Venmo Vs. PayPal: How Do They Compare?

Venmo and PayPal are extremely popular digital payment services that allow registered users to pay for goods and services online, as well as to transfer funds with friends or even receive direct deposit from an employer. These digital wallets connect directly with users’ bank accounts, credit cards or debit cards and can be used with any computer, tablet or mobile device that can access the internet.

We’ll look at both platforms to understand how they stack up.

A Quick Look At Venmo Vs. PayPal

PayPal was founded in 1998 as a tool to help consumers make purchases online just as e-commerce was beginning to explode into the behemoth it is today. PayPal’s primary benefit, other than robust fraud prevention and insurance, is that it provides an extra layer of encryption protection to sensitive banking and credit card information that is sent over the internet.

Venmo started in 2009 as a service allowing two individuals to quickly send and receive payments, such as when splitting a dinner tab or making a group purchase with co-workers. While Venmo was marketed differently than PayPal, its growing popularity prompted PayPal’s purchase of Venmo in 2013.

The Difference Between PayPal And Venmo

While the world of digital payment services might pit Venmo against PayPal, in reality the applications are very similar and are indeed part of the same corporation. But there are some key differences that make each more attractive depending on the needs of the end user.

1. User Accessibility

Once a user has created an account, Venmo and PayPal are both accessible online or through a mobile device app using a desktop or laptop computer, tablet or mobile device. A key difference is that Venmo users can only make payments through the app, while PayPal can be used to make payment both online and through its app. Another difference is that Venmo is available for use only in the United States, while PayPal is established in more than 200 countries and 25 currencies.

2. Creating An Account

Since you will only be able to send payments through the Venmo app, you can sign up for the service by downloading the app on either an iOS or Android device. After creating a unique username and password and providing a phone number and email address, you will provide and verify the bank account, credit card or debit card you will link up with Venmo.

For PayPal, you will provide the same information as Venmo to set up the account. A distinction is that PayPal also allows you to set up a separate business account, for which you will have to provide the business’s Employer Identification Number (EIN) or your Social Security number.

3. Sending Money

The Venmo app is designed to be a fast and easy way for people to send money to other Venmo account holders. Imagine a friend is picking up takeout for you for lunch and you don’t have cash to reimburse them. Simply search for their Venmo account or scan the QR code on their app and send a payment. If your Venmo account isn’t verified, you can only send up to $299.99 to another person, but you can send a total of $60,000 a week to other users once your account is verified.

In addition to peer-to-peer payments, PayPal account holders can make online purchases from e-commerce sites that allow checkout with PayPal. Since PayPal is geared toward businesses, the transaction limit is $60,000 per purchase.

Both services allow touchless QR code purchases from participating retailers.

4. Requesting Money

The home page of the Venmo app has a Pay/Request button. Tap it and choose Pay or Request and the app will present a list of users you have already transacted with. If the person you are requesting payment from is not listed, you can search for them or simply ask them for their username. You can also scan the QR code on their app if they are present. You will not receive payment, however, until the person has seen your request and sent money. Their payment will land in your Venmo balance account, where it will stay unless you elect to transfer it elsewhere. To transfer, you’ll choose either “Instant” for a 1.75% fee, or “1 – 3 business days,” for free, then select your preferred bank account or debit card and select “Transfer.”

To request payment on PayPal, open the app and choose “Request.” You will enter a dollar amount and then search for the PayPal contact you are transacting with, then tap “Request Now.” You can also request payment online by logging into your account on PayPal.com. Click the “Request Payment” tab and enter the person’s email address and the amount you’re requesting. You will receive payment once the person has seen your request and sent money. Funds will stay in your PayPal balance account, but you can transfer them to a linked bank account or credit card for free in a few days or instantly for a 1.75% fee.

5. Transaction And Withdrawal Fees

When comparing Venmo vs. PayPal fees, note that the two services, while structured similarly, are designed to accomplish different things.

Venmo fees

• No fee for sending money from a linked bank account, debit card or Venmo Balance
• 3% fee for sending money from a credit card
• 1.75% fee for instant transfer to a linked bank account; no fee for standard transfer (1 – 3 business days)
• $2.50 ATM Domestic Withdrawal fee for debit card and $3 over-the-counter fee at financial institutions

PayPal fees

• No fee for sending money from a linked bank account or PayPal balance
• 2.9% fee for sending money from a debit card or credit card, plus a fixed fee for certain currencies if applicable
• 5% fee for sending money internationally, plus any applicable fees for using a debit or credit card
• $2.50 ATM domestic withdrawal fee for debit card and $3 over the counter fee for withdrawal at financial institutions

Business Features

While Venmo is geared more to person-to-person interactions, it does allow online sellers to create a business profile. The seller is charged a 1.9% fee for each transaction exceeding $1.

