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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.