Venmo and PayPal are two of the most popular payment platforms that can be used to send and receive money to and from friends or customers. PayPal was founded in 1998 as an electronic payment system tailored specifically to online commerce.1 Venmo was developed in 2009 to make it easy for everyday users to send money to each other via text or a mobile device.2
We reviewed both platforms based on cost and fees, ease of use, transaction limits, ratings, where each can be used, and more. Although there are many similarities between the two (PayPal actually owns Venmo), there are also important differences that sometimes make one better than the other.
Venmo vs. PayPal at a Glance
| Venmo | PayPal | |
|---|---|---|
| Platforms | iOS, Android, web* | iOS, Android, web |
| Payment Methods | Credit, debit, bank transfer | Credit, debit, bank transfer |
| Credit Card Fee | 3% | 2.9% + $0.30 |
| Debit Card Fee | Free | 2.9% + $0.30 |
| Bank Transfer Fee | Free | Free |
| Transfer Limit | $4,999.99 | $10,000 |
| Withdrawal Timeframe | 1 Business day | 1-2 Business days |
| Fee | Free to use | Free to use |
| Best For | Businesses (Merchants) | Everyday users (P2P) |
| Availability | U.S. only | 200 Countries |
* Venmo only lets users make payments using its mobile app
What Are Venmo and PayPal?
Venmo and PayPal are digital wallets—services that let users make electronic purchases by securely storing payment information and passwords for multiple payment methods. Both allow users to connect their accounts to multiple bank accounts or credit cards.
Both payment platforms offer credit cards: the Venmo Credit Card, the PayPal Cashback Mastercard, and the PayPal Extras Mastercard.
While both services make it easy to send money to other users, PayPal is more focused on acting as a payment gateway for online purchases. PayPal also offers business financing options.
Although Venmo is slowly gaining traction as an online payment portal, it’s primary use is for sending money quickly between two users. It does this far more easily and faster than PayPal.
How Do Venmo and PayPal Work?
Venmo and PayPal process payments using either the existing balance in each account or by drawing on funds from connected bank accounts or credit cards. Both services can be accessed online or through native mobile apps. PayPal lets users send or request payments on the web, while Venmo only offers this function through its mobile app.
Who Should Use Venmo or PayPal?
PayPal is best for online merchants who want to offer additional payment options to their customers. It offers both buyer and fraud protection so businesses can be assured they’re protected.
Venmo is better for sending money between two people. However, because it doesn’t have buyer protection like PayPal, it might not be a great option to send money to people a buyer doesn’t know. If funds are sent to the wrong person, the sender is wholly responsible for trying to retrieve those funds. Venmo makes no guarantee that money sent to the wrong end user will be recovered.
Payments: Venmo vs. PayPal
Both Venmo and PayPal allow users to send money using their account balance or through connected credit cards and bank accounts. PayPal is used by online merchants and many e-commerce sites to allow shoppers to make purchases with their PayPal account. Because PayPal is tailored for business use, it has a high transaction limit of $10,000.
By contrast, Venmo is often just used to send money between friends. Only a few businesses so far accept payments directly through Venmo, including Uber, Grubhub, Forever 21, J. Crew, and Poshmark. Other businesses need to use PayPal Checkout or Braintree if they want their customers to be able to pay with Venmo. Venmo’s initial person-to-person sending limit is $299.99. Once a user is confirmed, that increases to a weekly rolling limit of $4,999.99.
Accessibility: Venmo vs. PayPal
Both Venmo and PayPal can be accessed using a desktop or mobile browser or their native apps. While PayPal allows users to make payments both online and via its app, Venmo payments can only be made through the Venmo app.
PayPal users can also activate PayPal’s One TouchTM feature, which lets them enter their PayPlay information once and shop from participating merchants with one click without having to sign in to their PayPal account every time. One-Touch works on both desktop and mobile devices. Shoppers can also pay directly with the PayPal app by scanning eligible QR codes.
