Venmo vs. PayPal: Which Option is Best in 2024?
Venmo is a part of the PayPal family, acquired by them in 2013. Although they belong to the same parent company, both platforms are unique and better serve different purposes. To determine which digital payment platform would be best for you, let's begin by considering the types of payments you need to process and the parties involved. Venmo is a standout for peer-to-peer (P2P) transactions, while PayPal is tailored for commercial interactions. PayPal offers comprehensive merchant payment solutions, whereas Venmo simplifies transferring money among acquaintances.
Venmo is evolving to better serve businesses, with over 2 million merchants now accepting payments through its service. However, PayPal remains the leader in business payment services.
Both services offer mobile and desktop platforms for managing funds. PayPal's versatility extends to both its app and website, facilitating seamless payments. They also maintain a digital ledger, providing clear visibility of your financial inflows and outflows.
For check deposits, both PayPal and Venmo support image-based submissions. However, this feature on PayPal requires a PayPal Balance account subscription.
For all the details on whether Venmo or PayPal is right for you, check out our breakdown below.
What is Venmo?
Venmo serves as a convenient digital wallet in the U.S. for both personal and shared financial transactions, streamlining the process of dividing bills and monitoring expenditures. It also facilitates shopping deals with approved vendors, offering options like the Venmo Mastercard Debit Card for nationwide use, processing payments via affiliated apps or websites, executing in-store transactions with QR codes, purchasing from Venmo Business Profiles, and designating transactions as purchases directly in the Venmo application. Venmo is more widely used for personal use, payments between friends and family, and small businesses.
Venmo for Business
Although PayPal is usually better suited for business use, Venmo does have some options for businesses. Venmo's business profiles cater to a diverse group, including individuals, sole proprietors, associations, clubs, and formally registered businesses. These profiles enable Venmo users to establish a distinct presence within their account for receiving payments for goods and services. Some benefits highlighted on Venmo's business FAQ are:
- Enhanced business exposure on the Venmo feed
- Referral generation among Venmo's community of active users
- Detailed business information for potential customers, including website and social media links
- Specialized in-app gallery to showcase your products and services (available for select industries)
- Direct in-app refunds to customers via the Venmo app
- Comprehensive tax documentation for business accounts meeting or surpassing reporting requirements
- Tipping feature for received business payments
- QR Kits for seamless, contact-free payment methods
- Contactless payment acceptance with Tap to Pay for compatible cards and digital wallets
Disclaimer: The provided information is not tax advice. Consult with a tax expert for guidance on transaction reporting.
What is PayPal?
PayPal enables you to send and request funds, indulge in both physical and digital shopping, oversee your banking and card details, and enjoy cash back rewards and discounts where they're available, alongside a variety of payment methods. As a global online payment platform, PayPal facilitates international money transfers with ease. You have the option to connect your bank accounts and cards, or opt for a PayPal Balance account for added convenience. Renowned for its quick and secure transaction capabilities, PayPal doesn't charge for account creation or for using its app to move money. Moreover, frequent users can benefit from additional cash back promotions on a diverse array of brands. PayPal's offerings may vary in other countries. Because PayPal is so widely used worldwide, and was one of the first digital payment apps, it is more frequently used for business transactions.
What Are the Differences in Fees for Venmo and PayPal?
While both platforms offer free features and services, some transactions may incur some fees. Below is a chart to break it down:
| Venmo | PayPal | |
|---|---|---|
| Fees | Free to 3% | Free to 5%, depending of type of transfer |
| Transaction Limits | Up to $5,000 per bank transfer; $10,000 per week limit into your Venmo account | Verified accounts are limited to $60,000 per transaction |
| Number of Countries Accepted | 1 (United States) | 200+ |
Does Venmo Have a Daily Transaction Limit?
Venmo transaction limits are on a rolling weekly basis. Verified accounts are limited to sending up to $60,000 per week, based on total amounts, not number of transactions.
Does PayPal Have a Daily Transaction Limit?
Without a PayPal account, you can send a one-time payment of up to $4,000. With a verified account, there is no sending limit daily or weekly, with an amount limit of up to $60,000 per transaction.
