What is Venmo and how does it work? – Councilor Forbes
Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
Americans continue to dive into the digital payment movement. In 2021, 82% of Americans were using digital payments, up from 78% the year before and 72% in 2016, according to a McKinsey & Co. survey.
The rise of mobile payment applications, including Venmo, is a key part of the digital payment revolution. Owned by PayPal, Venmo allows users to send and receive money quickly. Users can also make purchases through the app. As of November 2021, Venmo, available only in the US, had over 80 million users.
How does Venmo work?
Basically, Venmo is a cashless way to send and receive money. For example, you can use Venmo to share dinner with a coworker, pay for your share of a cab ride you shared with your aunt, or send half the monthly rent to your roommate.
Venmo’s functionality goes beyond that, however. You can also :
- Make purchases with the Venmo Mastercard debit card anywhere in the United States where Mastercard is accepted
- Pay for your purchases through mobile apps and websites from authorized Venmo partners
- Use a QR code in store to make a purchase with Venmo
- Cash certain checks after verifying your identity by requesting a Venmo debit card or setting up direct deposit
- Sign up for direct deposit to have your paycheck go straight to your Venmo account, up to two days earlier than your usual salary
- Receive price alerts on four types of cryptocurrency (Bitcoin, Ethereum, Litecoin, and Bitcoin Cash) that you can buy, sell or hold through Venmo
The Venmo app works on iOS and Android devices.
Who can use Venmo?
Venmo has three main requirements for using the app. You have to:
- Be located in the United States
- Have an American cell phone capable of sending and receiving text messages using short codes; in the United States, short codes are five or six digit numbers for texting
- Be at least 18 years old (in most cases)
If you want to transfer money from your Venmo account to your bank account, you must have a US bank account or debit card that can be used for instant money transfers. If you do not have access to a Venmo account balance, you must add a US bank account, credit card, or debit card to initiate payments.
If you have access to a Venmo account with a balance, you must add a US bank account, credit card, or debit card to initiate payments in excess of your Venmo balance.
How much does it cost to use Venmo?
Venmo doesn’t hit customers with monthly or annual fees. In addition, it does not charge for basic services such as:
- Send money from a linked bank account, linked debit card, or your Venmo account
- Accept money that goes to your Venmo account or withdraw money from the account
- Make a standard transfer to your linked bank account
However, Venmo does charge for some premium features and other services. These include:
- 3% fee when you use your credit card to send money to someone
- 1% fee (with a minimum of $ 5) for using the check cashing feature for faster deposits of payroll and government checks
- 5% fee (with a minimum of $ 5) for using the check cashing feature for faster deposits of unpaid, non-government checks
- 1.5% fee (minimum 25 cents, maximum $ 15) to instantly transfer money from your Venmo account to your debit card or eligible linked bank account
- Fees ranging from 50 cents to 2.3% for buying and selling cryptocurrencies
How long does it take to send money to your bank?
The time it takes to transfer money from your Venmo account to your bank account depends on the type of transfer you initiate.
A standard free transfer from your Venmo account to a linked US bank account typically takes one to three business days.
An Instant Transfer allows you to send money from Venmo to a qualifying US bank account or Visa or Mastercard debit card, typically within 30 minutes. However, the instant transfer will cost you. There is a 1.5% charge (with a minimum charge of 25 cents and a maximum charge of $ 15). Instant transfer can be done 24 hours a day, 365 days a year.
What are the dollar limits for Venmo?
Venmo has spending limits on person-to-person payments, purchases with the Venmo Mastercard debit card, online and in-app purchases made with your Venmo account, and in-store QR code purchases.
If you have not yet verified your identity, your combined weekly spending limit for all transactions is $ 299.99.
If you’ve verified your identity, your combined weekly spending limit is $ 6,999.99. This includes person-to-person payments, in-app and online purchases, purchases with your Venmo Mastercard debit card, and purchases using a QR code in-store. The weekly limit for person-to-person payments is $ 4,999.99.
Additionally, you are limited to $ 20,000 in cryptocurrency purchases per week and $ 50,000 in cryptocurrency purchases over a 12-month period.
Venmo also limits the amount of money you can add or transfer from your account.
If Venmo allows you to add money from a linked bank account, the weekly limit on the amount you can transfer from your bank account to Venmo is usually $ 1,500.
If your identity has not yet been verified, the limit on the funds you can send from Venmo to your bank account is usually $ 999.99 per week. Once your identity is confirmed, you can transfer up to $ 19,999.99 per week to your bank account. The one-time transfer limit is $ 2,999.99.
Instant transfers are limited to at least 26 cents and above. Standard transfers can be made for 25 cents or less.
Is Venmo Safe?
Generally, Venmo is considered safe.
Venmo says it uses encryption to help protect your account information and monitors your account activity to help spot unauthorized transactions. Additionally, it states that it stores your IT service information in secure locations. You can add an account PIN through the Venmo app to enhance security.
On top of all this, Venmo protects accounts with multi-factor authentication. When signing into your Venmo account, you may be asked to confirm your identity by entering a code that Venmo sends by phone or email.
Venmo cautions that its platform “is designed for payments between friends and people who trust each other.” Avoid payments for goods and services unless authorized by Venmo.
To further improve security, Venmo now requires users to verify their identity through the Venmo app. Without verification, Venmo will not allow you to dip into a Venmo balance to make payments, but you can still receive money and transfer funds to your bank account.
You will need a Social Security number or an Individual Tax Identification Number (ITIN) to verify your Venmo account.
“While there is always a risk in providing sensitive information to a business, identity verification is necessary to reduce the number of identity crimes,” says the Identity Theft Resource Center.
In a related move, Venmo now allows users to choose a public, private, or friend setting for their friends list on the app, and opt out of being seen on the friend lists of other Venmo users. .
The Identity Theft Resource Center warns that scams involving Venmo and other cash applications have escalated since the start of the Covid-19 pandemic. On social media, email and text, crooks have targeted cash app users to steal their money or identity.
Common Venmo scams include:
- Notify someone by email or text that they have won a Venmo prize
- Call a Venmo user to get their account information (Venmo does not)
- Call a Venmo user and pretend to be someone from Venmo Technical Support
- Selling something to a stranger that makes you believe they’ve paid for an item or service when in reality they haven’t
Does Venmo offer a credit card?
In October 2020, Venmo introduced a Visa credit card equipped with a QR code offering 3% cash back on purchases. Cashback can be used for cryptocurrency purchases without transaction fees. The card does not charge an annual fee or foreign transaction fees.
The card is available to eligible Venmo users who apply through the Venmo app.
Venmo offers a range of services that go beyond just letting users transfer money. However, Venmo users or those planning to use Venmo should keep in mind that many of these services are not free. Venmo charges fees for some of its services. Additionally, Venmo imposes dollar limits on a number of transactions. Despite the fees and transaction limits, users may find that the value of Venmo’s full capabilities exceeds any costs they could incur.