Venmo vs Paypal - What are the differences?

TransferWise
03.30.20
9 minute read

As a global payment service, PayPal is used widely for online shopping and to send money to friends, family and business contacts around the world. Venmo is part of the PayPal family, and lets users in the US send personal payments and buy things via authorized merchants.

While there’s some overlap in the services provided by PayPal and Venmo, they are distinctly different, with their own pros and cons. This guide tells you all you need to know. We’ll also take a brief look at TransferWise - a newcomer in financial tech.

Table of contents:
TransferWise lets you make low-cost international payments, hold a balance in 40+ currencies, and get a multi-currency mastercard with no foreign transaction fees. Plus you’ll get the mid-market rate on all transactions. Take a look and see if you can save today.

Venmo vs PayPal: Key differences

Wondering what is actually so different between PayPal vs Venmo? Read on for a review of some of the features of both services, so you can work out which may work best for you.

Fees

Before we get too far, let’s take a look at the fees applied by both Venmo and PayPal for their services. We’ll dive into the features of both Venmo and PayPal right after.

Service Venmo fee¹ PayPal fee²
Account opening Free Free
Monthly service charge Free Free
Sending money to people in the US Funded by Venmo balance/ debit card or bank - Free Funded by credit card - 3% Using the Venmo purchase program - 3% Funded by PayPal Cash, PayPal Cash Plus or linked bank account - Free Funded by credit or debit card - 2.9% + fixed fee based on currency of transaction
Sending money to people internationally Not available Funded by PayPal Cash, PayPal Cash Plus or linked bank account - 5% (minimum $0.99 to $4.99 maximum) Funded by credit or debit card - 5% (minimum $0.99 to $4.99 maximum) + 2.9% + fixed fee based on currency of transaction
Withdrawing money to your bank account Standard transfer - Free Instant transfer - 1% (Minimum $0.25 to $10 maximum) Standard transfer - Free Instant transfer - 1% to $10 maximum
Get a linked card Free Free
ATM withdrawal MoneyPass network - Free Out of network ATMs - $2.50 PayPal offers 2 different Mastercard credit cards, a debit card and a prepaid card. ATM usage and cost varies by card.³

How fast can I withdraw money?

Venmo offers 2 options for withdrawing your money to a bank account. You can make a standard withdrawal which takes 1 to 3 business days, or opt for an instant transfer for a fee. Standard bank transfers made during working hours on a weekday may arrive as soon as the next day, but if you’re making a transfer at the weekend, during a public holiday or after hours, you can expect to wait a little longer. Before you confirm the transfer you’ll see an estimated arrival date.⁴

Venmo instant transfers come with a fee of 1% of the transaction value, from a minimum of $0.25 to a maximum of $10. An instant transfer will normally arrive within about 30 minutes.⁵

PayPal standard transfers are free and payments are usually deposited the next working day. You can also opt for an instant transfer which can be processed in minutes, and will allow you to transfer your balance to a linked account or card. The fee is 1% to a maximum of $10.²

Security

Both PayPal and Venmo take the security of users very seriously.

PayPal monitors all transactions and has secure technology to make sure your details and purchases are safe. There’s also support for dispute resolution, and protection in case a purchase goes wrong.⁶

Venmo uses encryption to protect your account, and monitors payments for potential fraud or unauthorized activity.⁷

Special features

Both Venmo and PayPal have a few special features which go beyond the core services offered. Here’s a look at some of them.

PayPal business accounts

You can use a PayPal Merchant Account to accept business payments online - if you run an ecommerce site or sell through a platform like Amazon, for example. There’s a fee to use this service, with discounts for charities available. Here’s the fee structure for regular payments through PayPal Merchant Accounts² or you can use this PayPal fees calculator.

Sale type PayPal fee
Domestic sales to the US 2.9% + $0.30
International sales 4.4% + fixed fee based on the currency received

Venmo is primarily a peer to peer payment provider, so you can’t get a business account. Venmo works with authorized merchants to allow in app payments, but you won’t be able to receive business payments through Venmo unless you’re an approved Venmo merchant partner.⁸

TransferWise allows businesses to make low-cost payments across the world for low fees, using the mid-market exchange rate. You could save up to 19x compared to PayPal, so why not take a look, today.

PayPal cross border payments and purchases

Venmo is not currently available outside of the US, so you won’t be able to use the service to make cross border payments.⁸ However, PayPal payments can be made to people in other countries in a range of different currencies.

There’s a fee to pay for sending money to a PayPal account held in a different country or currency, which you’ll want to know about before you use the service. See the full details online, and the overview in the fee table above.

If you need to make a cross border payment, it’s worth doing some research into the payment providers available to you. Using a currency specialist like TransferWise may mean you pay less in fees for a convenient international transfer direct to your recipient’s bank account. More on that a little later.

