When Rachel Damuth held a yard sale this year, she was surprised by how many people wanted to pay electronically. Fortunately, the Redford, Michigan, resident had a Venmo account.
“I gave them my name to search,” Damuth explains. Shoppers then sent money via the payment app for a cashless purchase. She even used the app to sell the family’s camper, noting “It’s a secure way to get cash.”
Payment apps are popular, particularly with young adults, according to Jed Danbury, vice president of international sales for Computop, a global payment service provider. “It’s easy to pay one another,” he says, and it eliminates the need to hassle with cash.
Venmo and Paypal are two of the most popular payment apps, and while they are part of the same company, there are enough differences between the two that you may want to use them both.
[Read: Best Budget Apps.]
Basics of Venmo
Since coming on the scene in 2009, Venmo quickly became a popular option for people to split bills and pay one another. The app has a social aspect that allows users to add stickers, emojis and notes and make their payment feed public if they’d like.
However, its streamlined interface has made it an attractive way for people of all ages to send and receive money. “It’s incredibly convenient,” says Judy Thomson of Clarksville, Michigan.
It’s also free with no monthly fees and no cost to send payments from a linked bank account debit card or Venmo balance. However, there is a 3% charge for payments sent with a linked credit card.
Because of its ease of use, Venmo has become the payment method of choice for many online classified ads users. “That’s definitely the preferred way to sell on (Facebook) Marketplace,” Damuth says.
Over the years, Venmo has expanded its features to include direct deposit, purchase protection for eligible items and an option to buy cryptocurrency. Plus, the app has its own debit and credit cards.
Basics of Paypal
Paypal predates Venmo by more than a decade and can trace its roots to 1998. “Paypal was created for eBay to make payments online,” Danbury says. Compared to mailing checks and money orders for auction purchases, Paypal made it simple to complete transactions.
Today, Paypal’s functionality goes far beyond sending and receiving money. It has all the features of Venmo plus an extensive set of business tools which include invoicing, in-person and online payments and business financing solutions. The service has become integrated into the checkout process of countless retailers, including major chains like Walmart and Target.
“We use Paypal for almost everything we pay for online,” Damuth says. She likes the security of knowing a store isn’t getting her credit card number, and using the service is faster than pulling out a card and entering it at checkout. “For me, it’s a convenience thing,” she says.
That convenience comes at a cost for businesses, though. Thomson uses Paypal for her jewelry business, Baba’s 1909, and finds that she gets charged fees even for payments that are marked as “friends and family” transactions. “Because I invoiced it, they consider it a business transaction,” Thomson explains.
For personal accounts, there is no cost for payments sent with money from a linked bank account, Amex Send Account or a Paypal balance. However, those sent from a linked card will incur a fee of 2.9% plus 30 cents.
[Read: Apps to Meet Your Financial Goals.]
How Venmo and Paypal Compare
For consumers, Venmo and Paypal offer similar services and a similar fee structure, although some users find Venmo to be more user-friendly.
“With Paypal, I feel like I have to jump through more hoops,” Thomson says. She finds it can take longer to log in and complete transactions using Paypal’s app as compared to Venmo. What’s more, while both apps say it can take several days to transfer money to a bank account, Thomson has had money from Venmo show up in 24 hours.
However, from the business side, Paypal has its benefits. “Paypal makes you look more professional,” Thomson says. Plus, she feels as though the purchase protections are stronger for both buyers and sellers on Paypal as compared to Venmo transactions.
[SEE: 10 Best Money-Saving Apps.]
Do I Need Venmo if I Have Paypal?
Do you need both payment apps or will one suffice? The answer depends on how you use the apps and what your friends and families use.
Venmo seems to be preferred by young adults. “That’s how we get money to our (college-age) girls, and that’s how they pay us too,” Damuth says. She adds that the 20-something photographer for her daughter’s senior pictures asked to be paid via Venmo as well.
However, if you are running a small business or want to be able to pay for online purchases, Paypal may become your go-to app. In fact, Paypal has become such a mainstream payment option that it can even be used in-store at retailers such as Best Buy.
Regardless of whether you use Venmo, Paypal or both, be smart about how you use payment services. Follow the rules of privacy and security to avoid scams and ensure your cash remains safe.
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Venmo vs. Paypal: How These Payment Apps Stack Up originally appeared on usnews.com
