How Safe Is Venmo and Is It Free? (2024)

What Is Venmo?

Venmo started out as a free peer-to-peer (P2P) payment app available for iPhones and Android phones. That service is still free, as is using Venmo to pay participating merchants, who now number in the millions. You must be 18 or older to have a Venmo account.

Some other Venmo services carry a fee, however. Payments that go through a credit card account rather than a linked bank account or the user's Venmo account incur a 3% fee. There are other miscellaneous fees for transferring money instantly from Venmo to a bank and for depositing checks. Venmo also issues a debit card and a credit card that are accepted at a growing list of local and national retailers. Those products also carry fees.

Key Takeaways

Venmo got its start as a peer-to-peer payment platform with social network features.
That original Venmo peer-to-peer function remains free (as long as you don't use a credit card to pay).
Venmo can now be used to pay millions of retailers through the app or through a Venmo-branded debit card or credit card.
Some features such as instant money transfer or depositing checks carry fees.
Merchants who accept Venmo pay the bulk of Venmo's fees.

How Does Venmo Work?

After downloading the Venmo app from the Apple Store or the Google Play store, users are given options to link their Venmo accounts to a credit card, debit card, or checking account. Once enrolled, a Venmo user can instantly begin exchanging funds with any other Venmo user.

For peer-to-peer transactions, Venmo is a middleman between the accounts of two users conducting a transaction. For example, say Addison agrees to sell Kya a bracelet for $50. Kya sends Addison the funds via Venmo, which then raises the balance in Addison's Venmo account by $50 while reducing Kya's Venmo balance by the same amount. Neither pays a fee.

In this way, a Venmo balance is essentially a virtual ledger that represents funds changing hands, within the Venmo platform. Until Venmo transfers the money into the recipient's bank account, it isn't technically in that user's possession.

How to Send or Request Money

Money can be sent or requested by tapping the pay or request button in the Venmo app and then entering the other party's email address, phone number, or username. If you are the person receiving funds, you can either keep the cash in your balance or transfer it to your linked bank account. Using Instant Transfer rather than the traditional slower delivery adds a fee.

Money can be added to your Venmo account from your bank as well as from a Venmo debit card.

You can make payments through the app without holding the necessary funds in your Venmo account. If a payment exceeds your current Venmo balance, the money will be taken from your linked bank account. If the transfer amount is equal to or less than your balance, the funds stored on the platform will be used.

There's no fee for making a payment unless you use a linked credit card.

Age Restrictions for Using Venmo

Venmoisn’t yet available for younger teenagers. The app’s user agreement specifically requires users to be at least age 18. If Venmo eventually does offer accounts for minors, parents should be sure to protect their children’s privacy by setting all transactions to “private” so that their children’s recurring purchases, locations, and payments aren’t accessible to the public.

What Are Venmo's Fees?

Opening a Venmo account is free and there are no monthly fees. As noted, a simple Venmo transaction from a user's bank account, Venmo debit card, or Venmo cash balance is free of charge. If a credit card is used to pay, Venmo charges the sender a 3% fee.

Other services, listed below, carry additional charges:

Instant Transfer Fees

You can Instant Transfer money from your Venmo account to any U.S. bank account or participating credit card account for a fee of 1.75%. "Instant" means 30 minutes or less in this case.

You can avoid this fee by choosing the standard option, which is free and takes three to five business days.

Credit Card Charges

Venmo introduced its own credit card in 2021, and it carries a variable but steep interest rate just like most other credit cards. The interest rate as of March 17, 2023, is 19.49%-28.49%, depending on the credit rating of the applicant.

Cash advances cost the greater of $10 or 5% of the amount. Balances on cash advances carry an APR of 20.99% plus the current prime rate.

Debit Card Charges

The Venmo debit card, issued in partnership with Mastercard, is free to use except for some ATM fees, which you can avoid if you're careful.

ATM withdrawals are free from the MoneyPass network but cost $2.50 each from a domestic out-of-network ATM. Further, a $3 over-the-counter withdrawal fee applies when a signature is required for a withdrawal at a bank or financial institution.

There are no annual or monthly fees, processing fees, or interchange fees, Merchants pay the transaction fees.

How Long Does It Take To Send and Receive Money?

Any money sentfrom one Venmo user to another should appear immediately in the recipient's account.That's free.
For external bank transfers, standard three- to five-day delivery is free but Instant Transfers cost 1.75% of the amount being transferred.
If you add funds to your Venmo balance from your bank account, it can take three to five business days for the transaction to go through.