PayPal and Venmo cards

With PayPal you can get a credit, debit or prepaid card to use for in-store purchases and ATM withdrawals. Each card has different features and fees. You can get credit cards which earn rewards or cashback, a debit card which is linked to your PayPal Cash account and gives you free ATM withdrawals at US MoneyPass locations, or a prepaid card which comes with a savings account option. Check out all the details online - including the fees for different types of transactions - if you’re interested in a PayPal card.³

Venmo has a linked debit Mastercard, which you can apply for online.⁹ It’s available to most users, although some customers may need to wait in line to order. There’s no fee to get a card, but you do pay for some services. Cardholders are eligible for some perks, such as 4% cashback at Dunkin’.¹⁰


What is Venmo and how does it work?

Venmo is a mobile payment service which lets users based in the US send money to friends and family, and make in-app purchases.¹¹ Since being set up by former college roommates in 2009, Venmo has grown and evolved, and is now owned by PayPal. According to publicly available data, Venmo had over 40 million active accounts in early 2019, and was showing volume growth of 56% year on year by the last quarter of 2019. ¹²

One of the main ways Venmo is used is to split bills and make relatively small payments between friends. Users can easily pay their share of a dinner bill, cover rent costs for a shared apartment, or split the cost of a fun day out with their friends, family or loved ones. Because all you need to know is your recipient’s phone number, processing a payment is simple using existing phone or social media contacts.

Venmo payment messages

One big appeal of Venmo is the social networking aspect of the service. Users can choose to allow some details of payments they make to be viewed by others. This means you can send a payment with a message, including emojis, and the note will be visible to your network of contacts via your Venmo news feed.

The actual payment amount can’t be seen, and personal details such as kept secure, too. But this does mean Venmo customers can use the messages to connect with others, say thanks after a great night out, or wish someone a happy birthday, for example.

Receiving a Venmo payment

To receive a Venmo payment you’ll need to set up an account. If someone sends you a payment before you have your own account, you’ll be prompted to register to access the funds. You can then either hold your balance in the Venmo digital wallet, and send or spend it later, or you can withdraw it to your bank account.

You must be in the US and have a US registered phone number to get a Venmo account. ¹³


What is PayPal and how does it work?

Digital payment service PayPal was founded in 1998, and is now used in over 200 markets. You can use PayPal to send and receive personal and business payments, shop online, or get a linked card to use for in store payments and ATM withdrawals. PayPal lets customers hold a balance in 25 different currencies and also owns the Braintree, Venmo and Xoom platforms.¹⁴ ¹⁵

If you’re a PayPal business customer, you’ll be able to receive payments online into your PayPal account, making it easy for you to connect with customers around the world.

To use PayPal to shop or make payments, you’ll need to register an account and add a linked debit or credit card, or bank account. You can then use your account to fund payments to other PayPal users, or to shop online. You’ll simply select the linked payment method when you come to confirm the payment or transfer, which means you don’t need to enter your full card or bank details every time you shop. If you hold a PayPal balance you can also use this to fund payments and spending.¹⁶

Receiving a PayPal payment

If you are sent money via PayPal, you’ll get an email notification. If you don’t have a PayPal account yet, you’ll need to follow the prompts online to open a new account. If you already have a PayPal account active, the payment will automatically be placed in your account and you’ll be able to see it in the summary page.¹⁷


Venmo vs PayPal: Which is better for me?

As we have seen, Venmo and PayPal offer some of the same services, but each has its own advantages. Choosing between them will depend on the specific service you need, and your personal preference.

If you’re running a business and need to accept payments online, PayPal will work best for you. However, if you want to split a bill with friends, and be able to share messages and connect socially when you pay, Venmo might be a better choice.

Venmo is only available in the US, so if you’re paying someone based overseas it’s not an option. You can choose to make a PayPal payment internationally, but it’s worth checking out alternative services to make sure you get the best available deal.

Using a specialist in international payments may mean you get a better exchange rate and pay less in fees overall for your cross border transfer. Check out TransferWise as a convenient and cheap way to make international payments. The service is fast and secure, and easy to arrange using the award-winning TransferWise app. See if you can save, today.


Sources:
  1. Venmo - Fees
  2. PayPal - Credit Card Fees, Send Money Fees & Other Charges
  3. PayPal Cards | Credit Cards, Debit Cards & Credit
  4. Venmo - Bank Transfer Timeline
  5. Venmo - Instant Transfers FAQ
  6. PayPal Purchase Protection for Buyers
  7. Venmo - Security
  8. Venmo - General Business & Partnership Inquiries
  9. Venmo Card FAQ
  10. Venmo Rewards: 4% Cash Back at Dunkin
  11. About Venmo
  12. Statista - Venmo: total payment volume 2019
  13. Venmo - Signing Up - FAQ
  14. PayPal: Send Money, Pay Online or Set Up a Merchant Account
  15. PayPal About - Home
  16. PayPal Help - What can I do with PayPal
  17. PayPal Help - How do I receive money through PayPal

All sources last checked on 24 March 2020


This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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