As a global online commerce payment service in more than 200 countries, PayPal has a much more sophisticated Commerce Platform with a fraud protection system covering both buyers and sellers. Aside from accepting multiple payment options, PayPal also integrates with point-of-sale and invoicing systems, subscription services and all major financial management systems used by businesses. Anyone can set up a PayPal business account for free but will be charged 1.9% to 3.5% for each sale depending on the type of transaction.

Venmo Vs. PayPal: Pros And Cons

While both are extremely popular “digital wallets,” Venmo and PayPal are designed for different purposes — in fact, many people have active accounts with both. In short, Venmo works best as a way for people to digitally exchange money using the Venmo app, as opposed to using cash or checks. PayPal can do many of the things that Venmo does, but it is designed mostly as a way for people to buy and sell online.

Pros Of Venmo

• Make instant payment to individuals or participating businesses without using cash or check
• Maintains a Venmo Balance account from which payments can go out
• Transfers in 1 – 3 days from Venmo Balance to linked bank account for free
• Links to bank account, debit card or credit card
• Customize interactions with emojis

Cons Of Venmo

• Not supported for purchases outside the United States
• Not as widely accepted at businesses as credit cards, cash or checks
• For verified accounts, you may send up to $60,000 a week from your Venmo account, and you can make up to $7,000 worth of purchases a week.
• 1.75% fee for instant transfer from Venmo Balance to your bank account

Pros Of PayPal

• Supports transactions in more than 200 countries and 25 currencies
• Make instant payment to individuals and businesses without using cash, checks or credit cards
• Higher transaction limit of $60,000 per purchase
• Encrypts your banking and credit card information, keeping it safe when making purchases online
• Provides significant fraud prevention and will help get your money back if fraud occurs

Cons of PayPal

• All charges paid for through PayPal will show up as PayPal on your credit bill. This can make it difficult to manage subscriptions, though you can always recategorize those transactions using the Rocket Money^SM app to help keep track of your spending
• 1.75% fee for instant transfer to your bank account
• Sellers pay a fee on all business transactions
• User experience is more complex than Venmo

Venmo Vs. PayPal FAQs

After learning about the overlap and differences between Venmo and PayPal, you may still have questions about which service is best for you. Here are the answers to a few commonly asked questions about whether to use Venmo or PayPal.

Does PayPal own Venmo?

Yes. Venmo, started in 2009, was sold to Braintree, Inc. in 2012, which was in turn bought by PayPal in 2013.

Can I transfer money from Venmo to PayPal, and vice versa?

Yes – provided you have accounts for both services, you have a balance in the account for whichever service you are transferring from and provided both accounts are linked to the same bank account. If you have a Venmo Balance account with funds, for example, select transfer and choose instant transfer (there will be a 1.75% instant transfer fee from either service) or standard (free transfer will take a few days). Once the funds hit your bank account, you can then transfer them to your PayPal balance account. Transferring from PayPal to Venmo works exactly the same way.

Who is Venmo or PayPal best for?

Venmo and PayPal have some overlap in functionality, but Venmo is considered stronger as a fast, convenient way for individuals to send funds to each other. PayPal can also provide person-to-person service, but its real strength is as a payment service for e-commerce that is accepted widely. PayPal is supported in more than 200 countries, while Venmo only operates in the U.S.

Are Venmo and PayPal secure ways to send money?

Venmo and PayPal offer protection for sending money or making online purchases. Both services encrypt your account information and allow you to set up multifactor authentication. PayPal also offers security for business transactions.

The Bottom Line

PayPal and Venmo are both incredibly convenient, fast and inexpensive digital banking services that help people and businesses exchange money without the need for cash or checks. Each has its strengths and charges fees for certain transactions, though basic person-to-person transfers are free. Both are supported by all major mobile and internet platforms. Most importantly, these services provide confidence because they offer fraud protection for buyers and sellers and encrypt bank account and credit card numbers, protecting this information on the internet.

Looking for other ways to organize and track your finances? Download the Rocket Money app today.