The Social Side of Venmo

Venmo has dominated the P2P payment market by making the transfer of funds fun and interesting. Users can energize the exchange by using emojis to describe their payments or requests. For example, if one friend fronts his buddy the cost of a hamburger, the friend can issue a Venmo payment back to him, adding a burger emoji as a playful gesture.

That can take the awkwardness out of asking your friend to pay back his part of the meal tab.

How Does Venmo Make Money?

Venmo derives a significant pot of revenue from the per-transaction fees that it charges merchants. Thanks to PayPal's infrastructure, Venmo is available at more than 2 million merchants.

Venmo charges merchants a 1.9% fee, plus 10 cents per transaction. Companies are willing to pay these rates due to the number of new customers Venmo brings to their doors. Venmo also offers participating merchants a higher social media profile.

Another stream of merchant revenue is derived from the Pay-With-Venmo button that can integrate into other apps for in-app purchases. For example, Uber allows its app users to pay for rides and Uber Eats using Venmo without leaving the Uber app. Uber pays Venmo a fee for each transaction.

Plus, Venmo makes money from consumers—those who pay for instant transfers or use a credit card to fund payments. And Venmo earns money from the Venmo credit card, both from interchange fees charged to merchants, and from interest and fees charged to cardholders.

Is Venmo Safe?

All internet-connected applications are vulnerable to security breaches. Therefore, Venmo and every other app that links directly to consumers' bank accounts must be held to the highest security standards.

Venmo has taken measures to protect its users from theft. However, your account still could be vulnerable if you share your password, lose your phone, or fall victim to a scam.

Venmo uses dataencryptiontechnology to protect users against unauthorized transactions while storing user information on servers in secure locations. The mobile payment service also gives users the option to log out of lost or stolen phones and to set uppersonal identification number (PIN)codes for mobile applications.

Unfortunately, hackers and scammers have been able to circumvent these safeguards. After gaining access to a user's account, hackers can easily transfer the user's Venmo balance to a new bank account. And by changing the user's linked email address, hackers can reroute a user's transaction notifications, leaving them in the dark until the bank finally notifies them of balance changes long after thefts occur.

Regulatory Investigation

In February 2021, the Consumer Financial Protection Bureau (CFPB) began investigating Venmo’s treatment of scam victims, following complaints that the payment app had been threatening to send debt collectors to their homes.

Venmo Pressured to Clean Up Its Act

Venmo has been criticized for its security, slow customer service responses to breaches, and failure to protect users' privacy. These complaints have highlighted the app's shortcomings, On the positive side, they have also forced the company to take measures to prevent future slip-ups and serve its customers better.

One notable settlement was reached in 2016, regarding a complaint from Texas Attorney General Ken Paxton accusing Venmo of negligent privacy, safety, and security practices. The settlement included a $175,000 payment to the state as well as reforms to these practices.

In February 2018, Venmo reached a settlement with the Federal Trade Commission (FTC) concerning the company's failure to disclose information to consumers about privacy settings. The FTC also found the company in violation of the Gramm-Leach-Bliley Act (GLBA) Safeguards Rule, which requires financial institutions to implement measures to protect the security, confidentiality, and integrity of customer information.

In 2021, Venmo ditched its controversial global feed, which publicly listed all transactions made by users who failed to change their default settings to private.

How to Protect Yourself With Venmo

Users can take the following precautions to combat hacking:

Never store large amounts of money in your Venmo balance.
Immediately transfer Venmo transactions to linked bank accounts.
Only use Venmo to exchange funds with people you know.
Beware of scammers sending emails asking for your password or other personal information relating to your account. Venmo will never ask you for this information and urges users to send an email to support@venmo.com if confronted with suspicious activity.
Change your setting to "private" to cloak your transaction history. Otherwise, other people, including strangers, will be able to view details of your transactions by clicking on your profile.

What Are the Risks of Using Venmo?

As with other online applications, there is a chance that your Venmo account could be hacked and your balance emptied. Ways to avoid becoming a victim of theft include making sure that you don't share your account information and password, logging out of your account when you're not using it, and refraining from storing large amounts of money on Venmo's platform. Also don't click on emails that might be phishing expeditions.

Is Venmo Insured by the Federal Deposit Insurance Corp. (FDIC)?

