What Is Venmo? How Does It Work?

Banking
Updated: 23rd Jul 2021
Written by Justin Estes
Share this article
What is Crypto Banking? Is it the Future of Finance?
Venmo Debit Card Review: Pros, Cons, and Fees
Banking
July 12, 2021
Written by Justin Estes

Disclaimer: This post contains references to products from one or more of our advertisers. We may receive compensation (at no cost to you) when you click on links to those products. Read our Disclaimer Policy for more information.

Life can be fast-paced and stressful. When it comes to transferring money, most people don’t even carry cash or checks on them anymore.

This presents an issue when people are trying to send or receive funds.

Venmo presents itself to alleviate this stress because it allows users to connect their bank account to the Venmo app and digitally transfer their money to other Venmo users.

Before you go ahead and download anything, it is important to understand exactly how the app works, some of the benefits, as well as any additional options.

Let’s take a look at what makes Venmo so special and why it could make your life easier.

What Is Venmo?

Venmo is a peer-to-peer mobile app that allows you to directly send and receive money. It also provides some banking features, such as credit cards, debit cards, direct deposits, and mobile check deposits.

The app allows for a quick and easy method to exchange money, and all you have to do is download their app.

Recently Venmo ventured into the cryptocurrency market and now allows its users to buy and sell some of the most popular cryptocurrencies, such as Bitcoin and Ethereum.

How Does Venmo Work?

Venmo allows its users to send or receive money with other people who also have a Venmo account. The app may let you purchase items online if the website has a Venmo-specific payment button, similar to PayPal.

Although Venmo is a convenient way to transfer money, it is not intended for buying or selling items with strangers. Venmo can’t help you regain your money if it is sent to the wrong person, so be careful when making any payments and ensure you are sending it to the right person.

Does Venmo Charge Any Fees? Venmo Fees Explained

If you are looking to avoid fees altogether, Venmo does make this possible. However, if you want to utilize specific services, there are two fees.

Venmo requires 3% per transaction for any payments through a credit card. Venmo also requires 1% per transaction, or at least 25 cents, for instant transfers. Instant transfers are performed by cashing out from a Venmo balance to a debit card, which occurs in less than half an hour.

Venmo Features and Benefits

There are a variety of benefits when using Venmo. Any money from direct deposits or check deposits is FDIC insured. Venmo also allows its users to earn cash back on certain payments with their credit or debit card. Venmo also allows you to receive direct deposits up to 2 days earlier.

No Monthly Fees

When using Venmo, you do not have to worry about any monthly fees. The only fees that are required are instant transfers or any purchase funded by a credit card.

However, these are the only additional fees, so if neither option applies to you, you can use Venmo completely free.

Be aware that Venmo is beginning to promote its Venmo for Business platform, which will charge some transaction fees for goods and services related to business transactions, but they have not completely rolled this out yet.

Easily Send & Receive Money

Venmo makes it easy to send/receive money with friends and family. Transactions are quick and easy as long as both parties have a Venmo account on their mobile device.

Venmo acts as a convenient intermediary between two different bank accounts and will ultimately save you time when transferring money.

Free to Sign-Up

There is no cost when you sign up for a Venmo account. You simply provide the required information, and Venmo allows you to use its services without any additional sign-up costs.

Manage Privacy Settings

One topic people may be concerned about Venmo is that your transaction details may be displayed publicly. This means that other people will be able to see the transaction information, including your name, profile picture, and the memo that was sent with the money. Although this may be disconcerting to some, it can easily be changed.

The Venmo default transaction is set to public, but users are able to change this by opening the Venmo app, selecting the privacy menu in the settings, and changing it to private. This prevents third parties from seeing any transaction details.

Instant Deposits

Venmo allows its users to instantly deposit money from your Venmo account into your bank account. However, there is a fee tied to this option. Venmo takes 1% ($0.25 to $10) when using their instant deposits.

Unless you are in immediate need of your Venmo balance, choosing the free option is usually fine and does not generally take more than one business day.

U.S. Customers Only

If you want to use Venmo and live in the United States, you are in luck. Since PayPal operates Venmo, only people in the U.S. can use Venmo. It is important to note that both the sender and the recipient need to be in the United States.

Mobile Only

Venmo only allows you to send or request money through their Android or iOS mobile apps. If you sign in to your Venmo account online using a desktop or mobile device, you are only able to view your transaction history. The only way to transfer any money is through the Venmo app.

Venmo Security Analyzed

Venmo provides security measures on the app. The Venmo app offers both PIN and fingerprint login options, as well as two-factor authentication.

If you somehow lose possession of your phone, you can always log into your account through Venmo’s website and change your permission settings.

Venmo Cryptocurrency Services

It’s hard to read any news without some mention of cryptocurrency. Whether you are interested in it or not, Venmo now offers a limited offering of cryptocurrency options that you can buy and sell within the Venmo mobile app.

