Venmo raising and adding fees
Venmo will soon be adding fees for some previously-free services and hiking existing fees on others, the mobile transaction service informed its customers.
PayPal, the cash app's parent company, also announced forthcoming increases in its own consumer and merchant fees.
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In an email to users last week, Venmo informed its customers that starting July 20, "users who receive payments that are identified by senders as for goods and services will be charged a seller transaction fee of 1.9% + $0.10." Such transactions have thus far been free on Venmo except for credit card transactions, which carry a 3% charge on the service.
CRYPTOS NOW PART OF VENMO'S OFFERINGS
The company further informed users that its current fees for instant transfers to bank accounts would also be going up soon. Starting Aug. 2, the charge for an instant transfer estimated to take 30 minutes or less will be 1.5% with a minimum fee of $0.25, and a maximum of $15. The current instant transfer fees are at 1% with a $10 maximum. However, slow transfers, which typically take around one to three business days, will remain free on the app.
PayPal explained in a press release that the new ability for users to tag items as "goods and services" on Venmo means those transactions will also be covered by Venmo's Purchase Protection Program. Fees are paid by the seller.
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Meanwhile, PayPal itself is hiking its own customer and merchant fees come Aug. 2, when the payment giant will charge 3.49% plus another $0.49 on most transactions. That is up from the current standard fees of 2.9% plus $0.30.
Fast Company's Arianne Cohen pointed out that competitors Apple Pay and Google Pay do not charge transaction fees.
Venmo Vs. PayPal: Which To Use And When
Several mobile payment apps and peer-to-peer payment tools can help you quickly send and receive money. You may be most familiar with Venmo and PayPal, two of the most popular apps on the market. If you’re trying to decide between these two services, it helps to know how they work and the pros and cons of each.
Here’s a closer look at Venmo and PayPal and how these platforms can help you send money, receive money and shop online.
Venmo vs. PayPal: Quick Look
Venmo is owned by PayPal and is part of PayPal’s larger family of brands. This mobile payment app allows you to send and receive money quickly. The company describes its service as making sending money “safe, simple and social.” You can also use Venmo to make purchases via the mobile app, online or in person. Venmo has 65 million users.
Who is it best for? Venmo is designed to be a social, consumer-friendly app. If you need to pay a friend for last night’s restaurant bill, or if you need to split the rent payment with your roommate, Venmo is set up to be a quick, no-fee way to make these transactions. Some small businesses also use Venmo to receive payments.
How it Works
Venmo lets you connect your bank account, debit card or credit card and then use the app to make payments or send money and transfer money back to your external accounts. Along with connecting your external bank and card accounts, you can keep money in Venmo as part of your Venmo balance that you can use to spend or send cash.
You can also sign up for direct deposit to have your paycheck go straight into your Venmo account, up to two days earlier than your usual payday. Your Venmo balance is eligible for pass-through FDIC insurance through Venmo’s partner banks, Wells Fargo Bank and The Bancorp Bank, but only if you’ve purchased cryptocurrency or added money to your Venmo account via direct deposit or remote check capture.
Venmo has weekly transaction limits for person-to-person payments, merchant payments and debit card purchases. For person-to-person payments, the maximum is $4,999.99 weekly. It’s $6,999.99 for authorized merchant payments and the same for Venmo Mastercard debit card purchases. The overall combined spending limit each week is $6,999.99. For example, let’s say you spend $3,800 on person-to-person payments within a week. You’ll have $3,199.99 left to spend on authorized merchant purchases and Venmo Mastercard debit transactions in the rolling weekly period.
- Easy to quickly send and receive money and shop online
- Charges few fees, unless you make certain kinds of transactions or receive payment as a small business owner
- Offers interactive social features and colorful emojis to make payments friendly and fun
- Offers debit cards and credit cards
- Only available in the U.S.
- Has a $6,999.99 overall combined weekly spending limit for person-to-person transactions, merchant payments and Venmo Mastercard debit purchases
- Not as widely accepted at businesses as other forms of payment, like debit cards, credit cards or cash
- Charges a 1.5% fee for instant transfer of money to your external bank account or debit card
- Privacy settings may be difficult to navigate—transactions may be publically visible to app users
Founded in 1998, PayPal was one of the first digital payments companies. It started as a method for people to send money via email or pay for purchases on eBay. Today, PayPal connects merchants and customers in more than 200 countries, with 392 million consumer and merchant accounts.