Unlike U.S. bank accounts, Venmo balances aren't insured by the Federal Deposit Insurance Corp. (FDIC). This means that if Venmo goes bust or somehow loses your money, you won't automatically be reimbursed. That suggests that Venmo users are better off keeping little or no money in the Venmo account and instead keeping it in the linked bank account where it can be tapped as necessary.

Is Venmo Free?

Venmo is free to use for its original function, which was to send and receive money from friends and associates. It's also free to use it to pay participating merchants, who now number in the millions. One word of caution: Don't use a linked credit card to pay anyone. Otherwise, you will be charged a 3% fee.

Can You Buy Cryptocurrencies on Venmo?

Yes, you can now buy digital currency on Venmo. However, Venmo isn't the only place where you can buy cryptocurrency, so be sure to compare its capabilities, choices, and pricing with those of other exchanges before opting to use this service.

The Bottom Line

Venmo has become one of the most popular peer-to-peer payment platforms, eventually branching out to merchant services and offering its own branded credit card.

While Venmo is easy to use, its users are still vulnerable to hacks and cyber theft. Use Venmo with the same caution that you would with any other online payment platform, including monitoring transactions and changing passwords regularly.

Venmo offers a free platform for transferring money between private parties, with options to fund transactions via credit card for a small fee. It's also free to pay for purchases in store using Venmo (but not by tapping into a credit card.)

As an enthusiast with a deep understanding of financial technology and mobile payment platforms, I can provide comprehensive insights into the concepts mentioned in the article about Venmo. I have a solid grasp of the workings of peer-to-peer payment systems, transaction fees, security measures, and the overall landscape of digital finance.

Venmo Overview: Venmo started as a peer-to-peer payment app for iPhones and Android phones, offering free transactions between users. It has since expanded to include millions of participating merchants, offering services like instant money transfers, debit cards, and credit cards.

Age Restrictions: Users must be 18 or older to have a Venmo account. There's a mention of potential accounts for minors in the future, emphasizing the need for privacy settings if introduced.

How Venmo Works: Venmo acts as a middleman for peer-to-peer transactions. It maintains a virtual ledger until funds are transferred to the recipient's bank account. The article outlines the process of linking accounts and the use of Venmo for various transactions.

Sending or Requesting Money: Details on how money can be sent or requested using the Venmo app, including the option to link credit cards and the absence of fees for payments from a bank account.

Venmo Fees: Venmo's fee structure is explained, covering free services, fees for credit card transactions, instant transfer fees, and charges associated with the Venmo debit and credit cards.

Instant Transfer Fees: An explanation of fees for instant transfers, with the option for a standard free transfer that takes three to five business days.

Credit Card Charges: Details about Venmo's credit card, including interest rates, cash advance fees, cash-back features, and the absence of fees for using the Venmo debit card under certain conditions.

Debit Card Charges: Information about the Venmo debit card, including potential ATM fees and the absence of annual or monthly fees.

Transaction Duration: Insights into the time it takes for money to be sent or received, with distinctions between peer-to-peer transactions and external bank transfers.

The Social Side of Venmo: Exploration of the social aspect of Venmo, where users can add emojis to describe payments and make transactions more engaging.

How Venmo Makes Money: An overview of Venmo's revenue streams, including per-transaction fees from merchants, fees from credit card transactions, and revenue from the Venmo credit card.

Venmo Security: A detailed examination of Venmo's security measures, encryption technology, and user options for additional protection, along with a mention of past regulatory investigations.

Venmo's History and Settlements: Insights into Venmo's history of criticism, settlements with regulatory bodies, and steps taken to address security and privacy concerns.

Tips for Protecting Yourself: Practical tips for users to enhance security, avoid scams, and protect their Venmo accounts.

Risks of Using Venmo: An overview of potential risks, including hacking, and ways to mitigate them, emphasizing responsible account management.

FDIC Insurance: Clarification that Venmo balances are not insured by the FDIC, highlighting the importance of keeping minimal funds in the Venmo account.

Venmo's Free Services: Reiteration that Venmo's original function remains free for users, with caution against using linked credit cards to avoid fees.

Buying Cryptocurrencies on Venmo: Confirmation that users can buy digital currency on Venmo, with a suggestion to compare its capabilities with other exchanges.

Conclusion: Summarizing the key points, emphasizing the popularity of Venmo as a peer-to-peer payment platform, and cautioning users to use it with the same vigilance as other online payment platforms.