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Nowadays, carrying cash seems to be a thing of the past for many people. Many people choose to use debit or credit cards instead of cash, while others may opt to use digital currency. Managing money in this manner has evolved considerably in the past decade, with more options than ever before for storing and accessing funds via apps. At this rate, plastic may take the backseat to mobile payment apps.
Venmo, a subsidiary of PayPal, is a popular digital wallet service that allows users to send and receive money through an app on their smartphone or via a website. With just a few clicks, verified users can easily request payment from their trusted contacts, or make payments to their friends and family. Because Venmo is a subsidiary of PayPal and both operate as a form of digital currency, there may be some confusion about what each one does — and the best use for each form of payment.
What is Venmo?
Venmo was designed to be used as a method of payment between friends who know and trust each other. While certain businesses are verified by Venmo and can accept it as a form of payment, it is primarily used to help facilitate transactions between friends and relatives. For example, if you go out to eat with friends and one person pays the bill with her credit card, you could send your portion of the check to her via Venmo rather than giving her cash.
Venmo is typically used via a mobile app, but can also be accessed through their website. One important aspect of Venmo is that the transactions are social in nature; users are asked to comment on each request or payment. Other friends in the same network can then see those comments, which can make Venmo feel like its own social network. In the example above, the person sending the payment could do so with a funny comment about dinner, or with emojis that help to tell the story of why you are sending money.
Venmo does not charge fees for most transactions, including those sent using a checking account or a debit card, or those sent using a Venmo balance. However, for any money transferred using a credit card, Venmo charges a 3 percent fee.
What is PayPal?
PayPal is a digital wallet service that has been in existence since 1998. It was originally designed to be used on eBay, but it has since branched out and can be used for any number of transactions. In 2013, PayPal acquired Braintree, which had purchased Venmo in 2012.
PayPal functions more like a bank account than a way to send money between friends. PayPal can be used to accept donations, send and pay invoices, and to send and receive individual payments. Users can access their PayPal balance with a debit MasterCard, and may even qualify for lines of credit.
PayPal has become so ubiquitous as a digital wallet service that it is now offered as a method of payment for many merchants, both online and in brick-and-mortar stores. PayPal buttons are a common feature on many websites as a simple way for businesses to accept payments. Many stores are also utilizing PayPal at their cash registers, allowing customers to input their account information at checkout to pay using their digital wallet.
PayPal allows users to transfer funds to their bank account without a transaction fee. However, sending money with a debit or credit card will result in a fee of 2.9 percent plus 30 cents. International transactions will typically have higher fees.
Venmo vs. PayPal: What are the Similarities?
Venmo and PayPal are similar in that both allow users to send money to friends and other contacts, often with no or a low transaction fee. They are both forms of digital currency that allow users to send money instantaneously, and those funds can both be deposited into bank accounts.
Venmo and PayPal are both currently secure, using bank-level encryption and security to protect account holders from unauthorized transactions. Both services allow users to access their services via an app or a website, with multiple methods of accessing their balance.
Venmo vs. PayPal: What are the Differences?
Venmo and PayPal are meant to target different audiences. Generally, Venmo is used for people who want to send money to other people they know, such as their friends or family members. It’s more peer-to-peer based and used on-the-go. In contrast, PayPal is meant to be used by businesses and individuals worldwide, regardless of whether or not they have a personal connection.
Venmo relies on a trusted network of people sending payments to each other, each registered and with their own Venmo app on a smartphone. Unlike Venmo, to send money via PayPal, people and businesses do not need to be registered users. They simply need to have the contact information of the person they want to send money to, and then enter their credit or debit card on the PayPal platform. Because PayPal has a broader application and functions more like a bank than a personal payment service, it is used by more businesses than Venmo.
PayPal transactions are more private than Venmo transactions, giving you more of a traditional banking or business experience. In contrast, Venmo may feel like more of a social experience when sending or receiving money. However, you can adjust Venmo’s settings to make it feel more private.
Which Service Might Be Better in Particular Situations?
When it comes to sending money between friends and people you know, Venmo is the top choice for most people. It is easy to use, does not require a website, and most transactions are free. However, if you want to keep a particular transaction private, then Venmo would not be a good option; PayPal is the better alternative in that situation.
For anything that involves sending or requesting money to businesses or to people you do not know, PayPal is the better choice. Because PayPal does not require anyone to be a registered user in order to send money, it is a better alternative for these types of transactions. In addition, any funds sent to you can be transferred to a linked bank account for no fee, or to a PayPal debit MasterCard.
Author: Jeff Gitlen