Venmo: What it is, How it Works & Pros and Cons - Austen Morris Associates (2024)

Over the last decade or so, the number and popularity of digital payment services have soared, with an array of apps and platforms available to make finance more seamless.

One of the most popular payment service apps in the U.S. is Venmo, a peer-to-peer (P2P) payment app founded in 2009.

What is Venmo?

Venmo is a peer-to-peer payment app enabling users to quickly send or receive money from their friends, family or acquaintances.

Venmo achieves this with a social twist since users can send messages and emojis with their payments and like or comment on exchanges made between friends on a social media-like feed.

Since its founding, Venmo has expanded its horizons, becoming a payment option with retailers such as Hulu, Footlocker, and millions more participating merchants. Venmo users can use their Venmo accounts to do their shopping.

Both these services are free for users, though merchants pay 1.75% of the cost of each transaction.

How does it work?

To use Venmo, you must first download the app – available for iPhone and Android phones – and link the app to either your bank account, debit card or credit card (though you should note that credit card payments are subject to a fee worth 3% of the transaction).

Then, you can start sending or receiving money from any Venmo user by tapping either ‘pay’ or ‘request’ and entering the username, email or phone number of the person you want to send or request money.

When you receive funds from another Venmo user, the amount will detract from their account and add to yours. You can then keep the money in your Venmo account or transfer it to your bank account.

This transfer typically takes 1-5 days, though Venmo users can opt for ‘instant transfer’ to have the money transferred within 30 minutes. Still, you must pay a fee of 1.75% of the value transferred.

What are the pros of using Venmo?

1. Quick and easy to make payments.

Within minutes of downloading the app, you can start making payments to friends and acquaintances, needing only a single piece of contact info to send and request money instantly.

Venmo makes splitting bills easier, as you can request the same amount of money from multiple people at once. Venmo also provides a calculator to help divide costs fairly.

2. The social aspect.

Thanks to the customisation features – including the ability to add notes and emojis to the funds you transfer or request – Venmo can make asking people to pay you back a lighthearted, whimsical task.

The ‘request’ function also allows you to remind someone to pay you back what they owe without the awkwardness of having to message them directly and organise a bank transfer.

3. Basic service is free for users.

Venmo users don’t have to pay fees to send or receive money from other users or transfer money from their Venmo to their bank account.

This means Venmo users can benefit from the ease and convenience of the P2P service without losing out financially.

What are the cons of using Venmo?

1. Can’t make international payments.

To use Venmo, you must live in the U.S. and have a U.S. phone number.

This means that even if you’re a U.S. native, you can’t send or request funds from any of your international friends or family members.

2. Transactions are public by default.

Venmo’s default settings make it so that all of your exchanges – including the messages sent along with funds (though not the amount sent) – are visible to any Venmo user who wants to view them.

If you want to keep your finances more private, you’ll need to go and alter your settings accordingly.

3. Potential scams and hackers.

The biggest downside to using Venmo is the potential for your money to be stolen.

If a hacker gains access to your Venmo, it’s pretty easy to change the associated bank account – so the hacker could change the account to their own and transfer the money in your Venmo to their bank.

What’s more, a common Venmo scam has users being sent money by a scammer who asks for the money back, claiming it was an accident. In actuality, the scammer has used a stolen credit card, and when the cardholder reports the fraud, Venmo will remove the sum from your account; if you’ve already sent the scammer the money back, this is bad news for you.


Venmo provides an easy way for people in the U.S. to exchange money, make bill splitting easier and pay friends and family back without extra costs.

However, when using the app, it’s essential to be highly mindful of security: avoid leaving any significant funds in your Venmo account, never share your password and always report any unusual activity to Venmo to protect your finances.

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Venmo: What it is, How it Works & Pros and Cons - Austen Morris Associates (2024)


What is the downside of using Venmo? ›

Potential scams and hackers.

The biggest downside to using Venmo is the potential for your money to be stolen. If a hacker gains access to your Venmo, it's pretty easy to change the associated bank account – so the hacker could change the account to their own and transfer the money in your Venmo to their bank.