Options include Bitcoin, Litecoin, Ethereum, and Bitcoin Cash, with presumably more on the way.

You can buy and sell cryptocurrency using your Venmo balance or by depositing additional funds from your linked checking account.

If you want to learn more about Venmo’s cryptocurrency offerings, they offer a robust library of educational materials directly on the app.

How Do You Fund a Venmo Account?

You can fund your Venmo account using your daily bank account. In order to send money on Venmo, you will need to link the app to an acceptable account.

You can link the app to a debit card, prepaid debit card, or credit card, or a U.S. online bank account. After receiving money on Venmo, you will need to link a bank account to your Venmo app to withdraw any money.

How Much Money Can You Send on Venmo?

Overall, you are able to transfer up to $5,000 per week. However, Venmo has a system of verification for its users, limiting the amount you can send. When first downloading the mobile app, you are required to confirm your phone number, bank account, and email address.

This information allows you to transfer $299.99 per week. If you want to spend more money per week, you will have to verify your account.

To verify your account, you simply submit your Social Security number, birth date, and ZIP code. Once you have done this, you are able to send up to $4999.99 per week in either one or many different transactions.

How Does Venmo Compare to Other Peer-to-Peer Payment Apps?

Venmo is a great way to transfer money with friends and family; however, it is not the only option when making digital payments.

There are alternatives that offer different benefits, so it’s important to note the top choices so you can pick what’s best for you.

#1. Venmo vs. PayPal

As the parent company of Venmo, PayPal offers a wider variety of options through its app and website for sending and receiving digital payments.

It includes business options and more protection when ordered items go missing from eBay or any other supported partners.

If you need straightforward peer-to-peer money transferring service, Venmo is sufficient for most, but if you want more functionality and desktop access, PayPal is a better option.

#2. CashApp vs. Venmo

CashApp offers a very similar option to Venmo when digitally transferring money. With just a username, phone number, or QR code, you can easily send money to another person who has CashApp.

Unlike Venmo, however, CashApp never allows any third parties to view your payment history.

#3. Zelle vs. Venmo

Zelle has partnerships with a few major banks which offer free money transferring ability, allowing Zelle to be included in their apps.

Zelle works similarly to Venmo, allowing its users to send money or receive money from other people. However, Zelle allows the money to be sent or received directly into your accounts.

Zelle requires either a phone number, email, or a Zelle-supported bank.

Venmo Frequently Asked Questions

Peer-to-peer money transferring services revolutionized personal finance because they enable people to send money to others quickly and safely. Since it is a relatively new financial technology company, let’s dive into some of the most frequently asked questions regarding their service:

Does Venmo Have a Credit Card?

Yes – Venmo offers a Visa-branded credit card which you are able to manage using the Venmo app. Through the Venmo Credit Card, you are able to divide your credit card payments with other friends on Venmo, earn cash back rewards, and make contactless payments.

If you are interested in the Venmo credit card, make sure that you read the requirements before applying. Depending on when you apply for this card you may be eligible for a lucrative welcome bonus, cash back payment, or more. However, if you do not anticipate using the card too much it may not be worth adding to your wallet.

>> Learn More: Venmo Credit Card Review

Does Venmo Have a Debit Card?

Yes – Venmo released a limited physical Mastercard that can be used in the United States. Because Venmo’s debit card operates on the Mastercard network, you are only able to purchase items from locations that accept Mastercard. The debit card will take money directly from your Venmo account, so be wary that it will affect your balance.

Do You Need a Bank Account for Venmo?

You may be able to set up a Venmo profile without linking a bank account, but there is basically no way to use their service without adding at least one.

Is it Free to Use Venmo?

Yes – Venmo allows anyone to download and use its app for free. However, It is important to note that Venmo does require

fees on credit card-funded payments and instant deposits.

Is Venmo Safe to Use?

Yes – Overall, Venmo is a safe option when trying to digitally transfer money. However, there are some risks varying from stolen account information and website “phishing,” although it is unlikely.

Venmo does protect its users from unauthorized transactions made in their account if another person has accessed it; but, if you send money to the wrong recipient, then Venmo cannot help.

Bottom Line: What Is Venmo?

If you are looking for a fast and easy method to digitally send and receive money, Venmo is a great option. Because of its affiliation with PayPal, you can trust that Venmo will keep your money safe.

Whether you’re paying back a friend or receiving a gift, Venmo makes it easy and safe to transfer money. Although there is a variety of money transferring services, Venmo sticks out because of its convenient method to transfer money.

Justin Estes
Justin Estes
Justin is an experienced personal finance writer, blogger, and author. His background in accounting and finance led to a passion for helping people make the most of their money and matching them with financial products that enhance their lifestyle. When he's not working, he enjoys hiking, playing guitar, and drinking coffee.