PayPal is a publicly traded company (NASDAQ: PYPL) that owns several other brands in the online shopping and payments space, including Venmo, Honey, Xoom and Zettle. This digital payment service is available online and on mobile—it has a mobile app for iOS and Android that allows you to make payments, send money to friends and family, request money and more.
Who is it best for? Compared to Venmo, PayPal has similar features for sending money to friends and family and shopping online, but it offers a more robust range of payment solutions for small businesses. If you need to accept payments from customers in person or online, PayPal could be a better choice than Venmo.
How it Works
PayPal offers several ways to make payments or send and receive money:
- Buy online. When you buy online with PayPal, you can use your PayPal account without entering your personal financial information.
- Pay in person. If you’re shopping at a business that accepts PayPal payments, you can pay directly from your PayPal account, such as by using a QR code.
- Send money to more than 200 countries. If you have a friend or family member in other countries, you can securely send money to them with PayPal.
- Receive money via your own personal PayPal.me link or QR code. Or, collect money from a group of friends with a Money Pool.
Like Venmo, PayPal allows you to connect your external bank account, debit card or credit card to your account and use that as a source of funds. You can also spend and send money directly from your PayPal account balance.
If you have a verified PayPal account, there’s no limit on the amount you can send from your account in a given time frame. In a single transaction, you can generally send up to $60,000, but it may be limited to $10,000.
- Accepted by millions of merchants
- Available in 200+ countries; PayPal lets you send money worldwide in 25 currencies
- Robust business tools, offering reliable ways to get paid and make payments more convenient for customers
- Fees are complicated: PayPal has a more complex fee structure than Venmo
- PayPal charges a 1% fee for instant transfer of money to your external bank or debit card
- User experience is more complex than Venmo
Venmo vs. PayPal: A Deeper Look
PayPal lets you send money to anyone in more than 200 countries and 25 currencies, so long as you have the recipient’s username or email address. Venmo enables you to send money to anyone in the U.S. who has a phone that can receive text messages. If the recipient does not already have a PayPal or Venmo account, they will be prompted to create one. With both services, you can sync your contacts to the app.
Venmo generally lets you send money fee-free, so long as you’re sending money from your Venmo balance, bank account or debit card. If you use your credit card to send money, you’ll pay a 3% fee.
PayPal lets you send personal transactions fee-free if the money comes from your PayPal balance or bank account, but, if you use a credit card or debit card, you’ll pay a 2.90% fee plus an additional fixed fee based on the currency. You’ll also pay fees for international personal transactions.
Receiving and Requesting Money
There is no fee to receive money for personal transactions on Venmo or PayPal (when no currency conversion is involved).
The Venmo app is available in the App Store (rated 4.9 out of 5 stars) and Google Play (rated 4.3 out of 5 stars). The PayPal mobile app is available in the App Store (rated 4.8 out of 5 stars) and Google Play (rated 4.2 out of 5 stars), or you can sign in to your PayPal account online from any browser.
Venmo Fees vs. PayPal Fees
Perhaps the most notable difference between PayPal and Venmo fees for most personal users is that PayPal charges a 2.90% fee for personal debit card transactions, while personal debit card transactions are fee-free on Venmo.
Pay attention to what kind of transaction you are making. Both PayPal and Venmo charge an extra fee (about 1%) for instant transfers when moving money to your external bank account or card account. And both charge for sending money with a credit card: 3% with Venmo, 2.90% on PayPal.
PayPal and Venmo also charge fees for business transactions. So, if you are receiving payments as a business owner, freelancer or entrepreneur, be prepared to pay a fee for those transactions.
Venmo has business features that enable small businesses to accept Venmo payments in person or online, using QR codes for point of sale. You can set up a Venmo business profile for your small business and get paid via the app in the same way that people use Venmo to pay their friends.
PayPal offers a more extensive commerce system for businesses, with features and services such as point-of-sale (POS), payments and invoicing, business debit cards, working capital and business loans, shipping and dispute management and more.
Frequently Asked Questions (FAQs)
What security features do Venmo and PayPal offer?
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.
Are Venmo and PayPal FDIC insured?
It depends on how you use your account. Venmo and PayPal are not banks, and keeping money in your Venmo or PayPal balance is not the same as keeping it in an FDIC-insured bank account.
However, if you use direct deposit for Venmo or PayPal, that money is transferred to and held by each service’s bank partner, where the funds are eligible for FDIC pass-through insurance up to the applicable limits. Also, if you have a PayPal Cash Plus account and a PayPal Cash Mastercard, the FDIC pass-through insurance also applies.
If you want the security of FDIC insurance, make sure your PayPal or Venmo deposits are eligible.
