So, you’ve got a checking account, and a debit card and a checkbook. You may even have a credit card! Do you need or want a peer-to-peer payment account – like VenMo or Paypal?
What is a Peer-to-Peer Account?
Peer-to-peer (P2P) payment methods include Venmo, Apple Pay Cash, PayPal, and others. Each has their own pros and cons. You can use these mobile apps to quickly and easily pay friends or others you are buying goods and services from, e.g. buying a used phone from someone on CL or splitting the bill at a restaurant. They all basically work the same way, but we will use VenMo as an example.
- Read: https://www.nerdwallet.com/blog/banking/p2p-payment-systems/
- You set up a VenMo account and you connect that account to either a debit card or a credit card or you connect directly to your bank’s checking account.
- Whenever you pay someone using VenMo, then VenMo takes that payment from your connected account. For example, if you have connected a debit card, then VenMo uses your debit card to take money from your checking account and send it to the VenMo account of the person you paid. Note that if you use a credit card to fund your VenMo account, then you will charged about 3% of every transaction. In other words, connect it to your checking account or your debit card to eliminate these fees.
- If someone is paying you using VenMo, then you will see the money appear in your VenMo account almost immediately. You can then spend that money from your VenMo account at merchants, or to pay friends, or you can transfer the money to your bank account.
Which Peer-to-Peer App should I Use
Good question, and of course it depends on what you want to use it for. A quick summary is that VenMo is great for paying friends when splitting bills, and PayPal is great if you also want to use it to pay online merchants and avail yourself of PayPals financial services, like debit cards and loans. VenMo does not allow person to business transactions at this point in time. Of course there is Apple Pay Cash (only works to pay others with iPhones), and Squares Cash app, too! And note that PayPal owns Venmo!! A lot of the time the decision comes down to what app your friend uses, so that you can pay them. Many people have more than one P2P account for this reason.
Some good comparisons to read, to help you make a decision, are below. Keep in mind fees for moving money around between your accounts – some will charge you to send money back to your checking account! And pay attention to Venmo’s social aspect – where every payment you make is sent to a live feed unless you specifically tell it not to!