Can Venmo take money from your bank account? ›

Payments are automatically deducted from your balance, or if your balance doesn't cover the amount, they're deducted from your linked bank account. If a retailer doesn't accept payments through the Venmo app, they likely accept the Venmo Mastercard debit or Visa credit card. Identity Theft Protection Software can help.

Does Venmo need your bank account? ›

Pay with a debit card, a credit card or a bank account. To send money on Venmo, you need to link the app to a U.S. bank account, debit card, prepaid debit card or credit card. If you receive money and want to transfer it from Venmo, you'll need to link a bank account.

What is the simple explanation of Venmo? ›

Venmo is a smartphone app designed to transfer payments from one user to another through connected bank accounts. Venmo is owned by PayPal. Venmo uses user-provided account information to enable electronic fund transfers (EFT) between individuals.

What is safer, Venmo or Zelle? ›

Both of the payment services are decently safe, have user-friendly interfaces, and allow you to conveniently send money when you need it. Zelle stands out from Venmo with its absence of instant transfer fees, but it also cannot be used as a wallet. So, if you need a wallet function, you should go for Venmo .

Is Venmo a good or bad thing? ›

Venmo is safe to send and receive money on. Transactions are encrypted so hackers can't steal money from your account. But scammers can trick users into giving up their money, so it's possible for users to lose money. To keep money safe, consider keeping transactions private.

Does Venmo report to the IRS? ›

The $600 tax rule is a new rule that will eventually require third-party payment apps like Venmo, PayPal, and Cash App to submit Form 1099-K for any user who earns more than $600 on the platform during a tax year. The new rule is delayed for 2023, so it won't affect users during tax season in 2024.

What banks work best with Venmo? ›

Large national banks like Synchrony Bank, Chase, Bank of America, and Wells Fargo allow customers to connect Venmo. Many regional and online banks also have integration with Venmo for P2P payments. Some smaller banks and credit unions may not yet offer Venmo connectivity.

When someone pays me on Venmo, how do I get the money? ›

How does Venmo work when someone pays you? The person paying you will either send you money using your Venmo username, QR code, phone number, or email. Once the funds are released, you'll need to accept them before they go into your Venmo account.

Does Venmo require SSN? ›

As such, we are obligated to collect certain information from our users to verify their identities. We may ask for your SSN to verify your identity if you try to do any of the following: Send $300 or more in one week (rolling 7 day period)

Is it better to link bank account or debit card to Venmo? ›

Link Credit Cards, Not Debit Cards

Venmo allows you to link both credit and debit cards to your account to use as payment methods. In terms of security, you're better off using a credit card in place of debit, as credit cards have more legal protections governing fraud compared to debit cards.

What do I need to set up a Venmo account? ›

To set up a Venmo account, you will need to:
  1. Download the Venmo app on your phone.
  2. Open the app and choose to sign up with email or Facebook.
  3. Provide the necessary information, including your full name, date of birth, address, phone number, and email address.
  4. Read and accept the terms of service.
Oct 12, 2023

Why do people want to use Venmo? ›

When two people have Venmo accounts, the app is one of the easiest ways to transfer money between them. Venmo allows you to send money between friends and pay people for expenses like rent, shared utilities or a meal.

What is the daily limit on Venmo? ›

Venmo Daily Limits

These limits dictate the maximum amount of money a user can transfer within a 24-hour period. Typically, Venmo's daily limit starts at $2,999.99 for most users. However, this limit may vary based on several factors, including account verification status and transaction history.

Which is safer PayPal or Venmo? ›

Venmo uses encryption to protect your account information. You can also work with Venmo to set up multi-factor authentication or create a PIN for your account. PayPal offers similar security protections as Venmo, but it also provides a more robust set of security features for businesses.

Does Venmo charge a fee for receiving money? ›

It's free to send and receive money using what's in your Venmo account or bank account. *Venmo does not charge for sending money from a linked bank account, debit card, or your Venmo account. There is a 3% fee for sending money using a linked credit card.

Does Venmo charge a fee to cash out? ›

Instant electronic funds withdrawal — 1.75%. The minimum fee is $0.25; the maximum fee is $25. The merchant fee is 1.9% of the transaction amount.


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