I’m an Old Millennial with the brain of a Midwest mom.
When I first heard “Venmo me” from a kid (i.e. 30-something) from the city (i.e. town with more than 5,000 people), I dismissed it as something I’d look into if I ever made my way to New York. Whatever happened to an I.O.U.?
I’m caught up now, and I realize peer-to-peer payment services are a godsend.
They’re so vital in our day-to-day lives, in fact, that tons of companies in the financial and social media spaces have created tons of ways for us to send digital money back and forth.
PayPal is the O.G. payment app — or, rather, service, since it existed long before apps… or smartphones. (A history lesson from your resident Old Millennial.)
Let’s see how this classic holds up against the new model.
Venmo vs. PayPal: Our Honest Review
Venmo and PayPal have surface-level similarities: They’re both payment-processing apps and digital wallets you can use to split the bill or buy a cute dress from your favorite small business.
One glance at either app, though, and you can see they target vastly different customers and needs. Under the hood, the differences are even more stark.
Venmo vs. PayPal at a Glance
| Venmo | PayPal | |
|---|---|---|
| Best for | Sending money to friends and family | Online payments for goods and services |
| Unique features |
|
|
| Transaction fees |
|
|
| Spending/transfer limits | Weekly spending limit of $4,999 to $6,999; per-transaction limit of $2,999 to $4,999 | No daily or weekly spending limits; up to $60,000 per-transaction limit |
| Debit card | Mastercard | Mastercard |
| Mobile payments | No | Yes, via QR code |
What Is Venmo?
Venmo’s flagship function is a social payment app that lets you send money to friends and family for things like splitting dinner, paying your portion of the rent or receiving birthday money from your hip aunt. Like how our parents used to hand each other cash or write a personal check (sounds bulky).
Venmo’s signature is the social feed, where you can see public interactions between your friends or even strangers. When you send or request money in the app, you can add a message, and that’ll appear in the feed. Doll it up — or make it a puzzle — with emojis.
You can link a bank account or debit card to send money via Venmo for free, or link a credit card to send money and pay a 3% fee.
Since its inception, Venmo has expanded to include direct deposit, a debit card, online payment and business payments.
You can keep money received right in your Venmo balance and use it to buy stuff or send money to others. Or you can withdraw funds anytime into your linked bank account. A bank transfer takes one to three business days to land in your account, or you can pay a 1% fee (up to $10) to instantly send money to your bank.
Venmo was acquired by the payment service Braintree, which was acquired by PayPal in 2013, according to the Braintree acquisition news on TechCrunch. So — PayPal owns Venmo.
Venmo: Pros and Cons
What you like or dislike about Venmo will vary depending on what you need in a payment processing system. Here are some main points to consider when comparing it to PayPal:
Pros
- No fees for person-to-person transfers from your bank account, debit card or Venmo account.
- Pay with Venmo in apps including Hulu and Uber Eats.
- Venmo Mastercard debit card accepted anywhere in the Mastercard network.
- Currently no fees to accept payments to your business profile; future charge will be a competitive fee of 1.9% + $0.10.
- Control which of your transactions and messages show up for friends or in public (or remain private) by adjusting your privacy settings.
Cons
- Weekly spending limit of $4,999 to $6,999; per-transaction limit of $2,999 to $4,999.
- Cash withdrawal limit of $400.
- Limited vendors accept Venmo online payments.
- No mobile payment option.
- Business profiles available by invitation only (with plans to expand in the future).
What Is PayPal?
PayPal is the O.G. of the online payment platforms. You probably first heard about it as a subsidiary of eBay, where it made it easy to purchase your vintage clothing or bags of pine cones on the peer-to-peer marketplace.
PayPal facilitates payments for online purchases using a PayPal account, or credit or debit card. Users who have PayPal accounts can also send and request money to and from each other.
You can keep money you receive right in your PayPal account and use it to make purchases or send money to others, or you can withdraw funds anytime into your linked bank account. Withdrawals take one to five business days to land in your account, or you can pay a 1% fee (up to $10) for an instant transfer using your debit card.
PayPal’s offerings are vast compared with most of its competitors in the payment processing space, including Venmo.
