The other day, I was on the phone with my mom trying to figure out how I could transfer money to her. My first thought was Venmo, the mobile app I use on a regular basis. Whether I’m splitting the check at brunch with friends or getting my monthly rent payment to my roommate, it comes in handy often. My mom, on the other hand, was reluctant — how could it really be free? How does the company make money without fees? And is it safe?
I’ll be honest, I didn’t have any answers for her at the time. Over the past few years, it just became second nature to use Venmo without thinking too much about the company behind it. After hearing her concerns, I realized I should probably do some digging.
First off, there are some fees attached to certain money transfers. If you choose to use your credit card to make payments rather than a debit card or straight from your bank account, there is a three percent fee. However, that money doesn’t go back to Venmo — it originates from the credit card companies.
So how does Venmo earn any money to help people pass their cash around? Investopedia explains that they place more fees on merchants, not users. Around two million companies, like Uber Eats, have a “smart payment” button within their own apps that use Venmo to complete transactions. Again, those companies pay the fee to use Venmo, not the user.
As for fees that do affect users, Instant Transfer, a newer app addition that allows you to choose a quicker money transfer (they usually take a few days), will charge anywhere between 25 cents to $10. If you don’t mind waiting, though, the standard (non-credit card) transfer is still totally free.
Now, perhaps the most important question: How safe is Venmo? Attaching your money to a third party can always come with risks, of course. The official website explains how the company uses encryption to protect users’ data and personal information. Just like Facebook and other tech-based companies, there have been a few cases of hacking and breaches that cost users big money. That’s not to say you can’t trust it, though. You just have to be careful about who you’re sending money to. You can also set up a PIN or Touch ID within the app that can help prevent anyone else from hacking in and attempting to transfer money out of your pocket.
And although the credit card fee might be a bummer, if you are really worried about getting hacked the money experts from the Balance say it's the safest way to transfer funds on the app. Most credit card companies are more likely to refund you any time there’s a mistake or scam, unlike the app itself. Once your money has been transferred, it's out of Venmo's hands, but a credit card company has more resources to track your money down.
As someone who’s been using the app for quite some time, I’ve never personally experienced any issues with my money. If you’re still not convinced (like my stubborn mom), there’s nothing wrong with sticking to a classic wire transfer or good old cash!