Venmo vs. Paypal: Which one is best? In a time when I’m trying to simplify, both digitally and physically, I’m almost embarrassed to admit that I use both. If I’m shopping, I send funds via PayPal. Paying the babysitter or splitting the tab with friends at dinner? Venmo all the way. (Love those emojis.) But which peer-to-peer payment system is best? We weigh the pros and cons—and talk to a financial advisor—to decide.
What Is Venmo?
Venmo is a free peer-to-peer payment app that allows users to send and receive money from contacts and friends. (PayPal actually acquired the service in 2013 as part of a larger acquisition.)
To use Venmo, both the sender and the recipient need to have Venmo accounts. But a primary difference from PayPal is that Venmo is mobile-only, allowing you to “text” cash, so to speak, simply by searching for the recipient’s username, phone or email. There’s also a social component: Users can opt to make transactions public (it shows who’s being paid and for what, but not the amount) so that they appear in a timeline, allowing friends to like and comment on purchases, if you’re into that sort of thing.
Your account is linked to your bank account or credit or debit card.
What is PayPal?
A player since the 1990s, PayPal is one of the earliest cash apps and payment services around. But while the service is known for its help with online purchases and e-commerce, it also offers peer-to-peer money transfers. To set it up, you’ll first need a PayPal account, then—as long as the person you’re sending money to is also enrolled—you can use their name, email address or phone number to send or request cash. (If the recipient doesn’t have an account, they’ll get an email alert that funds are available and they need to set one up to receive.)
Venmo vs. PayPal: What’s the Difference?
Yes, PayPal owns both, but there are still distinctive features about each payment service.
When it comes to security, both Venmo and PayPal offer bank-grade security and encryption. But PayPal takes a couple of extra steps to help you feel more secure about your cash. For one thing, you’ll get a confirmation email whenever a transaction takes place, allowing you to keep tabs and stay alert when it comes to any fraudulent activity. They also regularly scan to be sure you’re using the most up to date encryption technology on your browser.
Venmo stands out in that it requires that users register an account to use it. (PayPal does not.) Still, Venmo encourages you to only send/receive money from those you know and trust. And if you accidentally pay the wrong person, you may be hard-pressed to get that money back. (Venmo can only reverse purchases with explicit permission from the recipient.)
2. How You Use It
Venmo focuses primarily on peer-to-peer transactions—meaning this is the service to use if you want to reimburse a friend or quickly tip at the hair salon if you forgot to carry cash.
On the flip side, PayPal was created to work with businesses. (Peer-to-peer payments and transfers was a feature that was added later.) That means that its infrastructure is well-suited to small businesses. There’s even a toolbox full of customizable solutions and payment options (like a mobile card reader) for merchants.
3. Transfer Limits
The sending limit for PayPal is up to $60,000 for a single transaction (some limits may apply, depending on your currency and account status). You can also use multiple methods to fund your account—a debit card, a credit card, PayPal balance (cash sits in your account until you transfer it to your bank) and PayPal credit (a credit line offered by PayPal).
With Venmo, the limit for peer-to-peer transactions is $5,000 a week (this spending cap increases slightly for merchant payments). That mostly comes down to the use cases of each app, outlined above. PayPal is meant for bigger transactions (for example, a business expense) whereas Venmo is more about day-to-day spending (reimbursing a friend for lunch).
4. Social Features
Here’s where Venmo is a cut above. Venmo allows users to like, comment and add emojis to transactions that take place within the app. Spending is also optionally private, meaning you can choose to share the details (not the amount) of spending activity between friends. PayPal offers nothing of the sort.
5. Fees & Withdrawal Speed
Both apps are quite similar here. Venmo is also free to use and no fees are charged as long as you pay with your Venmo balance, linked a bank account, debit card or prepaid card. Fund transfers are free and speedy (they typically take one business day). Users are charged a 3 percent fee for transferring funds from a credit card, and Venmo also charges a 1 percent fee if you need an immediate transfer of cash to your account. It’s worth noting that Venmo doesn’t offer international transactions at this time.
PayPal is similar—assessing a 3 percent fee, but also tacks on an additional 30 cents for any transactions with a credit or debit or card. (A linked bank account or a PayPal balance are free.) As for speed, transferring money from PayPal to your bank account can take up to five business days. If you want the funds to go to your account immediately, you have to pay a fee of 1 percent. (Maximum fee is $10.) You can also only cancel a PayPal transaction if it’s yet to be completed/claimed. (But unlike Venmo, international transactions are possible for a fee of 5 percent as long as the transfer is coming from your bank account.
Both services check out when it comes to security and ease of use, so we tapped Priya Malani, financial planner and co-founder of Stash Wealth, to weigh in on which app is best and why. “At the end of the day, they’re all good and free, so it really depends on what you’re buying or who you’re paying.”
Her recommendation: PayPal is great for international transfers, but Venmo is the way to go for day-to-day use. “It’s widely used, but it’s also a spectator sport. It combines a social feed with the ability to quickly split a utility bill or bar tab.”