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If you’ve ever made a payment online, chances are you have heard of Venmo.
To get an idea of how big the online payment giant is, consider that about $150 billion moves on its platform every year, according to its owner, PayPal. That’s the same as the entire economy of Ukraine, or twice the size of Venezuela’s or Bolivia’s.
Now it’s experiencing another surge in activity as the pandemic has made contactless payments more popular. Venmo now has 60 million users in the United States, including a quickly growing set of older customers.
“We’ve started to see a rise in usage from older age groups, or ‘silver tech,’ amidst the pandemic,” a Venmo spokesperson said. In the second quarter of 2020 alone, the volume of payments handled by Venmo has ballooned by more than 50 percent to $37 billion, compared to a year earlier, according to data from PayPal.
Designed as a way to send and receive payments between individual users with no fees and no physical contact, it has become so ubiquitous in our everyday lives that “Venmoing” is now a commonly used word.
For those who are new to it, or if you have been avoiding it until now, here’s a quick summary of how Venmo works. In this article, we’ll also answer some common questions about the service.
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What Is Venmo Used for?
You can use the service to send money to other Venmo users for almost everything, from your share of the brunch bill to paying the babysitter.
Anyone over 18 with a bank account, debit card or credit card can sign up for a Venmo account by downloading the app to their smartphone, or signing up on the Venmo website. Any user can send or receive money from anyone with a Venmo account in the United States, once they link their bank information.
Some websites also offer Venmo as a payment option. The “pay using Venmo” button will appear at checkout, or after users select “Pay with PayPal” as their payment option.
But is Venmo right for everyone? And how can users make sure their data is safe and secure when using Venmo to pay friends back, or get money from them? Before you sign up for an account, here’s everything you need to know about “Venmoing.”
How Does Venmo Work?
To ask for or send money, users simply tap on the “Pay or Request” button in the Venmo app, and put in their friend’s username, phone number, or email in the top box. If the friend is nearby, they can also scan a QR code from the app. From there, they can either request money from them, or send them money. After typing a memo indicating what the payment was for, the transaction is complete.
Money sent in Venmo comes from one of three sources: the user’s Venmo balance, a debit or credit card, or their bank account. Venmo users can even request that their paycheck, or a portion of it, be directly deposited to Venmo, to always keep a balance in the app.
Users can also request a Venmo debit card. In addition to spending anywhere Mastercard is accepted, the card can be used to withdraw money from a user’s Venmo balance. Withdrawals can be made from ATMs displaying the Mastercard, PULSE, or Cirrus logos. However, if they withdraw from any machine that isn’t in the MoneyPass network, users will pay a fee.
There are also limitations to using the Venmo debit card to access cash. If you decide to get cash from an ATM, the withdrawal limit is capped at the balance in your Venmo account, with a hard limit of $400 per day.
The company has just launched a Venmo-branded credit card as well. It has a QR code stamped on, so your Venmo profile pops up when someone scans it with their phone. They can then send you money or request a payment just like in a regular Venmo transaction. It also offers a so-called virtual card number, different from the one stamped on the card, which can be used to shop online for added safety.
How Long Does It Take to Send and Receive Money on Venmo?
Once money is sent, it shows up immediately in the recipient’s account, and can be spent using either the Venmo app or the Venmo debit card, or sent to a user’s linked bank account.
However, not all transfers are immediate. If you are adding to your personal Venmo balance from your credit card, debit card or bank account, it can take between one to three business days to complete the transaction. The opposite is also true: if you want to make a deposit from your Venmo account to your bank, it can take between one to three business days for the money to show up.
What Fees Does Venmo Charge?
For most actions in Venmo, there are no fees. That doesn’t mean it’s completely free to use – rather, users need to know when they may be charged for sending and accessing their money.
Venmo can be a great way to send and receive money between friends, but it doesn’t offer the protections of a traditional bank. Use it to pay your buddies back for brunch, but stick with debit and credit cards for everyday spending.
