What is Venmo and How Does It Work?
written by Mike Ballew December 4, 2022

Have you ever heard someone say "I’ll Venmo you" and wondered what that is? Join us as we examine Venmo and how it works.

Venmo is a mobile payment solution – an app that lets you exchange money with other people. A simple example is you’re dining out with friends and they want to split the bill. Instead of reaching for your wallet and hoping you have the right cash, you can use Venmo to send your portion to whoever’s paying the bill. You can use Venmo to pay the babysitter and send money to your college student and pay for goods and services at millions of businesses.

How Venmo Works

To use Venmo, you enter the other person’s phone number, email address, or Venmo username (both parties must have Venmo). Then you press Pay or Request depending on whether you want to send or request money. You can also use a QR code for identification. Venmo is connected to your credit card and bank account which you enter when you set up the app. Venmo has its own account where money is stored.

How Much Does Venmo Cost?

Venmo is free to set up and use, but there are fees for optional services. The fees are not hidden, they are clearly shown when options involve fees. Venmo charges a 3% fee to send money from your credit card instead of using your bank or Venmo account. When moving money from your Venmo account to your bank, there’s a 1% fee (up to $10) if you choose the instant transfer feature.

Is Venmo Safe?

Venmo has been around since 2009 and is owned by PayPal. Everything is encrypted similar to online banking and shopping at Amazon. Venmo has 83 million active users which is impressive given that it's only available in the U.S.   Venmo’s annual transactions are growing each year and currently stand at $230 billion. Users are protected from unauthorized transactions if someone accesses your account.

If you are looking for a disadvantage, Venmo accounts are not FDIC insured. While it seems unlikely that a company used by almost a third of Americans will go bankrupt, it’s probably not a good idea to store your life savings in Venmo.

Is Venmo Good for Buying and Selling Used Items?

Remember putting ads in the newspaper to sell items such as cars and furniture? Craigslist put an end to that, then Facebook Marketplace took over as the go-to place for selling large items locally.

If you have ever been involved in such a transaction, you know that sometimes it can feel a little unsafe. You’re walking around with a wad of cash hoping no one hits you over the head. Or, someone hands you a cashier’s check which for all you know they could have printed at home.

Is Venmo the answer to buying and selling used items? Unfortunately, no. Venmo does not provide buyer and seller protections for these types of transactions. If something goes wrong, there is no mechanism in place to sort things out. 

Venmo is best used between family and friends and at established businesses. By the way, a good way to handle used car transitions is to do it at the bank. You meet at the purchaser’s bank and the teller hands the seller a cashier’s check. That way there are no concerns about cash or counterfeit checks and you’re surrounded by people and security cameras. 


Venmo is a convenient and easy way to send and receive money. While it’s not for every financial transaction, it’s ideal for transferring money between family and friends. It’s as safe as any other online transaction and if you use it right, it’s free.

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
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Eggstack founder, Financial Planning Association member, engineer, and software developer.