Venmo Versus PayPal
Let's start with how these two payment platforms are similar. They both are free of charge to open a new account. Downloading the application and signing up for an account are both free. They both also let you transfer money from your account balance, to your personal bank account for free, as long as you choose the option that takes one to three business days. Instant transfers to your bank account on both Venmo and PayPal will incur a fee. Both also allow you to buy, transfer, and sell 5 different cryptocurrencies directly through their apps.
Getting into some notable differences, the biggest is that Venmo only works in the United States, while PayPal is available in 200+ countries and 25 currencies. With Venmo, you are limited to $5,000 per transfer at a time, and capped at $20,000 per week. PayPal allows transfers of $25,000 at a time, with no weekly limit. Each transaction has stipulations as well, Venmo has a combined weekly spending limit of $7,000 for standard users, and a $60,000 limit for verified customers. PayPal has no limit on the total amount you can send, and has a cap of $60,000 per transaction — this gives you a lot more flexibility.
| Platform Features | Venmo | PayPal |
|---|---|---|
| Opening an Account | Free | Free |
| Fees | $0 if sending money from debit card, Venmo account or linked bank account. 3% if using a linked credit card | $0 if using PayPal balance or linked bank account. Fees apply for using debit or credit cards, and additional fees apply for international transactions. |
| Best Used for | Receiving and sending money between family and friends | International transactions, business payments and transactions, in-store and online purchases from business merchants. |
| Compatible Platforms | Android, Apple iOS, Web | Android, Apple iOS, Web |
| Payment Methods | Linked bank account, Venmo balance, debit card, credit card | Linked bank account, PayPal balance, credit card, debit card |
| Payment Speed | Instant | Instant |
| Send Amount Limits | $7,000 weekly spending limit. Verified accounts allow up to $60,000 for peer to peer payments | $60,000 per transaction and no weekly limit |
| Bank Transfer Speed and Limits | $5,000 limit per transfer, up to $19,999 per week | $25,000 per transaction, no weekly limit |
| Countries Available | United States only | 200+ countries and 25 different currencies |
| Security | Known and trusted secure provider | Known and trusted secure provider |
How To Plan for Tax Season When Using Venmo
The Internal Revenue Service (IRS), the authority on all things tax-related, calls upon every user of the Venmo platform to report their financial gains from the sale of goods and services. Rest assured, we have some helpful tips below to guide you.
The tax landscape is always evolving, and in the world with digital payments and cryptocurrencies, it's easy to get confused. It's always a good idea to get the input of a tax professional to help you navigate the confusing realm of tax reporting when it comes to Venmo. Every year the IRS revises its reporting requirements, and it's important to understand how these changes affect Venmo users who receive payments for goods and services.
Users with business accounts, and individuals who meet the reporting criteria should receive the Form 1099-K from Venmo. Cryptocurrency sellers on Venmo during the tax year will also be sent a Gains and Losses Statement, regardless of where they reside. Even if your Venmo activity doesn't include crypto sales or receiving payments for goods and services, you can still obtain your account statements from venmo.com for tax reporting statements and information. According to Venmo, Form 1099-K will be available to eligible users by January 31st, and Gains/Losses statements will be ready by February 15th. Venmo will automatically send these tax documents electronically to qualifying individuals.
How To Plan for Tax Season When Using PayPal
In 2024, the IRS implemented new reporting requirements for payments received for services and goods. This change to the Form 1099-K reporting is only applicable to certain types of transactions. The modification to the 1099-K reporting threshold is designed with a focus on transactions related to the exchange of goods and services. Consequently, personal paybacks, such as sharing a meal's cost or contributing to a communal present through PayPal, do not fall under this criterion. Originating from the American Rescue Plan Act of 2021, which brought changes to the Internal Revenue Code, the policy shift now requires Third-Party Settlement Organizations (TPSOs) like PayPal to issue a Form 1099-K for any customer whose total gross sales reach or exceed $600 USD annually.
This marks a significant change from the previous threshold of $20,000 USD and over 200 transactions. In the case of PayPal, tax reporting mechanisms are activated the moment a transaction is designated as a goods or services sale to the IRS, even if mistakenly. Surpassing the $600 USD limit initiates this reporting process. Although PayPal will document these transactions, it doesn't automatically classify them as taxable. For detailed tax advice, consulting with a tax professional is recommended.
