Is Venmo Safe and How Does it Work?
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Summary:
Venmo is a safe, peer-to-peer (P2P) mobile money transfer app meant to send and receive money usually between family and friends, but it has business applications as well. It’s as safe as other mobile apps, you just want to make sure to only send money to Venmo users you know or trusted merchants.
In an ever-growing trend where many people no longer carry cash (but always have their phone), money transfer apps have become the norm. These mobile apps allow people to quickly and securely send and request money.
The Venmo app is one of the most popular today, which also has a fun social media aspect to it that’s particularly appealing to younger consumers. Read on to learn more about the Venmo app, its security measures, and how to set up a Venmo account and become one of the millions of Venmo users.
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What is Venmo?
Venmo is a cashless mobile money transfer app that allows users to transfer money in seconds, most commonly between friends and family who also have a Venmo account.
Forgot to bring your wallet to dinner one night? Need to reimburse a friend for picking up baseball tickets or covering the electric bill? No problem. Venmo transactions make it easy to pay back friends and family with a few taps from your mobile device.
You can also use your Venmo account to make purchases online or in stores with merchants who accept Venmo payments. On top of that, Venmo accounts can facilitate in-app purchases with participating vendors such as Hulu, Uber Eats, and Poshmark, to name a few.
Business owners can also benefit from the Venmo platform by reaching customers who prefer not to use a credit card account or debit card when making online payments. If the online business accepts Venmo transactions, you’ll see an option at checkout, much like PayPal (which owns Venmo, by the way).
“Venmo is a popular addition to e-commerce websites, as it gives customers a way of paying online without having to share their card details. Venmo, in a similar way to PayPal, adds a more trusted and potentially safer payment gateway to the customer” says Sam Cooper, a digital consultant at DM Wilbury.
Whilst no e-commerce payment gateway is completely without vulnerability, Venmo uses sophisticated data encryption methods to ensure the safety of sensitive banking information. — Sam Cooper, a digital consultant at DM WilburyClick to Tweet
How the Venmo app works
To set up your Venmo account, you just need to download the mobile app and set it up using your personal details including your legal name, phone number, and email address. Then you’ll come up with a username and Venmo account password. For additional security measures, you can set up multi-factor authentication to further protect your financial information.
Once your Venmo is set up, you can fund your Venmo account by linking it to any of your bank accounts, debit cards, or credit card accounts. To initially fund your account, link a bank account, debit card, or credit card to your Venmo account. Then, when people make payments to you, that money will be added to your Venmo balance.
If you want, you can transfer money from your balance to one of your linked bank accounts or leave it in your Venmo balance for future payments.
IMPORTANT! Venmo places certain restrictions on your account until they’ve verified your identity. This can include being unable to pay people from your Venmo balance or send and receive larger payments. Venmo will contact you through email or within the app if they need to verify your identity, or you can do it yourself anytime from the settings menu in the app.
Using your Venmo balance
If you choose to maintain a Venmo balance, your bank account will act as a backup, meaning your Venmo account won’t “bounce.” For example, let’s you owe your friend $200 and want to use the payment app to send the money. However, your Venmo balance is only $150.
In this case, the remaining $50 will come out of your linked bank account, or you could choose to fund the entire $200 from your bank account. Just be sure your bank account has enough money in it to cover any overages.
You can also add to your Venmo balance by using direct deposit for payroll checks or using the “Cash a Check” feature on your Venmo payment app.
Be aware that if a credit card is your linked account, you’ll be charged a 3% transaction fee every time a payment is made using the credit card. It’s best to have your default account be a debit card or bank account to avoid those transaction fees and only use your credit card in an emergency or to finance a large purchase.
Pro Tip
Reconsider leaving too much money in your Venmo balance. Not only does it not earn any interest, like if it’s kept in one of the below savings accounts, but your money is also not insured by the Federal Deposit Insurance Corporation (FDIC).
Does Venmo have a debit card?
For those who want to use their Venmo balance anywhere, you can apply for a Venmo debit card. They’ll need to verify your personal data and account details, but there aren’t any credit checks or fees to apply. Venmo debit cards run on the MasterCard network, so once you receive your card, you can use it anywhere MasterCard is accepted, including ATMs.
You can also get a Venmo credit card, which offers cashback rewards on certain spending categories. However, just like other credit cards, you’ll need to pass a credit check. If you’re approved, you can even use your Venmo balance to make easy payments on your credit card account right from your mobile device.
Is Venmo safe?
Financial institutions do get hacked on occasion, but Venmo takes every precaution to ensure your account remains secure. It uses encryption to protect both personal and business account information and stores that data on servers in secure locations. Venmo also monitors your account to help identify unauthorized transactions.
