Is Venmo a Bank?

Venmo is quite popular right now due to the convenience it offers to users and its unique social media factor. However, some users might wonder whether Venmo can be regarded as a bank since it has some similarities with a bank account. Well, here’s what you need to know about the app. 

Is Venmo a Bank? Venmo is not a bank. Venmo allows users to send money to one another using their phones, but it does not offer traditional banking services such as checking or savings accounts.

Owned by PayPal, Venmo was initially created in 2009 for people to split bills for things such as dinner, movies or even rent. Its acquisition by PayPal in 2016 made it grow in popularity and currently hosts more than 65 million users in the U.S.

Its social feed feature appeals to the younger generation and is fueled by the accelerated migration from cash to digital transactions. 

Is Venmo a Bank?

Venmo has become an essential tool in people’s lives and has helped individuals migrate from cash to digital transactions for most day to day transactions.

For a new user Venmo can be described as a p2p money transfer tool just like Cash App where you can send and request money via text. 

Venmo does have some similarities with a bank account in that 

  • It can store a balance just like PayPal and bank accounts
  • You can withdraw Venmo balance from ATMs 
  • The app shares some of the security features with normal accounts
  • Has a debit card for its users

However Venmo is not a bank and people should not treat the app as a bank account.

The main reason behind this is that Venmo is not federally insured. Banks are usually insured by the federal government such that in case anything happens the client’s money remains safe.

However, if Venmo went through something like bankruptcy, clients are always at the risk of losing their money.

Venmo is useful for the day to day transactions but as much as people might make a habit of leaving their money there, it’s not as safe as your bank like we’ve explained. 

Venmo payments can also sometimes be declined for a variety of reasons. If your payment is declined, don’t worry – there are a few ways to unfreeze your account.

How Does it Work?

Through Venmo, you can send or request funds from anyone with a Venmo account. So, it makes it easy for people to reimburse each other and split the fee on purchases. Venmo is also used to pay specific merchants for goods mostly on websites also using a PayPal button in their payment section. 

The app is available for android and IOS and their services are acceptable via phone or through their website. However, you can only use the website to view transactions and not make payments or requests. Venmo also only works in the U.S so both sender and recipient need to be in the country for it to work. 

Getting Started on Venmo

To start sending or receiving money on Venmo you need to; 

  • Download the app on your phone 
  • Create your login 
  • Confirm your email, phone number and bank account 

After completing the registration process you can start transacting almost immediately. 

You can also get verified on Venmo which comes with perks such as more security and higher transaction limits. Here is the process involved. 

  • On the Venmo app, go to your menu and then settings. 
  • Tap “ identity verification” 
  • Follow the prompts and provide the required information
  • Once you see the message “You are all set” you have completed the process. 

What are their Charges?

When using Venmo users can avoid all their fees meaning almost all transactions will not be charged except; 

  • 3% per transaction charge for transactions through a credit card
  • 1% transaction charge for an instant transfer (cashing out from Venmo to a debit card).

Venmo does not charge for any transactions funded by a debit card, or a bank account. However, sending money with a credit card has a fee. A standard cash out is also free and takes about 3 days to be completed. 

How Much You Can Send on Venmo

Once you complete your basic registration process, Venmo allows you transact up to $299.99 in a week. 

To increase your transaction limit, you will have to further verify your identity. It includes providing details such as your birth date, social security number and Zip code. 

Once you are verified your sending limit rises to $4999.99 a week for person to person transactions. You can send the amount in one or multiple transactions.

For purchases at authorized merchants, you will pay a maximum of $6999.99 after verification. The limit is also similar when using the Venmo master Card to make purchases. 

Venmo has a $6999.99 weekly limit for all types of transactions. For P2P payments, you can only send up to $4999.99. That leaves $1999.99 of the limit that users can spend through making purchases either through the MasterCard or through the authorized merchants. 

However, it’s important to note that if a user spends more than the $1999.99, their limit for peer to peer transactions will decrease accordingly

When it comes to sending to a bank account, you are restricted to $999.99 initially but after verification, the figure rises to $19,999 weekly.

There is a lot of speculation on whether or not Venmo reports to the IRS – hopefully this article will clear some things up!

The Social Feature

The social feed feature of Venmo is a feature that different users might not agree on. Basically, you can see and even comment on other people’s transactions and they can also do the same for yours. 

So people value privacy and might not be comfortable with this feature while others are okay with it and use it for interactions. However, there is a way to set the privacy settings such that transactions are only visible to the sender and recipient. People can also block others like any other social app making it suitable for both groups. 

Final Thoughts

Choosing whether or not to use Venmo is a decision that relies on your needs. Some people prefer paying cash while others lean towards digital payments more. Either way Venmo is built around convenience so it definitely worth a try.