It caters to individuals and businesses (with a PayPal business account); offers debit and credit cards; facilitates mobile payments; helps small businesses and contractors easily manage invoicing, online sales and point-of-sale; facilitates tips and subscriptions; oh, and still lets you stock up on clothes and pine cones on eBay and newer platforms like Instagram.
When you shop or sell using PayPal, the platform provides protections for you as a buyer or seller. As a buyer, you can lodge a dispute within six months of a transaction for the possibility of a full refund. On the seller side, PayPal will resolve disputes on your behalf and won’t charge you if you can provide proof of delivery for a disputed item.
PayPal is no longer owned by eBay; the two split into separate companies in 2015, and Recode reports PayPal’s reign as the platform’s top payment processor ended in 2020.
PayPal: Pros and Cons
Depending on your personal and business needs, the pros and cons of PayPal will vary. Here are some major points to consider when comparing it to Venmo:
Pros
- Most online vendors accept PayPal payments.
- You can pay through PayPal even if you don’t have an account.
- Mobile payments don’t require a complicated point-of-sale system. The buyer and seller each just need the PayPal app on their mobile phone.
- Robust buyer and seller protections for physical goods.
- No daily or weekly spending limits for verified accounts; up to $60,000 per-transaction limit.
- PayPal Mastercard debit card accepted anywhere in the Mastercard network.
Cons
- User experience is complex for simple peer-to-peer transactions.
- No point-of-sale system.
- Payments for goods and services are charged a fee of 2.9% + $0.30 per transaction.
- Cash withdrawal limit of $400 and daily debit card spending limit of $3,000.
Alternatives to Venmo or PayPal
PayPal or Venmo not meeting your financial needs? Consider these other payment processing platforms for your personal or business transactions:
- Cash App: Formerly Square Cash, this app lets individuals send and receive money through your username, phone number or a QR code. It offers a debit card with merchant discounts, and stock and cryptocurrency investing, but doesn’t facilitate merchant or business transactions.
- Zelle: This payment processor is available within mobile apps for major banks, so you can send and receive money with friends and family, regardless of which bank they use.
- Apple Cash: iOS users can send and receive money through iMessage using Apple Cash or connected debit cards in your Wallet app. Apple Pay also facilitates mobile and online payments with merchants and businesses.
- Facebook Pay: Send and receive money through Facebook, Messenger, Instagram or WhatsApp, or through Facebook Marketplace or Instagram Shops.
- Google Pay: Google and Android users can use this app to make social payments with individuals and businesses, as well as mobile and online payments to merchants.
- Stripe: This payment processor for merchants and businesses facilitates one-time payments and subscriptions online, but no personal, peer-to-peer transactions.
- Square: This payment processor facilitates online payments, and robust and simple point-of-sale systems for small businesses, but no personal, peer-to-peer transactions.
Which of These Payment Options Is Best: Venmo or PayPal?
PayPal and Venmo offer increasingly overlapping services, but the apps still provide significantly different user experiences.
Whether Venmo is worth it for you to use most likely depends on whether most of your family or friends use it. However, its burgeoning business services make it an app to watch if you have a small business or side hustle selling online.
PayPal is almost ubiquitous as the payment gateway of choice for online vendors. Whether you’re a buyer or a seller, you’re likely to benefit from an account with this app.
Even though Venmo (and the Cash App) outshine it for peer-to-peer payments, PayPal is probably the most common app among your friends and family, too. You just might have to navigate a more complicated array of features to get to the “send money” part.
Which is best for you depends on your personal and business needs. You may even find that using both apps, each for different purposes, works best for your money.
If you just need a way to split the check with friends, PayPal is probably too robust and complicated. It also lacks Venmo’s fun and social environment.
However, if you need a way to manage payments for a freelance business, online store or in-person transactions, PayPal has everything you need.
Venmo doesn’t offer nearly as much support for businesses, and what it currently offers is only available to merchants by invitation. But it has plans to roll its offerings out to more businesses and will likely expand offerings in the future.
If Venmo sticks with its promised fees, merchants might be flocking to the app and leaving PayPal’s pricy system in the virtual dust.
Dana Sitar (@danasitar) has been writing and editing since 2011, covering personal finance, careers and digital media.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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