What Is Venmo And How Does It Work? (A Fast And Easy Guide)
Venmo is a peer-to-peer (P2P) payment app that allows users to easily send and receive money from their mobile devices.
An increasing number of American consumers are embracing the ease and convenience of mobile payment methods, particularly peer-to-peer (P2P) payment apps, and one of the leading platforms in this realm is Venmo.
In 2021, the adoption of digital payments in the United States increased to 82 percent, marking a rise from 78 percent the previous year and 72 percent in 2016, as reported by a Digital Payments Consumer survey conducted by McKinsey & Co.
If you’re in search of a mobile payment solution, Venmo, a mobile payment platform that has taken the financial world by storm, could be the ideal app for you.
Wondering what Venmo is and how it works?
In this comprehensive guide, we’ll explore the PayPal-owned platform, how to set up an account, associated fees, and why you may want to consider using Venmo.
KEY TAKEAWAYS:
- Venmo Overview – Venmo is a user-friendly mobile payment service designed for US customers, enabling easy money transfers, purchases, and more.
- Funding Your Account – Venmo offers multiple funding options, allowing you to link a checking account and pay with a debit card, credit card, or bank account.
- Security First – Venmo prioritizes security with features like PIN- and fingerprint-based login options and robust two-factor authentication.
So, What Is Venmo?
Think of Venmo as your digital wallet for sending and receiving money among friends or even for conducting business transactions. It’s like having a virtual money-sharing tool at your fingertips.
For instance, if you need to divide the cost of a rideshare, Venmo allows you to transfer your share seamlessly.
On the other hand, if your colleague skipped settling their dinner tab from the previous evening, you can employ this mobile payment app to send them a friendly reminder to reimburse you.
Having started out as an SMS payment system in 2009, Venmo has evolved and can now be used to make purchases from a growing list of retailers, including Amazon, Uber Eats, Grubhub, and Poshmark.
Currently, Venmo has over 60 million users.
Other apps similar to Venmo include PayPal, Cash App, and Zelle.
Here’s what Venmo is in a nutshell:
Transfers and Purchases: Venmo functions as a peer-to-peer (P2P) payment platform, offering a seamless way to send and receive money.
It’s particularly handy for splitting bills, sharing expenses, and making purchases using your smartphone. Moreover, you can use Venmo to pay select merchants, further enhancing its versatility.
Mobile-Only Access: Venmo operates exclusively through its mobile app, available for both iOS and Android devices. The app’s intuitive design ensures effortless navigation, empowering you to complete transactions on the go.
Exclusively for U.S. Customers: As of now, Venmo is accessible only to customers within the United States. You should have a U.S. cell phone that can send/receive text messages using shortcodes. If you’re traveling internationally or need to transact with individuals abroad, it’s essential to explore alternative payment methods.
How Does Venmo Work?
Here’s how to send or request money through Venmo in a few simple steps…
Download the Venmo App: Begin by downloading the Venmo app. While you can do this on your computer, it’s more convenient through the mobile app. Venmo is available for both iOS and Android.
Account Setup: Once you download the app, open it and choose whether you want to create a personal or business account. You’ll need to provide your basic information, including your legal name, desired username, email address, and phone number. Once your account is ready, you can personalize it by adding a profile picture and adjusting privacy settings.
Connect Your Bank: By completing the above steps, you now have a new Venmo account. To send or withdraw funds from Venmo, you’ll need to link a bank account. You can link your Venmo account to a bank account at any United States bank. You can change what bank Venmo is connected to later if necessary. If you’re worried about sharing sensitive banking info, you can link your Venmo account to your debit card.
Access Venmo: Open the Venmo app or website and locate the “Pay or Request” button. It’s typically blue and adorned with a V, resembling the Venmo logo.
Choose the Recipient: Select the person you want to pay. You can search your friends list using their username, scan their Venmo QR code, or enter their email or phone number. Double-check your choice before proceeding.
Specify Amount and Reason: Enter the amount you wish to send or request. You can also include a note specifying the purpose of the payment as you scroll down.
Privacy Preferences: Review and adjust your privacy settings if you want to control who can see your transactions. This step is optional.
Confirm Transaction: Finally, choose to either request payment or make one, and confirm your decision. You’ll receive an email confirmation once the payment or request is processed.