It’s free to send money to other Venmo users using your Venmo balance or your bank account. However, if you decide to send money using your credit card, Venmo will charge you a 3% fee. For example, if you are sending your friend $100 using the credit card linked to your account, you will be charged $103.
You could also face fees If you are withdrawing money from your Venmo balance to your bank account using the instant transfer feature. With an instant transfer, money will arrive to your bank usually within 30 minutes, but Venmo will charge a 1% fee, with a minimum of $0.25 and a maximum of $10. There is no fee to use the standard withdrawal, which can take up to three business days to show up in your bank account.
Finally, if you use the Venmo debit card, you could also be charged fees for withdrawing money from an out-of-network ATM. In addition to ATM fees, Venmo will charge $2.50 for using an ATM that’s not in the MoneyPass network and $3 for an over-the-counter cash withdrawal at a bank. You can avoid these fees by using a MoneyPass ATM.
Is Venmo Safe?
Venmo says it employs several security measures to protect the financial information of its users, including data encryption and password protection. But it’s not bulletproof, and users can face threats ranging from website “phishing” to stolen account passwords.
Under Venmo’s terms and conditions, users are protected from unauthorized transactions made in their account if someone else accesses it. However, if you accidentally send money to the wrong person, your only recourse is to politely ask for it back. Although users can ask Venmo for help, the company states on its website, “We cannot guarantee we’ll be able to help recover the money.”
If you send money on Venmo to someone for goods that are not delivered or a service that is not provided, you may not be able to recover the cash.
“Venmo does not protect you from transaction fraud,” says Samantha Ettus, founder and CEO of payment solutions provider Park Place Payments in Woodland Hills, Calif. “Let’s say you paid your neighbor in advance to pick up groceries. You pay them via Venmo, and if they never deliver the groceries, you have no recourse.”
For that reason, Ettus recommends that users send money only after a certain service has been rendered. “Pay the babysitter at the end of the shift. Pay your friend after they bought the gift,” she says, “or do this with friends you trust. You don’t want to be sending money somewhere to someone you don’t know via Venmo if you haven’t already received what you are supposed to receive.”
Finally, your Venmo transactions may not be private. If you haven’t changed your settings from when you opened your account, everyone in the app may be able to see your transactions – including your name, your profile picture, and the memo you sent with the money.
“Venmo by default sets transactions to ‘public’,” says Justin Varner, principal security engineer at credit-building lender Self Financial. “The user has to opt in to make them private.”
To make transactions private by default, users must go into the “Privacy” menu under Settings in the app, and change them to private. Otherwise, everyone – including any friends who use Venmo – could see when you send money and to whom.
Alternatives to Venmo
For those who want the flexibility of making digital payments on the fly, but without the worry of possibly sharing every payment they make with the world, there are several alternatives. The top options include:
- Cash App: Like Venmo, users can send and receive money quickly and easily using their phone. You can send money to any other Cash App user with either their username, phone number, or QR code. Payments are not displayed in a feed that can be seen by third parties.
- Zelle: Zelle partners with several major banks, so it may already be included in their apps. It works with your financial institution to send and receive money to and from friends, family and other trusted parties, directly into your accounts. All you need is an e-mail, phone number, and a bank that supports Zelle. It is also available as a separate app.
- PayPal: The parent company of Venmo, PayPal offers — on its app and site — more options for sending and receiving money, including a suite of business options. Plus, PayPal offers more protection when things go wrong, including missing items ordered from eBay or other supported partners.
Venmo presents one of the easiest options to send and receive money for users within the United States. Backed by PayPal with encrypted data, Venmo can be a great way to pay a friend, or send someone money for a service rendered.
But before you start “Venmoing,” it’s important to understand how your data might inadvertently be shared, and what happens in the worst-case scenario. By understanding the limitations of Venmo, you can send and ask for cash with confidence.