Chances are, if you order online, you’ve noticed the option to pay by credit card or PayPal. But digital payment apps like PayPal and Venmo have also become commonplace in everyday transactions outside of online shopping. You may be wondering if they are secure, what their purpose is, and how to set up an account. Here we give an overview of PayPal and Venmo, why you might want to use them, and precautions to take.
PayPal and Venmo Explained
PayPal and Venmo (which is owned by PayPal) give you the ability to quickly send and receive money through an app. PayPal can be used on a mobile device or desktop computer, but Venmo is primarily used on an app on your cell phone. Both platforms allow you to choose how you want to draw funds when sending a payment. You can link a bank account, debit card, or credit card. When receiving money, you can choose to keep those funds in your PayPal or Venmo account for later use, or you can transfer them to your bank account.
Since its founding twenty years ago, PayPal has been geared toward business transactions where you are either paying or receiving payment for goods and services. A personal account enables you to shop and make purchases, pay a merchant, and receive money from a friend. A business account is suitable for a company that wants to accept credit cards or payments securely from their customers.
Venmo is popular for social transactions such as repaying a friend for dinner, paying a babysitter, or leaving a tip for a tour guide. Roommates use Venmo to pay their share of the rent and utilities and parents even pay their child’s allowance through Venmo. Venmo tries to make transactions more fun and interactive by allowing users to include messages and stickers with their payments.
No Cash, No Problem
Young adults have fully embraced Venmo. Ask a teen or twenty-something if they’re carrying cash and they’ll most likely say “no.” While debit and ATM cards still play a role in young people’s lives, Venmo has become their go-to currency. If they order pizza with friends, they “venmo” each other their share of the cost with a quick swipe of the app.
But there’s a place for PayPal and Venmo for everyone, regardless of age. Have you ever been in a situation where you realize that a tip is expected but you have no cash? Or the dogwalker or house cleaner is due money and you come up short? This is where digital payment comes in handy. You open the app on your phone, enter the recipient’s e-mail address or username, type the amount you want to transfer, and the transaction is complete.
Are They Secure?
Both PayPal and Venmo use monitoring and encryption technology to protect all transactions. They provide protection to buyers and sellers in the event that shipments get lost, payments don’t go through, or purchases are disputed. The degree to which PayPal and Venmo will help depends on the type of purchase and, in the case of a PayPal merchant, the type of business plan you have.
Like all online accounts, you need to take care to protect your log-in info. Make it a habit to routinely check your statements to ensure that all transactions look legitimate. Venmo won’t refund money if you send it to the wrong person, so double-checking data entry is key.
Outside of system specific security, you also need to consider the security of your phone if you’re using mobile payment apps. It’s important to password protect your phone, and never give someone access to your phone.
While it is free to set up an account with PayPal and Venmo, some transactions do incur a fee. Both platforms enable you to send money free of charge if you use your account balance or a linked bank account. However, you do pay a transaction fee to use a credit card and to buy or sell cryptocurrencies. As an added consideration, there is no charge to transfer funds from your PayPal or Venmo account to a linked bank account, but that could take 1 – 3 business days. If you need an immediate deposit, you will pay a service charge.
Using PayPal, merchants incur a fee with each customer transaction. However, they gain the ability to accept credit and debit cards internationally. In addition, PayPal offers assistance with invoices, shipping, and marketing.
Venmo requires users to take more care with their privacy. Unless you turn your settings to private, others can see your transactions. This can be helpful if friends are chipping in on a group gift and you want to see who has paid, but the downside is that others can see your name and message on a mutual acquaintance’s feed.
Digital payment apps have revolutionized the way we do business and reimburse friends. PayPal and Venmo make it easy to send and receive money, but young people in particular can forget that the funds being exchanged are real. You have to monitor your bank balance and credit card bill.
Working with SageVest Wealth Management, you receive personal attention and clear advice, all just a phone call or email away. We’re your sounding board and your financial partner. Whether it’s about your investments, a life change, or making a financial decision on the fly, we’re here to help. We invite you to contact us today.