“Venmo for business use is as safe as the industry standard. It is already used by over 2 million online merchants. Whilst no e-commerce payment gateway is completely without vulnerability, Venmo uses sophisticated data encryption methods to ensure the safety of sensitive banking information,” says Cooper.
While Venmo is at least as safe as any other payment app, it’s still a good idea to take certain precautions, suggests Richard Gardner CEO of Modulus Global and an expert in financial technology and cybersecurity, among other specialties.
“The Venmo app is safe, but, as with anything, it can absolutely be misused and poor cybersecurity practices can lead to disaster. You should implement proper password protocols, and, perhaps most importantly, it is critical to close accounts that are not actively used. Leaving an account dormant, connected to your bank account or credit cards, is just asking for trouble in case of a data breach.”
Pro Tip
“One of the more unique parts of the Venmo experience is that it makes user transactions public by default, meaning that anybody can see who a user sends money to and why, creating potential security concerns. It is important to alter the default settings to make your transactions private,” advises Gardner.
Beware Venmo scams
While your Venmo account is generally safe when you’re receiving or sending money between users you know or when making purchases from Venmo merchants, you always want to make sure you’re transferring money to trusted sources. This is because sending money through Venmo is pretty much just like sending cash, meaning it can be difficult to get it back.
For example, one of the more common Venmo scams is when a private vendor asks for payment or a deposit upfront, you pay through your Venmo account, and then they disappear without delivering the product. This kind of Venmo scam sometimes occurs with unregulated markets like Facebook Marketplace and can also happen on fake websites.
Another Venmo scam, which also happens with other payment apps, is someone making a Venmo payment to you using a stolen credit card or debit card. Then, once the fraud is discovered, you’ll have to give the money back and (possibly) lose out on the item you sold.
If you do think you’ve fallen for a Venmo scam, the Federal Trade Commission (FTC) recommends you contact Venmo’s customer service right away. The easiest way to do this is through the Venmo app.
Go to your profile, tap on the settings menu (top right corner icon), and click on “Get Help.” From there you can chat or email with Venmo customer service regarding your dispute. If your phone is lost or stolen, you can also log into your Venmo account on any computer and contact a representative through this form.
IMPORTANT! If you paid a scammer with a mobile payment app, the FTC recommends you also report the fraud at ReportFraud.ftc.gov. When you report a scam, you’re doing your part to help the FTC and other law enforcement agencies put a stop to scams.
FAQs
How do I avoid getting scammed on Venmo?
It’s not hard to avoid Venmo scams if you’re vigilant, keep your phone or other mobile device and your Venmo login information in secure locations, use multi-factor authentication, and act quickly if you suspect any unauthorized transactions. Also, don’t accept payments from anyone you don’t know, and make sure anyone requesting money from you is a trusted source.
In addition, if you lose your phone or mobile device or notice a lost or stolen credit card (especially if it’s linked to your Venmo account), you can log in to Venmo from anywhere and disable your account so fraudsters can’t process transactions of any kind.
A further bit of advice that always makes sense is to enroll in an identity theft protection service. This isn’t just because of potential Venmo scams but because we live in a digital world where people’s identities get stolen every day.
Is Venmo free?
For the most part, Venmo is about as free as you can get, but there are a couple of (mostly avoidable) features Venmo offers that might cost you a few dollars.
For example, when you transfer money from your Venmo balance to your checking account, and you need the money right away, you’ll pay instant transfer fees of 1.75% of the transaction (minimum of $0.25 with a maximum of $25). If you can wait one to three business days, transferring money to your bank account is free.
If you have a Venmo debit card and use an out-of-network ATM, you’ll be charged $2.50 per transaction. Also, if you make payments through your Venmo account with a credit card, there’s a 3% processing fee.
Can I use my Venmo account outside the United States?
Currently, Venmo accounts and Venmo debit cards can only be used in the United States and U.S. territories. The rules also apply to online merchants not located in the U.S. You can, however, use a Venmo’s Visa credit card for foreign transactions.
Key Takeaways
- Venmo is a money transfer mobile app that allows users to send and receive money from their mobile phones.
- You can fund a Venmo account by linking to a bank account (like a checking account), a debit card, or a credit card.
- Using the app with other known and trusted Venmo users is pretty safe. However, make sure you don’t authorize Venmo transfers or otherwise exchange funds with people or vendors you don’t know.
- Venmo is free for most money exchanges, but processing fees apply if you pay with a credit card or want immediate transfers to your bank account.
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