How Do I Fund My Venmo Account?
Venmo provides several funding options to cater to your preferences.
Link a Checking Account
Linking your Venmo account to a checking account is one of the simplest and most cost-effective ways to fund it. This method ensures smooth transfers and payments.
Pay with Debit Cards, Credit Cards, or Bank Accounts
Alternatively, you can fund your Venmo account using a debit card, credit card, or bank account. Keep in mind that using a credit card may incur a fee, so it’s wise to review the associated costs.
How Venmo Generates Revenue
Venmo’s widespread availability at over 2 million merchants, combined with its strong user base, contributes to its revenue-generating capabilities.
Here’s how they make money:
Merchant Fees
Venmo charges merchants a fee of 1.9% plus 10 cents per transaction. Businesses are willing to pay these fees to tap into Venmo’s large customer base and to enhance their social media presence.
Pay-With-Venmo Button
Venmo generates revenue from the Pay-With-Venmo button, which can be integrated into other apps for in-app purchases. For instance, Uber allows its users to pay for rides and Uber Eats using Venmo within the Uber app, and Uber pays Venmo a fee for each transaction.
Consumer Payments
Venmo earns money from consumers who pay for instant transfers or use a credit card to fund their payments.
Venmo Credit Card
Venmo generates revenue from its credit card, including interchange fees charged to merchants, as well as interest and fees charged to cardholders.
What Are Venmo’s Fees?
Like other mobile payment services, Venmo charges fees, such as when you pay with your credit card or request an instant bank transfer. The payment service also charges fees with their cards.
Understanding Venmo’s current fee structure is vital for managing your transactions efficiently. Keep in mind that they are subject to change, so make sure you do your due diligence when getting started.
Here’s a simple breakdown…
Peer-to-Peer Payments Funded by Credit Card: When you use a credit card to fund peer-to-peer payments on Venmo, a fee of 3% per transaction applies.
Instant Transfers: You have two options for sending money: you can use the standard service and wait for it to arrive in 1-3 days, or you can pay for instant transfer to your bank account. If you opt for instant transfers from your Venmo balance to your bank account, a fee of 1.75% per transaction is imposed, with a minimum fee of 25 cents. “Instant” means 30 mins or less in this case.
ATM fees: If you use a Venmo debit card at an out-of-network ATM, you’ll incur a $2.50 fee for withdrawals and a $3 fee for over-the-counter cash withdrawals.
Cashing checks: Depositing checks into your Venmo account comes with a fee ranging from 1% to 5% of the deposited amount, with a minimum fee of $5. The exact fee depends on the type of check you’re depositing.
How Do I Receive Money with Venmo?
Receiving money through Venmo is straightforward:
- Tap Request at the bottom of your phone’s screen
- Perform a search and add the person you want to charge
- Enter an amount and add a note
- Tap Request
The app displays your Venmo balance, allowing you to keep track of incoming payments from friends, family, or other contacts. To quickly charge one of your top payment partners, simply tap their avatar at the top of the Home tab in your Venmo app.
What Are the Dollar Limits for Sending Money with Venmo?
Venmo imposes specific limits to ensure responsible usage:
Initial Limit
When you first create your Venmo account, you can send up to $299.99 per week until you complete identity verification.
Post Verification Limit
After successfully verifying your identity, your weekly sending limit increases significantly, allowing you to send up to $6,999.99 per week.
Is Venmo Secure?
All internet-connected apps are vulnerable to security breaches.
Security is a top priority for Venmo, and they have implemented several security features to protect your financial transactions.
Encryption: The app employs encryption to safeguard your sensitive information and continuously monitors your account for any suspicious activity or unauthorized transactions, enhancing security.
PIN- and Fingerprint-Based Login: Venmo offers the option to secure your account with a personal identification number (PIN) and supports fingerprint-based login for added convenience and security.
Two-Factor Authentication (2FA): For enhanced protection, Venmo provides two-factor authentication, adding a layer of verification to ensure that only you can access your account.
Some Final Thoughts About Venmo
In conclusion, Venmo is a mobile payment platform designed to simplify your financial transactions, making it effortless to split bills, share expenses, and conduct transactions via your smartphone.
As the world moves toward more digital payments and digital currencies, mobile payment platforms like Venmo will likely become increasingly popular.
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