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What is Venmo? How does it work? Fees, safety, limits, and more explained

Here's everything to know about the popular money transfer app Venmo, from basics to fees and limits.
September 29, 2022
Venmo app on phone 4

Venmo is a company you’ve probably heard of, especially in the United States, even if you’ve never used it yourself. It can be a hugely convenient way to handle simple money transactions, but it isn’t quite the same as a bank account or debit card. So, what is Venmo, and how does it work? Here’s everything you need to know, from fees and transfer limits to concerns about safety and more.

Want to get started with Venmo right away? Click the buttons below to download the app from the Google Play Store or Apple App Store.

What is Venmo?

What is Venmo app home screen

Venmo is an app for Android and iOS that enables quick and simple transfers between private individuals. It’s primarily for use between friends, and it’s typically marketed as a way to split bills, reimburse friends for cab rides, or pay roommates for your half of the rent. Like PayPal, Venmo hooks up to your bank account or debit/credit card, although there is an in-app balance as well.

What makes Venmo unique is its focus on social interactions. Each payment has a message attached that’s publicly — or privately — published with the dollar amount removed. This works much like other social media feeds like Twitter or Facebook.

Additionally, Venmo added support for cryptocurrency early in 2021. It’s quick and easy to buy and sell four different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. There are also guides and tutorials for those new to the crypto-craze.

Venmo also added a new partnership with Amazon set to start in 2022. Essentially, the new deal allows Amazon customers to check out using the payment service following PayPal’s split with eBay.

Who owns Venmo?

Braintree purchased Venmo in 2012, which PayPal purchased in 2013. PayPal’s ownership of Venmo has led to various new features being added to the platform, although they are competing in the same space in some regards.

Read also: Venmo vs PayPal — Key differences, advantages, and disadvantages

How does Venmo work?

Venmo is a mobile-only platform, so to use it, you need to download the app from the Google Play Store or Apple App Store. You then need to create an account and link a US bank account or credit/debit card to send money. Venmo does not currently work with bank accounts outside of the United States.

The service essentially works as an intermediary and transfers money from your Venmo account to another person’s account. It may take a few hours to a few days for the funds to appear in the other user’s account. If you have enough funds in your account, the money will be deducted from there. Otherwise, it will transfer the total amount from your preferred payment method (bank account, debit card, or credit card).

Is Venmo free? How does it make money?

Venmo app on phone 2

Creating a Venmo account and transferring funds is free if you link a bank account or debit card. If you attach a credit card, there is a 3% fee on each transaction that originates from the credit card company itself. Venmo passes this fee onto its customers.

Venmo makes money from a few sources, one of which is instant transfers. This service allows you to send money from the app to a US bank account or debit card and have the funds arrive within 30 minutes. This service costs 1% of the transfer value, with a minimum fee of $0.25 and a maximum of $10. If you don’t want to pay, you can still transfer money for free with a one to three business day wait time.

The company also makes money from vendors, which pay a small percentage of each transaction that goes through the service. This is standard practice, and as a customer, you won’t pay any extra fees. The app is currently accepted at over two million retailers within the United States.

If you plan to use Venmo for business, the platform will begin to report transactions totaling over $600 to the IRS each year. This isn’t a new tax but rather an easier way for Venmo to track who owes what. Previously, Venmo would only have to report if a user had over 200 business transactions and made more than $20,000 in payments over a year.

Is there a limit on transfers?

Yes, there is a limit to how much you can transfer to other users with Venmo each week. For new, unverified users, the limit is $299.99 per week. Once you’ve verified your identity by sending in specific identification like your Social Security number, ZIP code, and birthday, the limit jumps to $4,999.99 per week. You can spend an additional $2,000 per week on authorized vendors, so the overall limit is $6,999.99.

For Venmo transfer limits, the start of the week is rolling and starts at the transaction time. This means that every transaction counts against your limit for precisely one week, regardless of when you made the transfer.

There are also Venmo limits on how much money you can transfer to a bank account. Those limits are $999.99 for unverified users and $19,999.99 for verified users per week, following the same rules above. However, the largest amount you can transfer at one time as a verified user is $2,999.99.

Is Venmo safe?

Is venmo safe security settings

Venmo is generally safe for simple money transfers to friends or buying goods at an authorized vendor. The company encrypts your data and keeps it stored in secure locations, so the likelihood of a security breach is low. However, like all services related to finance, you should take extra precautions.

The Venmo app has a few extra security measures to keep your account safe, such as a PIN requirement for each transfer. If you lose your phone or suspect someone is using it without your knowledge, you can log out of your account remotely on the official website.

That said, Venmo itself states that the service is intended for use between friends, so you should never transfer money to someone you don’t know. You will not get your money back from a bad actor if you willingly transfer it to them. Additionally, be careful what you write with your transfers, as anyone can see your comments. You can change this in the settings, but the default setting is public to all.

See also: A step by step guide on how to use Google Pay

Venmo hasn’t always been as safe as it is today. In 2016, the FTC intervened to get the company to clean up its act. Previous claims of “bank-level” security were found to be untrue. The notification system Venmo used for transfers also allowed scammers to easily pull one over on users.

Thankfully, these issues have been fixed today, and the platform is safe to use for all. Just don’t expect it to function as a replacement for a regular bank account.

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