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How Safe Is Venmo And Why Is It Free?

How Safe Is Venmo And Why Is It FreeNeed to split the dinner bill but don't have cash? Want to settle up with colleagues the quick and easy way? Do what the millennials are doing. Go Venmo.

What is Venmo?

The use of Venmo as a way to pay between friends has exploded since startup in 2009, launching first as a text message-based system. But it's changed and evolved right along with the rise of social media apps and the peer-to-peer economy.

A series of acquisitions brought Venmo under the control of online financial giant PayPal. While it does have competitors, its name has almost become synonymous with transferring money quickly between friends.

Before you condemn it as a millennial fad, however, you might want to consider how much money is getting transferred using the app. In January of 2016 alone, Venmo handled $1 billion.

The smartphone app is popular with people under 30 that some have even begun referring to the age as the "Venmo Line." When someone transfers money to you, for the rent, last night's dinner tab or even the water bill, they can optionally comment on it as well, bringing in the social media component. Friends can check another person's feed and see what they have paid other people for, seeing where they've been and what they've done as well.

Cost of Doing Business with Venmo

Another advantage is that, unlike even parent corporation PayPal, money can be transferred for free. Venmo is free to download and free to setup an account. You can even transfer money without a transaction fee, provided you link to your bank account.

When you transfer money from a credit card, you will incur a three percent charge. At this point, Venmo still reports zero revenue, but that doesn't mean the app isn't profitable. As part of the PayPal family, it's helped its parent company extend its reach.

How Safe is Venmo?

Of course one of the main concerns about using any electronic form of banking is how secure it is.

It's no fly-by-night operation. They employ bank-level security and data encryption to protect users against security breaches. Users can also set a PIN code for increased security. When used as originally intended for moving funds from friend to friend, it's entirely safe. Risk enters when Venmo, like any other similar app, is used in a way that isn't consistent with its stated purpose.

Staying safe with Venmo requires you to know how it works.  Transferring money isn't instantaneous. It helps to think about it working like a checking account. While your balance might reflect money someone just sent you, it actually takes a couple of days for the transaction to complete.

So, when used among your trusted friends and family members, Venmo is just as safe as any other payment method such as giving them a check. Judging by its ever-increasing market share, it's pretty popular, too.

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