Not long ago, we scribbled mathematical equations on the back of restaurant bills before passing a stack of credit cards to a server for processing. Or are you thinking of stopping by an ATM to get cash for babysitters or dog walkers? How about the days when you wrote checks to a roommate for their share of the rent payment?
Venmo, a mobile payment service founded in 2009 and owned by PayPal, has greatly simplified transactions between friends and family. Some small businesses even accept Venmo payments. With a few taps, you can send your portion of a restaurant bill to a friend with spaghetti and wine emojis. However, in some cases there are fees associated with using the service. Users should also heed financial security tips to protect their banking information and also be aware of some potential scams targeting Venmo users.
Curious to learn how secure Venmo is? Here’s what you need to know about using the payment app, from fees to reducing the risk of fraud.
How does Venmo work?
Venmo is a peer-to-peer money transfer mobile app that allows you to send and request money from others through the app.
It borrows a page from other social media sites with its timeline showing payments you and your contacts make, complete with notes and emojis. However, the timeline does not show the dollar amounts being exchanged. If you don’t want others to see that, for example, you billed your friend for his portion of gas on a car trip (which may indicate you’re out of town), you can mark your transfers as private so that they are only seen by you and the person you are exchanging money with.
Venmo has three privacy settings: public, between friends, and private, and you can set one as your default. CNET recommends making sure your transactions are kept private, and warns that unless you change your settings, they’ll automatically become public.
To send or receive money on Venmo, you can link your Venmo account to your bank account, debit card, or credit card — or you can keep a combination of the payment methods in your digital wallet. However, if you use your bank account to deposit funds, you save on fees (more on that below)! When someone sends money to your Venmo account, you can withdraw from your balance when making payments.
Does Venmo charge fees?
While Venmo is free to sign up or have an account, there are some instances where the app charges fees.
Sending money to people with your debit card, bank account, or Venmo balance doesn’t cost you anything; However, if you send money with your credit card, you’ll pay a 3 percent transfer fee, according to the app’s fee breakdown.
Another common charge comes up when it comes time to transfer money from the app to your checking account. If you choose to transfer the money to your bank account, it’s free, but it can take anywhere from one to three business days. If you want the money right away, you can add it to your debit card, but there’s a 1.75 percent transfer fee — the minimum fee is 25 cents and the maximum fee is $25 for this type of transaction.
Venmo also has a check cashing feature that allows you to add funds to your account, starting with a 1% fee on payroll, or government checks with a minimum fee of $5.
How to reduce potential risks with Venmo
It’s important to take a few extra steps to ensure your Venmo account remains secure. In addition to password protecting your phone so no one can open your Venmo account and send yourself money, the app has additional security features.
With every digital or mobile transaction, there is a risk of data breach, Rocket Money emphasizes. Because of this, it’s best not to keep large amounts of cash in your Venmo account, and instead regularly transfer your funds to your linked bank account. Also, only send money to people you know. When you send money to someone who isn’t in your contacts, Venmo gives you an optional prompt to enter the last few digits of someone’s phone number to ensure you’re sending cash to the right person.
Venmo offers users the ability to set up a PIN code for sign-in, as well as a fingerprint-based sign-in option if their phone allows it.
If you lose your phone or suspect it’s being used in an unauthorized manner, you can prevent your phone from accessing your Venmo account. Go to Venmo.com > Settings > Security and remove the session associated with your phone. Removing the session will log you out of the app on your phone.
Scams to watch out for on Venmo
There are some common Venmo scams that Venmo and consumer advocates are warning about.
a common? A stranger sends you a Venmo payment and then contacts you to say it was an error and asks you to send the money back as a new payment. Fraudsters may be using stolen credit cards or debit cards, and if the actual card user reports the fraud and issues a chargeback, you’re out of money, explains The Ascent, a personal finance review website.
If you don’t know the person who paid you, contact Venmo and the app can help you reverse the payment. Venmo also says you can block users who send unsolicited payments or requests.
Scammers may also try to trick you into paying them a full or partial amount for an item. This is especially common with rare or hard-to-find items like game consoles and concert tickets. It’s a red flag if you’re asked not to mark the payment as a purchase. When you mark a payment as a purchase in a personal profile, your payments are legitimate and covered by Buyer Protection. Only buy things from strangers on Venmo if you’re buying from a Venmo-approved business account, or if you’re marking payment to a personal profile as a purchase, Venmo warns.
Venmo has undoubtedly made transferring money between friends and family a breeze, and even a growing number of retailers accept Venmo as a payment method. But it’s always good to make sure you keep your money safe by taking a few extra safeguards.