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PHNjcmlwdCB0eXBlPSJ0ZXh0L2phdmFzY3JpcHQiIHNyYz1odHRwczovL3N0YXRpYy5teWZpbmFuY2UuY29tL3dpZGdldC9teUZpbmFuY2Vfdmlld3BvcnRfZGV0ZWN0aW9uLmpzPjwvc2NyaXB0PjxzY3JpcHQgYXN5bmMgdHlwZT0idGV4dC9qYXZhc2NyaXB0Ij5teWZpV2F0Y2hXaWRnZXQoJ215ZmlXaWRnZXRfMScpO215ZmlXYXRjaFdpZGdldCgnbXlmaVdpZGdldF80Jyk7bXlmaVdhdGNoV2lkZ2V0KCdteWZpV2lkZ2V0XzEuMScpOzwvc2NyaXB0Pg==Lauren Williamson is the Financial and Home Services Editor for the Hearst E-Commerce team. She previously served as Senior Editor at Chicago magazine, where she led coverage of real estate and business, and before that reported on regulatory law and financial reform for a magazine geared toward in-house attorneys. You can reach her at lauren.williamson@hearst.com.Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.Mobile app users, click here for the best viewing experience.Payment apps like Venmo are widely used to transfer money, from splitting the bill with friends at a restaurant to paying for services like babysitting. In fact, more than 75% of Americans over 18 have used at least one type of payment app — and they transferred roughly $893 billion through these apps in 2022 alone. Venmo is certainly convenient and generally safe for moving money from person to person (as long as you’re sending money to someone you know) — but the Consumer Financial Protection Bureau (CFPB) recently issued a warning about letting too much money sit in your Venmo balance.Unlike a savings account, Venmo and most other payment apps are not FDIC insured, which means that you could lose any money that’s in the app if the company goes under. "Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe,” said CFPB Director Rohit Chopra. “As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to."Safety isn’t the only disadvantage to letting cash sit in a payment app: You’re leaving money on the table since these apps don’t generally pay interest on your balance. By contrast, some high-yield savings accounts are earning upwards of 5% interest right now, which could significantly grow your money over the course of a year.Read on to learn more about why you shouldn’t leave money in Venmo and what you should do instead.Is Venmo safe to use as a savings account?Day to day, Venmo is generally safe to use to send and receive money among people you know. (Just make sure you’re watching out for scams perpetrated by either people you don’t know or people impersonating people you know.) Venmo encrypts your personal data to help prevent bad actors from accessing your account. You can also implement safety features like multi-factor authentication to add an extra layer of security. The safety issue the CFPB has identified involves one of the ways people use Venmo: Americans leave billions of dollars in their Venmo accounts, essentially treating them like a savings account, according to the CFPB. There are a few reasons people do this: Some don’t have a checking or savings account at a traditional bank — what’s known as being unbanked or underbanked. One in five Americans fall into one of those two categories, according to the Federal Reserve. Then there are people who have one or more regular bank accounts but let money accumulate in Venmo for any number of reasons — convenience, inertia, forgetfulness, you name it. (We’ve all been there.)The problem is that accounts with payment apps typically aren’t FDIC insured, so users won’t have any recourse if something happens to the company, such as a bankruptcy filing. In the event that a bank fails, FDIC insurance will reimburse you up to $250,000 per depositor, per bank. Types of accounts FDIC insurance covers include:Savings accountsCDsChecking accountsMoney market accountsAs long as the bank is an FDIC-insured institution, your money will automatically be protected up to the $250,000 limit. There’s no need to apply or pay extra for FDIC insurance.While there’s no reason to think Venmo is in trouble, the stability of a financial service can change faster than you might think. In March, a run on withdrawals at Silicon Valley Bank caused it to fail within 48 hours. Luckily in that case, bank deposits were insured, so people got their money back within a matter of days.Why you should put your money in a savings accountWhile safety is the primary reason to take your money out of a payment app and deposit it into a savings account, it’s not the only reason. Payment apps don’t usually pay interest on money that’s stored in them. Until recently, that wasn’t necessarily a huge disadvantage: The average interest rate on savings accounts hovered around 0.06% as recently as March 2022, according to Bankrate.Over the past 15 months, however, the average interest rate on savings has quadrupled to 0.25%, according to Bankrate’s most recent survey. What’s more, if you’re willing to consider an online bank, it’s possible to find interest rates that are much higher — in some cases, hitting 5% or more. These types of accounts are known as high-yield savings accounts, and they’re becoming