Major Banks Charge Cash Advance Fees For Peer-To-Peer Credit Card Payments (Paypal, Venmo, Square, Etc)

A reader sent in a report that Chase now charges a cash advance fee on peer-to-peer payments (‘send money to friend’) using Paypal when paid with a credit card. Reports indicate that American Express and Bank of America now charge a fee now, along with potentially other banks as well.

This does not affect ordinary Paypal purchases, only peer-to-peer Send Money transactions on mobile wallets like Paypal, Venmo, Square Cash and likely others. Most people use a bank or debit card to do peer-to-peer money sending, but some of us in the miles-and-points community find it worthwhile to pay with a credit card in order to meet a spend bonus or similar.

The reader sent me an interesting article from New York Times back in April (I’m shocked that I haven’t seen this article before, did anyone in our community talk about this then?) which reports on this very issue. Apparently, “industry requirements” forced payment providers like Paypal and Venmo to change how they code peer-to-peer payments, and the new coding can potentially result in a cash advance fees.

The mobile wallet companies claim that most banks are opting not to charge cash advance fees, even with the new coding, but there are notable exceptions, and things can change at any time:

  • Chase: An anonymous reader was charged a cash advance fee in May 2020 when using the Chase Freedom Unlimited with Paypal. And another reader was charged a fee on a Chase business card in May. (This is despite the NYT quoting Chase as saying on record that they do not charge cash advance fees for such payments.) There are recent counter data points in June 2020 (1, 2) of Chase not charging a cash advance fee on a business card, perhaps they reversed policy (?).
  • American Express: The NYT article suggests that Amex does not charge a fee.
  • Bank of America: NYT reports on someone who was charged a cash advance fee for using a Bank of America credit card with both Paypal and Venmo. And a reader comments about getting a fee on their Bank of America business Cash Rewards card with Venmo.
  • Citi: the NYT article suggests that Citi does charge a fee if it’s categorized as Money Transfer (not clear if this is how the mobile wallets code it, but the implication is that some do code that way and result in a fee)
  • Discover: NYT article quotes a spokesperson who says that app transfers are considered merchandise purchases and do not result in a fee. Additionally, in the Discover Q3 2020 category, Discover specifically allows peer-to-peer payments to qualify for earning rewards which obviously means it does not code as a cash advance.
  • Capital One: no info
  • Wells Fargo: no info

Seems Bank of America and Citi are problematic, and maybe Chase too. I’m quite surprised we haven’t heard about it until now. Discover seems safe, and probably Amex too.

Note: if you are paying a friend for goods or services, you can easily mark it as ‘goods or services’ and then there shouldn’t be any cash advance issue. Maybe you can get creative over what to consider ‘goods or services’ too.

I’ll stop using a credit card for peer-to-peer payments until we hear any changes or updates on this. Reports suggest Paypal/Venmo might warn you about a potential cash advance fee, but I wouldn’t rely on that. Please comment below with your own data points.

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108 Comments
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Lyte
Lyte (@guest_1536343)
January 17, 2023 22:41

For all those that wanted to get in on a class action for Citi:
https://classactionsreporter.com/citibank-reclassification-of-paypal-venmo-purchases-class-action/

Jane
Jane (@guest_1500985)
December 2, 2022 23:32

Please help me. Someone wants to send money to me via chase bank to paypal. Is there a verification fee to connect between bank and paypal account? And the delivery fee from bank to paypal account?

Ben
Ben (@guest_1462251)
October 10, 2022 23:38

Data point – sent ~$1250 to a friend via PayPal for share of rent payment using Freedom (original) – not treated as a cash advance (my cash advance limit is set to ~$200 on the card).

LoveCreditCards
LoveCreditCards (@guest_1483183)
November 8, 2022 10:50

Did you mark it as friends and family?

Ryan England
Ryan England (@guest_1445039)
September 14, 2022 11:51

I am with Chase Sapphire Visa and have been for over 15 years. I have used Venmo and PayPal for peer to peer transactions for years and have just recently noticed this cash advance garbage. (Like, beginning around August 2022), so apparently it’s something new, at least with the particular Chase card I have. When I called to inquire, I got the same robotic message that has been mentioned – that this is considered a “cash advance”. When I asked when this changed, the rep was zero help and just read from the manual again.

The only “work around” I have found is to use PayPal and classify the transaction as “goods and services”. But your friend will get the 3% charge deducted from their net payment, so you’ll need to do the math on the 3% fee and add that to the amount you’re paying your friend. After all, you’d be incurring the 3% fee anyway so you’re not out anymore money than you would’ve been, and your friend nets the correct amount, and you dodge the extra $10 fee.

Fred
Fred (@guest_1116856)
December 24, 2020 15:29

Has anyone been hit with a cash advance fee from Chase while using Paypal to send money above their cash advance limit?

Caitlin M
Caitlin M (@guest_1113092)
December 17, 2020 23:08

Capital One just charged me a $10 cash advance fee for using Venmo. Their customer service rep’s solution when I called was to go have the business Venmo me back to return the money and then have them run my credit card like normal and then I could dispute the cash advance fee… Oh and they then charged me a minimum interest payment on the “cash advance”…

Mitchell A
Mitchell A (@guest_1107839)
December 12, 2020 10:13

Paypal app warns that Mastercard and Visa charge a minimum $10 fee plus high interest for sending cash to a friend or relative. Amex and Discover are not charging and counting it as a purchase for points.

Ray
Ray (@guest_1103624)
December 5, 2020 14:37

Just got off the phone with Citi to complain about 2 cash advance fees of $10 each for Venmo payments to friends and was able to get one of them waived. Rep was pointing the finger at Venmo but this seems like a money grab by the banks, which, during the middle of a pandemic, is a souless thing to do.

Gary
Gary (@guest_1115694)
December 22, 2020 13:20

Just got off the phone with Citibank complaining about a $12.87 “Cash Advance Fee,” which I ultimately learned was a result of a Venmo money transfer. I escalated to a supervisor and then spent a frustrating 10 minutes with her simply reading their policy to me. This is beyond frustrating, and I would be glad to join in a class action lawsuit regarding this money grab by the big banks.

Charles
Charles (@guest_1102837)
December 3, 2020 21:56

So when will all the class action law suits be filed?
This happened to me as well with several purchases I made at AliExpress.com using PayPal with Chase credit card. Trying very hard to get Chase to refund the $10 transaction fees but everyone I dealt with so far has refused to help in any way.

Dave
Dave (@guest_1102908)
December 3, 2020 23:40

Same thing happened to me at Ali Express recently, but it happened on one order and not the other. I used PayPal with Chase credit card. Chase did reverse one (my only) $10 transaction fee, but wouldn’t reverse the daily 24.99% interest fees for this incorrectly charged merchandise order. Ironically, Chase advertised I’d get 5% cash back if I used my credit card on PayPal transactions this quarter, then tried to rip me off like this.

Dmitry
Dmitry (@guest_1152915)
March 1, 2021 23:04

Their 5% cb on PP becomes a joke now.
I got the same issue – charged a $10 on a $5 transaction.
What a BS.
I’m leaving Chase. Makes little 2 no sense 2 me.

Jessica
Jessica (@guest_1090145)
November 13, 2020 09:42

Made a purchase on 11/11/20 on Aliexpress via PayPal, and got hit with a $10 Cash Advance Fee from Capital One. Customer Service claims that the merchant is a financial institution, thus the Cash Advance Fee. They offered no other help.