Is Venmo or PayPal Safer?
PayPal and Venmo provide essential security measures to protect your data. Each transaction is shielded with encryption, and two-factor authentication (2FA) fortifies your account. A dedicated customer support team is available to help with any issues. These services are equipped with the latest technology to defend your personal and financial information, meeting the highest data security standards in the industry. They use strong data encryption, secure connections, multi-factor authentication, and advanced fraud detection systems to ensure your protection.
PayPal has also introduced passkeys, an innovative sign-in method that secures your account without a username or password. While these platforms are generally secure, constant vigilance is crucial. Scammers constantly seek new targets and may pose as app fraud team representatives or vendors to steal sensitive information like bank details, Social Security numbers, or credit card information.
A typical scam involves a fraudster sending you money "by mistake" and asking for it back. Scammers might also mimic Venmo in emails, urging you to update your payment or personal information — a tactic known as phishing. Clicking a link in such an email could redirect you to a fake login page controlled by hackers. If you suspect a payment scam, act quickly: inform the payment service, contact your bank immediately, and report the incident to the FBI's Internet Crime Complaint Center.
PayPal's Security Measures
PayPal diligently oversees every transaction, employing advanced security measures to safeguard your personal and purchase information. Dispute resolution support is available, along with safeguards for those rare instances when a transaction doesn't go as planned. Your data is securely housed in encrypted databases, ensuring that it remains confidential during storage and transmission. This encryption prevents unauthorized access to your data during its journey from your device to PayPal's system, and their practice of not revealing your complete payment details to sellers during transactions adds an extra layer of privacy.
When it comes to highly sensitive information like tax records, bank accounts, or credit card numbers, PayPal's infrastructure is designed so that even staff members have limited access, viewing only what's necessary to assist you, such as the last four digits of your financial accounts. For the security of customer data, the specifics of their database locations, security mechanisms, algorithms, and encryption techniques are confidential. For instance, recipients of PayPal payments never see your sensitive financial information, such as credit card or bank account numbers, ensuring peace of mind for your online payments.
PayPal's Purchase Protection covers you when shopping on any website, offering assistance to obtain a full refund if an item is not delivered or not as described. PayPal also provides protection for sellers. Utilizing PayPal for receiving payments entitles you to PayPal Seller Protection, which covers eligible disputes, chargebacks, or reversals.
Venmo's Security Measures
Venmo employs robust encryption to secure your account details and vigilantly tracks payment activity to detect any signs of fraud or unauthorized transactions. As a regulated entity in the money transfer sector, Venmo is obligated to confirm the identity of some users. This verification is conducted through the Venmo app, where documentation photos and facial scans are encrypted to ensure their security. Rest assured, only the individual initiating the payment has visibility into the payment method specifics, while the recipient is never privy to your sensitive financial data.
Are Venmo and PayPal FDIC Insured?
FDIC stands for the Federal Deposit Insurance Corporation. It's a United States government corporation that provides deposit insurance to depositors in commercial American banks and savings accounts. The FDIC was created during the Great Depression, by the Banking Act of 1933, enacted to restore trust in the American Banking System. Venmo and PayPal are not considered banks, so keeping your money in your PayPal or Venmo account is not the same as keeping it in a FDIC-insured account at your bank.
The FDIC will not protect against the failure of these payment providers, however there are certain options that can help protect your funds — if you transfer the funds from your Venmo or PayPal account to the bank partners, the funds may be eligible for FDIC pass-through insurance up to applicable limits. Specific bank and credit cards issued thru Venmo or PayPal however, are covered. For example, Venmo's Mastercard debit card is FDIC insured because it's issued through The Bancorp Bank, NA.
Can You Withdraw Cash From ATMs From Venmo or PayPal Accounts?
If you have a Venmo debit card or a PayPal debit card, you can withdraw cash from ATMs. The Venmo card allows for free ATM withdrawals from MoneyPass ATMs within the United States. The PayPal debit card also allows withdrawals with no fees, if using MoneyPass ATMs worldwide.
Both Venmo and PayPal are convenient, simple to use, fast and secure ways to send and receive money in the modern digital age. Venmo is better suited for consumers, small businesses and payments between friends and family, while PayPal offers more benefits for mid to large businesses and international transactions.
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