an increasingly popular way to grow your nest egg.Online banks are able to offer such good interest rates for a few reasons. For one, they typically have few, if any, physical branches, which cuts down on overhead. They pass some of their savings on to customers in the form of more attractive interest rates. High interest rates are also one of the best tools banks have for winning new customers — and the more those customers deposit, the more money banks have to fund loans, which is how they generate much of their revenue.Interest rates have also been rising this past year as a result of the Federal Reserve’s aggressive string of rate hikes, aimed at cooling inflation. The Fed has raised interest rates 10 times since March 2022. Although it paused the campaign at its June meeting, it’s expected to resume increases at its July meeting, with two more hikes predicted this year.While checking accounts don’t typically pay much interest, they’re another solid option for keeping your money safe. Checking accounts are also FDIC insured and offer similar convenience to Venmo, since in most cases they allow you to make unlimited withdrawals. Nearly all allow for online transfers and some can connect to payment apps like Zelle that deposit and withdraw money directly to and from your checking account. That’s a best of both worlds situation: Your money stays safe in an insured bank and you can still send money to your pal with the tap of your phone screen.How high-yield savings accounts workMoney can feel very abstract when you’re not thinking about paying a specific bill, like your rent, or saving toward a concrete goal, like a new car. But the right account can make a big difference, especially over the long term, and even if you’re starting small. A high-yield savings account works like a regular savings account — it just delivers a better interest rate. Let’s look at the difference a high-yield savings account could make for your money:Say you have $2,000 that’s been sitting in a payment app. If you leave it there, you will earn no interest and will still have $2,000 at the end of the year (supposing you don’t send a portion of it to someone else).If you move it to a traditional savings account, you will earn $5 in interest and end up with $2,005. (Buy yourself an ice cream cone!)Here’s where you really start seeing a difference: If you deposit it in a high-yield savings account, you will earn $102 in interest and end up with $2,102.And of course the more that you deposit, the more interest you’ll get, especially when you factor in compound interest, which is the interest you earn on your interest. Because of the range of interest rates available on savings accounts, it pays to shop around and consider offers at multiple banks. You’ll want to look at any fees and minimum deposit requirements, as well as interest rates, of course. How to open a high-yield savings accountOpening a high-yield savings account is simpler than you might think, especially if you’re already used to managing your money online. You’ll need to gather the following information: Social security numberDriver’s license numberAccount information, if you’re switching from an existing bank account, so you can make your first depositThen, follow these steps:Compare savings accounts: As mentioned above, you’ll want to consider factors such as the APY (which is essentially the interest rate, including compound interest); monthly fees; minimum deposit requirements; minimum balance requirements; and any withdrawal limits. And, naturally, since part of the point of using a savings account is security, you’ll want to double check that the bank is FDIC insured.Fill out the application: Here’s where you’ll use the info you gathered above. You’ll also need to enter your birthdate, street address, email address, and possibly your phone number.Wait for your application to be approved: Some banks approve new applications in a matter of seconds, while others take a bit longer to process them. (Note that banks don’t check your credit score when you open a savings account, which helps speed up the process.)Make your first deposit: Double check how much you need to deposit when you open the account and ensure you meet that threshold. Then, if you’re either opening your first savings account or keeping other accounts open, you’re done! If you plan on closing any accounts, make sure you reroute any direct deposits or automatic withdrawals first.Bottom linePayment apps like Venmo are convenient and safe, for the most part. But there are some risks, especially to your long-term financial well-being, if you use them in lieu of a savings account. Opening a savings account at an FDIC-insured bank will not only ensure your money is there for you when you need it — it will also help it grow. And, thanks to rising interest rates, now is an ideal time to reevaluate where you keep your money and put it into an account that gives you the most bang for your buck.Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at lauren.williamson@hearst.com.