Can I withdraw cash at an ATM from my Venmo or PayPal account?
Yes, if you have a Venmo or PayPal debit card set up for the account. The Venmo Debit Card offers free ATM withdrawals from MoneyPass ATMs within the U.S. The PayPal Cash Card lets you withdraw cash fee-free from 33,000 MoneyPass ATMs worldwide.
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How Safe Is Venmo and Is It Free?
What Is Venmo?
Venmo is a peer-to-peer (P2P) payment app available on iPhones and Android phones that allows for the quick and easy exchange of money directly between individuals.
Founded in 2009, Venmo began as a text message-based payment delivery system. Then, in March 2012, the company introduced a platform with an integrated social network, in an effort to capitalize on the growing P2P economy. Less than six months later, Braintree, the mobile payment system utilized by Airbnb, Uber, and other e-commerce giants, acquired Venmo for $26.2 million.
Less than one year after that, Venmo enjoyed a substantial boost in users, when the payment company PayPal Holdings Inc. acquired Braintree for $800 million and rapidly monetized Venmo’s user base.
- Venmo began in 2009, with a text-message based peer-to-peer payment platform.
- Venmo launched a platform with an integrated social network in 2012.
- Sending money over Venmo triggers a standard 3% fee, but the company waives that expense when the transaction is funded with a Venmo balance, a bank account, or a debit card.
- The 3% fee is not waived when users send money from a credit card.
- Venmo is accepted as a form of payment by approximately two million online and brick-and-mortar merchants.
How Venmo Works
After installing the app on their phones, then linking their Venmo accounts to their credit card, debit card, or checking accounts, Venmo users can instantly begin exchanging funds among one another, with Venmo functioning as a virtual fiscal intermediary.
In other words, Venmo may be seen as a middleman between the two bank accounts of the two users conducting a payment transaction.
Consider the following scenario: Sally agrees to sell Mary a bracelet for $50. Instead of transacting with Mary’s bank account, Mary sends Sally the funds via Venmo, which then raises the balance in Sally’s account by $50, while reducing Mary’s Venmo balance by that same amount.
In this way, a Venmo balance is essentially a virtual ledger that represents funds trading hands, without actually executing transactions outside the Venmo platform. Therefore, until Venmo transfers the balance into the recipient’s bank, the money isn’t technically in that user's possession.
The Social Side of Venmo
Venmo has dominated the P2P payment market by making the transfer of funds a fun and interesting exercise. Users can jazz up the exchange by using emojis to describe the traded items in question. For example, if one friend fronts his pal the cost of a glass of wine, the friend can issue a Venmo payment, with the addition of a wine glass emoji, as a playful gesture.
“This takes the awkwardness out of asking your friend to pay back their portion of the bar tab, marrying the social element and the financial element,” explains Venmo spokesman Josh Criscoe.
According to Venmo’s website, there is ultimately no fee for sending money over the platform, if the money is funded with a Venmo balance, a bank account, or a debit card. But transactions financed with credit card payments trigger a standard 3% fee that originates with the credit card companies, which Venmo simply passes onto consumers.
Venmo derives a more significant pot of revenue from the per-transaction fees it charges merchants. Thanks to PayPal’s infrastructure, Venmo is compatible with at least two million merchants, consequently enabling Venmo to rake in two discrete types of income streams.
The first type of revenue is facilitated through a "smart payment button" that can be integrated into other apps, for in-app purchases. In 2018, Uber added a service that allows its app users to pay for rides and Uber Eats using Venmo, without ever leaving the Uber app. Furthermore, the cost of rides and food items can be divided among multiple users via the Uber app.
Venmo Debit Card
The second source of merchant revenue is derived from the Venmo debit card, which draws directly from a user’s Venmo balance. This card operates through Mastercard and can be used at any business that accepts Mastercard. This function has helped Venmo expand beyond its exclusive P2P platform, empowering customers to transact directly with online retailers and brick-and-mortar establishments.
In both revenue-generating scenarios, Venmo charges merchants a 2.9% fee, plus $0.30 per transaction. Companies are willing to pay these higher-than-average rates, due to the wealth of new customers Venmo brings to their doors. Furthermore, Venmo users are more likely to elevate the profiles of participating companies, over their social media accounts.
“Partnering with Venmo is like partnering with a credit card processor, but with much more upside,” notes consultant Richard Crone. “Retailers spend a lot of money trying to get you to like them on Facebook and follow them on Twitter. But they could get these things for free, as a byproduct of allowing Venmo payments. People can see where their friends have been and what they’ve been buying, which turns users into advertisements for businesses, among a highly desirable target demographic.”