Venmo’s app is specifically designed to make sending money to other Venmo users fast and easy. The app can automatically find the Venmo accounts of family and friends by connecting to a user’s Facebook account and phone contacts. Money can be sent to another user by searching for their account or by scanning the QR code on their app. Users can also see purchases their friends share publicly with a social-style news feed, send a message with a payment, and “heart” a friend’s purchase.
Features: Venmo vs. PayPal
Because PayPal is primarily geared toward merchants, it offers more features for business than Venmo. PayPal’s Commerce Platform lets businesses accept a variety of payment types and options, including point-of-sale (POS) systems, virtual terminals, subscriptions, billing agreements, and invoicing.
PayPal’s Commerce Platform supports over 100 currencies in more than 200 countries.
PayPal offers fraud and seller protection to protect businesses from chargebacks, reversals, and fees using advanced machine learning to identify new fraud risks.
Buyer Protection
- 24/7 monitoring
- Fraud prevention
- Full refund if the order never arrives
- Full refund if the buyer receives the wrong item
- Full refund if the item is damaged during shipping
- Full refund if the buyer receives a counterfeit version of the item
Seller Protection
- 24/7 monitoring
- Merchant fraud prevention
- No chargeback for “Item Not Received” claim with proof of delivery/shipment
- No chargeback for “Unauthorized Transaction” claim with proof of delivery/shipment
The company also offers fixed-fee working capital and term business loans based on a merchant’s PayPal history. Loans require no credit check and can be repaid with a percentage of PayPal sales for working capital loans or through automatic weekly payments for term business loans.
PayPal Financing Options
PayPal working capital loans provide financing up to 35% of a business’s annual PayPal sales. Once approved, loans are funded within minutes. PayPal charges a single fixed fee based on sales volume, account history, the loan amount, and the percentage of sales the business directs toward repayment (10% to 30%). Payments are automatically deducted from a business’s PayPal account until the loan is repaid.
PayPal also offers business loans between $5,000 and $500,000 based on the financial strength of a business and its credit score. PayPal charges a fixed fee and withdraws repayments weekly from the business’s bank account instead of a PayPal account. Loans are funded within 24 hours and are repaid over 13 to 52 weeks depending on the amount.
Lastly, PayPal offers cashback and points-based credit cards, as well as a digital line of credit wherever PayPal is accepted. Although Venmo can’t compete in this arena, it does offer a physical card that extends Venmo’s purchasing power to just about any merchant. The card can be used to split payments between friends and also earns cashback rewards. Individuals who set up direct paycheck deposits to their Venmo account can also access their money two days earlier using the Venmo card.
Reviews: Venmo vs. PayPal
Both Venmo and PayPal have a B rating with the Better Business Bureau and each only gets an average of one out of five stars from customer reviews.3 4 For the most part, however, the low rankings are a result of customer complaints against individual merchants rather than PayPal and Venmo themselves.
Cost: Venmo vs. PayPal
There is no cost to create either a Venmo or PayPal account. Each offers free iOS and Android mobile apps. PayPal allows users to create an account using an email, while Venmo requires a mobile phone number.
PayPal charges 2.9% of each transaction plus $0.30 for purchases made with a credit or debit card. Venmo charges 3% per transaction for purchases made with a credit card and no fee for debit card purchases.
Although neither service charges to transfer money to a connected bank account with a standard turnaround (one business day for Venmo and one to two business days for PayPal), Both services charge a 1% fee with a maximum of $10 for an instant transfer.
How We Evaluated Venmo vs. PayPal
In comparing Venmo vs. PayPal, we looked first at the users each served. We also looked at what each charged, how easy the service was to use, what protections each offered, and how well each service was reviewed.
Both services are owned by PayPal, but we found that PayPal is by far the more robust, secure, and safe option for processing online payments. For sending money quickly and easily to friends and family, however, Venmo has PayPal beat.