What is Venmo and is it Safe to Use?

A look at the popular mobile payment app

Woman using Venmo on smartphone
Photo: iStock

"Just Venmo me." Have you heard the phrase? If not, chances are you will hear it soon. Founded in 2009, Venmo is a mobile app that lets people easily transfer money between friends and family, rather than opening their wallets and pulling out cash. It wasn't until 2014, though, when Android Pay and Apple Pay debuted, that the mobile payments industry began to take off. In fact, eMarketer predicted there would be as many as 50 million mobile payment users in the U.S. by the end of 2017. You could be next.

Mobile payments can refer to three things: paying at the register using your smartphone; using an app to make payments online or within another app, and accepting or sending money within a payment app. You may have used Android or Apple Pay to make a purchase at a retailer, for example, or transferred rent money to a roommate or your share of the restaurant tab to a friend or family member using Venmo. Even if you're not using a mobile payment app like Venmo now, your friends probably are, and sooner or later they'll send you a request or payment. Download the app, and you'll get your money. (Resistance is futile!)

Venmo is certainly convenient, and it offers industry standard security, but, like any app or software that deals with finance, it's not impervious to scams. 

How Can You Use Venmo?

In general, you can use Venmo in two different ways:

  • Pay back friends and family for shared expenses
  • Purchase products or services from Venmo partners

Examples of how you might use Venmo include:

  • Sending your roommate your share of the rent
  • Requesting your friend's share of the bar tab
  • Paying for takeout ordered from a food app partnered with Venmo
  • Other non-business payments with people you know and trust

Whatever you use Venmo for, start by linking your bank account or debit or credit card, and then you can quickly send and receive payments to or from anyone you know who uses the app. You can also send payments and requests to non-users, who will then be prompted to sign up. You'll be notified once they do sign up, but of course, if they don't, you'll have to collect or send the money in a different way. (Being an early adopter isn't easy.)

When you first sign up, your sending limit is $299.99. Once you've successfully confirmed your identity by providing the last four digits of your SSN, your zip code, and date of birth, you'll be able to send up to $2,999.99 per week. Venmo is free if you send money from your bank account, debit card, or Venmo balance. If you send money using a credit card, Venmo charges a three percent fee. There are no fees to receive money or use Venmo to make purchases in apps.

Once you're set up, you can use Venmo nearly any way you like: pay a friend back for dinner, send your roommate your share of the cable bill, or request payments from friends or family for a shared Airbnb or HomeAway rental. Be sure to only use Venmo with people you know and trust. While PayPal owns the company, it doesn't offer the same purchase protection. So if you're selling something on Craigslist or eBay (or any selling platform) to someone you've never met, it's best not to use Venmo for the transaction. Stick to PayPal, Google Wallet, or other services that offer protection from scams and can aid you in cases of non-payment. We'll go into more detail on this in the next section.

You can also connect your Venmo account to partner apps such as Delivery.com and White Castle. Then you can use Venmo to pay for purchases using those apps, and even split bills for cab fare, food, or other shared expenses. Mobile businesses can add Venmo as a payment option at checkout, much like you can already pay with Android Pay, Apple Pay, Google Wallet, and PayPal, in addition to inputting a credit card.

Venmo also has a social media side to it, which is optional. You can make your purchase public, broadcasting it to your network of Venmo friends, who can then like and comment on it. You can also sign up for Venmo using your Facebook credentials, which lets you find friends who are using the mobile payment platform. We recommend always being careful about what your share on social media, especially when it comes to finances and big purchases. Similar to how broadcasting your vacation plans could invite burglars, so too can bragging about your purchase of a brand new TV or fancy bicycle. 

Risks of Using Venmo for Mobile Payments

Venmo automatically uses multifactor authentication when you use the app from a new device, which helps prevent unauthorized logins to your account. You can also add a pin code for extra security. While it's tempting to use the free option and connect Venmo to your debit card or bank account, that also means if you get scammed, money comes right out of your account in real time. Linking it with a credit card not only buys you time but may offer protection against fraudulent charges. The free option isn't always the best one.

There are, of course, risks involved with using Venmo including:

  • Scams when transacting with strangers, including false claims and reversed transactions
  • Non-payment from strangers for products or tickets you've sold and shipped to them
  • Lack of buyer and seller protection in cases of fraud or non-payment
  • Security breaches and fraudulent transactions on your account

There's an easy way to avoid the first three risks, above: don't talk to strangers. We can't stress how important it is to use Venmo only with people you know and trust. Receiving money from strangers can put you at risk in a few ways. You should be aware that users can reverse transactions on Venmo. Reversals can happen for an entirely innocent reason; perhaps the user sent payment to the wrong user or sent the wrong amount. However, a scammer could file a false claim with Venmo or use a stolen credit or debit card to back up the payment. Once the bank discovers the fraud, you could be subject to a chargeback.

It's important to understand that while receiving payments on Venmo appears to be instantaneous; it takes a few days to process. In essence, Venmo is temporarily lending you the balance until the bank clears the transaction. It's similar to when you deposit a check, even if you can access the funds right away, it doesn't clear for a few days. If the check bounces, your bank will remove the funds from your account, even if it's days or weeks later.

One way a scammer can take advantage of this delay is by offering to pay for something you're selling on Craigslist, say, using Venmo. Then, they'll send you payment, and once they've received the goods, they'll rescind it, and disappear. Unlike PayPal, its parent company, Venmo doesn't offer buyer or seller protection. In short, don't use Venmo with strangers; stick with a platform that protects against fraud like this. And even if you know the person you're dealing with, be sure it's someone you to which you would be willing to lend money or property.

To keep your account safe from fraudulent transactions, change your password regularly and don't use a password you use for another account. Add a pin code to your account as well and check your transactions as carefully as you would a bank or credit card statement. Report instances of fraud to Venmo and to your connected bank or credit card account immediately. Implementing all of these practices will keep your account—and your money—safe.