Venmo boasted 40 million by the end of the fourth quarter of 2919. Its net payments volume grew to $29 billion, representing a 56% year-over-year climb. Projected revenues for 2019 were approximately $300 million.
Is Venmo Safe?
All internet-connected applications can be vulnerable to security breaches. Therefore, Venmo and other platforms directly linked to consumer bank accounts must be held to the highest safeguarding standards.
For this reason, Venmo uses data encryption technology to protect users against unauthorized transactions while storing user information on servers in secure locations. Venmo also gives users the option of setting up PIN codes for mobile applications.
Unfortunately, hackers and scammers have still been able to circumvent these precautions. After gaining access to a user’s account, hackers can easily transfer a user’s Venmo balance to a new bank account. And by changing the user’s linked email address, hackers can reroute a user’s transaction notifications, leaving them in the dark until the bank finally notifies them of balance changes, long after thefts occur. Stories of Venmo users losing up to $3,000 have been reported.
The Consumer Financial Protection Bureau is probing debt-collection practices at Venmo, which said on Feb. 5, 2021 that it received a “Civil Investigative Demand” from the CFPB “related to Venmo’s unauthorized funds transfers and collections processes, and related matters.”
How to Protect Yourself
Users can take the following precautionary measures to combat hacking:
- Never store large amounts of money in Venmo balance.
- Immediately transfer Venmo transactions to linked bank accounts.
- Only use Venmo to exchange funds with familiar people.
- Opt out of Venmo’s social network, by changing the setting to “private,” in order to cloak transaction histories. Otherwise, Venmo's default new account setting of “public,” enables the app to publish transactions on its public feed.
Settlements Over Privacy Issues
Venmo has been criticized for its slow customer service responses to these breaches. In 2016, Texas Attorney General Ken Paxton announced a settlement with PayPal Inc. regarding Venmo’s negligent privacy, safety and security practices. The settlement included a $175,000 payment to the state, as well as reforms to these practices.
In March 2018, Venmo reached a settlement with the Federal Trade Commission (FTC) concerning the company’s failure to disclose information to consumers about privacy settings. The FTC also found the company in violation of the Gramm-Leach-Bliley Act’s Safeguards Rule, which requires financial institutions to implement safeguards to protect the security, confidentiality, and integrity of customer information.
As part of the settlement, Venmo is subject to biennial, third-party audits of its compliance efforts for 10 years. Violations of these terms could result in a civil penalty up to $41,484 for each one. So despite Venmo's imperfect record, institutional and legal measures aim to remedy these shortcomings.
'Does Venmo charge a fee?': A guide to Venmo fees, and how to avoid them
- Venmo does charge a fee in certain cases, though it's pretty easy to avoid these fees depending on how you use the service.
- Venmo charges a three percent fee to send money from your credit card, though if you only use your Venmo balance or bank account to send money, there are no fees.
- Instant transfers to your bank account come with a one percent fee, though standard transfers are free.
- If you have a Venmo Card, there may also be additional fees for cash withdrawal.
- Visit Business Insider's homepage for more stories.
Like any financial service, Venmo does charge fees in certain cases.
Though, depending on how you use Venmo, it's entirely possible to use the app for free without ever paying fees.
Venmo does charge a fee if you use a credit card to send money
The most common fee you are likely to encounter with Venmo is when you make a purchase or send money to another person.
If you send money using a credit card, Venmo adds a three percent fee (which is the fee from the credit card company being passed on to you).
You can avoid the three percent purchase fee by only sending money from your Venmo balance, bank account, or debit card. As long as you're not using a credit card directly, Venmo does not charge a fee to send money.
Venmo may also charge a fee if you use Instant Transfer, or have a Venmo Card
There will be a fee if you transfer money to your bank account with an Instant Transfer. If you choose an Instant Transfer, Venmo charges one percent (with a minimum fee of 25 cents and a maximum of $10).
Standard bank withdrawals, which take 1-3 business days, are always free.
If you get the optional Venmo Card, there are additional fees associated with it, including an ATM cash withdrawal fee ($2.50) and an over-the-counter cash withdrawal fee at the bank ($3).
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The Best Venmo Alternatives to Avoid Fees
People who sell goods and services on Facebook Marketplace and other online sites will soon face fees if they use Venmo. The mobile payment service announced it would soon add a "goods and services" tag that sets business payments apart from personal accounts.
Venmo will require sellers that have personal accounts to document sales. If customers don't receive the goods or services as expected, they may receive refunds from Venmo.
