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Personal Finance

Venmo Fees: Breakdown and Explanation

If you’ve ever split a tab or the cost of an outing, you might be familiar with how difficult it can be to get everyone to contribute their fair share. In 2017, it’s easier than ever to make these payments using an app like Venmo. Founded in 2009 as a text to text mobile payment system, Venmo is a mobile payment system owned by Paypal that allows users to send payments to friends, family, and even vendors through a simple tap on the screen.

The way that Venmo works is simple. Users install the app on their phones and then link their bank account or credit card to the app. They can then send and receive payments to anyone who uses the app. In addition to sending and receiving money to friends and family, Venmo can be used to purchase goods and services through authorized merchants, including paying for takeout through apps that have partnered with Venmo.

When you initially sign up for Venmo you are limited to sending and receiving a total of $299.99 per week. Once you verify your identity by providing the last four digits of your Social Security number, your zip code, and your date of birth, you will be able to send and receive up to $2,999.99 per week.

Venmo Fees

Standard Venmo services are offered completely free of cost, which means that for the majority of users, Venmo is cost-free. Therefore, sending money to friends and family using a debit card or checking account is completely free of charge. However, Venmo does charge fees for processing transactions with a major credit card; a 3 percent processing fee is added to every transaction paid for using a credit card.

Over time this small service charge could add up, particularly for anyone who sends multiple payments a day. For example, if you ordered a pizza with your roommates and sent a Venmo payment of $10 to your roommate for your share, you would be charged 30 cents for sending that payment. 30 cents might not seem like a lot, but if you also sent multiple transactions for shared rounds of beer, movie tickets, or other expenses, these transaction fees could end up costing you a lot of money.

Avoiding Venmo Fees

It is possible to avoid Venmo fees entirely by understanding how and when Venmo charges fees. First, Venmo does not charge a fee for receiving money and making payments to authorized businesses. If you are buying a good or service with a business that has an option to pay through Venmo (and has been authorized by Venmo) then you won’t be charged a transaction fee to do so.

Second, Venmo does not charge fees for sending money if the money is coming from one of three places: your Venmo balance (the money that’s already in your Venmo account), your bank account, or your linked debit card.

If you are concerned about the security of linking your Venmo account with your bank account or debit card, there are ways to ensure the security of your account. For starters, Venmo provides safety and security features such as multi factor authentication and the ability to add a pin code.

However, there are other, round-about ways to ensure your bank account is not compromised. You could set up a bank account that is linked only to your Venmo account, helping you to avoid the fees charged by Venmo (just be sure that the bank does not charge fees!). Alternatively, you could purchase a prepaid debit card to link to your Venmo account. This will help you avoid Venmo fees while protecting the security of your bank account.