Some peer-to-peer payments coding as cash advances

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A few days ago, Doctor of Credit reported on the fact that some credit card issuers are now charging cash advance fees when sending money to a friend via peer-to-peer payment networks like PayPal or Venmo. He cites this New York Times article from a couple of months ago that warned of this change coming. At this point, it seems that Bank of America and Citi are likely charging cash advance fees, YMMV regarding Chase, and Amex and Discover appear safe for now – but obviously that could easily change. Note that this does not affect payments for goods or services.

Truthfully, I didn’t find this shocking — you are essentially sending money to someone with one of these services and if it isn’t for goods or services, that does sound a lot like a cash advance situation. However, the surprise here comes in the fact that the coding abruptly changed and so some readers may have long been sending payments or using person-to-person payments to help meet minimum spending requirements may get an unpleasant surprise when those payments suddenly incur cash advance fees.

Apparently, this is due to a required change in how peer-to-peer credit card payments are coded. With the new coding, it is up to banks whether or not to charge a cash advance fee. Some indicated in the New York Times piece that they are not charging cash advance fees (though DoC has some contrary DPs). I think the thing here is that with the coding changed, it is certainly possible that these types of charges could code as cash advances at any time despite what current data points indicate.

I would therefore recommend only using peer-to-peer payments to pay friends for goods or services. I don’t know of any limitations in terms of what goods or services qualify, nor do I know of a requirement to get a good deal on whatever goods or services you buy from friends, so there may still be some possibility for paying without a cash advance fee depending on your situation.

H/T: Doctor of Credit

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