card balance.

Money-transfer apps such as Venmo and Zelle processed nearly $900 billion last year, and the Consumer Financial Protection Bureau expects that number to reach $1.6 trillion by 2027.

These apps and services provide easy instant payments, usually for free. The downside is that these options offer fewer protections from scams and unfulfilled orders.

“The U.S. consumer is very driven by convenience. They may not be directly driven by security,” said James Anderson, managing director at Paze, a bank-owned digital wallet.

Payment apps are among the fastest-growing sources of fraud reports and losses, according to Federal Trade Commission data. Overall fraud losses have increased more than fivefold to $1.2 trillion since 2019. Losses tied to payment apps jumped from $5 million to $47 million over the same period, according to the FTC data.

As new payment options gain acceptance, consumers should try to educate themselves how to use these methods safely, said Seth Ruden, director of global advisory at BioCatch, a fraud-detection software company.

“The channel itself is not the villain. The bad actors are the scammers, the social engineers and exploit artists,” he said.

Here’s how to weigh the security, convenience and benefits of each payment option:

Credit and debit cards

When you swipe or tap your card or authorise a card transaction online, the merchant’s bank communicates with your bank through a card network such as Mastercard or Visa to ask permission to withdraw a certain amount. Your bank then decides whether to approve the transaction based on your available funds or credit and the likelihood the transaction is fraudulent. If approved, your bank puts a hold on the funds until they are sent to the merchant’s account, usually within a business day.

Credit cards can be the most rewarding way to pay online. Card issuers use the revenue from transaction fees to fund perks for customers such as cash-back deals, travel points, access to airport lounges and fraud protection.

A credit card can be expensive if you don’t pay your balance in full, and higher interest rates have now raised the cost of carrying a credit-card balance. Paying off a $1,000 balance in 12 months at the current average annual percentage rate of 22.16% means $103 in interest, compared with $77 roughly a year ago when the average was 16.65%, according to estimates from the Federal Reserve.

Debit cards don’t offer the same rewards as credit cards since their issuers make less money from each transaction. They do come with similar fraud and payment protections as credit cards.

Federal regulations require issuers to reimburse customers for unauthorised transactions of more than $50 and allow customers to dispute charges within 30 days. Many credit cards also provide purchase protection, meaning you can ask for reimbursements directly from your issuer if something you buy is lost, damaged or inconsistent with what was advertised.

Few people make the most of their credit-card benefits, payments experts said. After finding most people don’t bother to read the fine print when they sign up for a new card, Mastercard is now notifying customers of benefits in real-time.

“If I have to read a big booklet or call a number to understand what my benefits are, I’m not doing it,” said Chiro Aikat, executive vice president of U.S. market development at Mastercard.

Digital wallets

Digital wallets such as PayPal or Apple Pay are among the safest and easiest ways to pay online. Checking out with a wallet is typically faster than paying with a credit card directly since one doesn’t have to re-enter billing information and shipping address.

All of the protections and benefits associated with the underlying card are still in effect for wallet transactions, so it is best to connect these wallets to a credit card directly to maximise your protection, said Corie Wagner, an analyst at Security.org, a safety-product review site.

If a digital wallet gives you the option to link a bank account directly, you should read the policy agreement to make sure you understand what is protected. For example, PayPal offers an extra level of purchase protection, but Apple Pay and Google Pay don’t.

Wallets also offer additional layers of security through encryption and biometric verification and many don’t share sensitive financial data such as your 16-card number with individual merchants. “Use as many authentication factors as possible” such as Face ID or personal identification numbers, Wagner said.

Peer-to-peer payment apps

Apps such as Venmo, Cash App and Zelle were designed to help people send money to friends and family, but they are now used in more settings. They move money more quickly than card payments because, instead of waiting on banks to approve the transaction, the payment is authorised once the sender hits submit. It is almost impossible to get money back once it has been sent.

These payment methods aren’t regulated as heavily as cards, so users might still be on the hook for unauthorised payments if a swindler gets control of their accounts.

“Use it to pay people you know, and trust,” said Meghan Fintland, a Zelle spokeswoman. “They’re not meant to have the credit-card security.”

Bank transfers

Businesses are increasingly offering ways to pay with your bank account directly since Automated Clearing House, or ACH, transfers are much cheaper to process than cards. This option should only be considered in exchange for a discount, payments executives said.

Consumers should be selective in sharing their bank information with merchants since wire transfers don’t have the same protection guarantees as cards.

If a business requests a direct bank transfer instead of a card payment, choosing a slower option over the newer instant methods such as Zelle might be best. ACH transfers typically take a few days to settle, giving you a few more days to try to stop the transaction before the money leaves your account.

“The slower it is, the greater likelihood is that you’ll be able to get recourse,” Ruden, at BioCatch, said.

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Credit Card, PayPal or Cash App? How You Pay Matters

A guide to weighing security, convenience and benefits of each payment option

Credit and debit cards

Digital wallets

Peer-to-peer payment apps

Bank transfers

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.