What Are the New Venmo Fees?
Venmo announced it would charge 1.9 percent plus 10 cents to those receiving payments for goods or services.
The change takes place on July 20, 2021. At the same time, Venmo plans to make changes to its purchase protection program and add visibility of your friends' list to other users. That may surprise some, but Venmo has always had a social network component that makes your transactions public.
Then, beginning August 2, 2021, Venmo plans to charge 1.5 percent per instant transfer (with a 25 cent minimum fee and $15 maximum fee).
Those fees can add up, which is why now is the time for you to begin looking for trusted Venmo alternatives. That's not PayPal, which acquired Venmo in 2013. PayPal plans to boost its fees, too. There are plenty of others options, though, including those listed below.
How to Avoid Venmo Fees
You can send money to friends instead of for goods and services without fees. Just make sure that you don't use a credit card for those transactions and the service is free.
Venmo will charge you a fee if you make an instant transfer. You can avoid that by making a standard bank transfer, which takes one to three business days, or by using a transfer system from your bank. It's always wise to check with your bank before moving ahead with any transfers to ensure they don't charge additional fees for certain services.
Best Venmo Alternatives
If you want to avoid Venmo fees for your small business or other business transactions, consider the following options––
Zelle is arguably your best Venmo alternative. You access Zelle in the mobile app from your bank. If Zelle is not offered at your bank, you can directly download the Zelle app. If the person to whom you send money doesn't have the app, Zelle will send them a text or email message to alert them to the payment and explain how they can obtain it. Payment is usually available immediately.
Fees: None. Zelle recommends that you contact your bank to ensure they do not levy charges for the use of this app.
Apple users can enable digital wallets called Apple Pay. Link your credit or debit card to Apple Pay to send money to whomever you choose.
Fees: Apple does not charge fees for Apple Pay.
You can use Cash App if you link your debit card. Then you can use the app to send either cash or Bitcoin.
Fee: There are no fees if you send or transfer money via debit cards. Money is usually available in one to three days. If you send payment via a credit card or send a one-day payment, you will pay 3 percent and 1.5 percent fees respectively.
Google Pay is similar to the other mobile payment transfers. Download the app and use it to transfer money to others.
Fee: If you transfer money with a credit card or bank account, there is no fee, whether the transaction is personal or business. If you use a debit card, you pay a fee of 1.5 percent or 31 cents, whichever is greater.
You can use Facebook Messenger to send and receive money from friends and family. The only catch is you must use a bank-issued debit card or Paypal account to make these transfers.
Fee: There are no fees from Facebook for this service.
Venmo's new fee structure means you need to pay extra charges to receive or send money for personal or business reasons. Consider the above services to make mobile payments for free or less.
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Venmo is paying closer attention to what’s being paid for on Venmo
Next time you Venmo a friend of a friend for a concert ticket, the app would like you to give it a cut of the action.
Last week, Venmo announced a new way for users to conduct “goods and services transactions,” giving people with personal accounts the ability to toggle between transaction types. Venmo takes a 1.9% cut of commercial transactions—previously only applicable to registered businesses—plus a 10-cent fee. In exchange, those transactions are entitled to payment protection. So if you’re selling a couch and want the buyer to pay via Venmo, you can flip a switch, pay a fee, and protect both parties in case of a dispute.
The app is zeroing in on a gray area familiar to many of its customers. Venmo’s user agreement states that personal accounts may not be used to conduct business, including paying for “concert tickets, electronic equipment, sneakers, a watch, or other merchandise, deposits for apartments, or dog walking.” But it’s unclear how many Venmo users break those rules—it’s common, for example, to pay a babysitter via Venmo—or what Venmo might be doing to better identify anyone gaming the system. The company declined to comment on how it monitors transactions, many of which are categorized only by sparse descriptions or a single emoji.
“While accounts could potentially be suspended or terminated, Venmo’s focus is on educating customers…on the value, protections, and benefits that the goods and services payment options provides,” a spokesperson told Quartz. In a June 28 press release, Venmo parent PayPal noted that more than half of respondents to a 2020 user survey said “they would be most likely to make a purchase from someone they don’t know if their transaction provided purchase protection.”
To be sure, payment protection is an important facet of e-commerce, and should be a staple on peer-to-peer payment apps. But asking individuals to pay a fee for pseudo-business transactions—the spokesperson offered the examples of selling concert tickets to an acquaintance or purchasing a couch from a local ad listing—could also be indicative of a more basic goal. Venmo, which has 70 million users and makes all its money on fees, still doesn’t turn a profit.
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