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PayPal vs. Venmo: Which Is Better For Sending Money?

Updated on August 04, 2022 12:12 pm
paypal and venmo apps on iphone

PayPal is undoubtedly one of the world's most well-known and dependable payment service providers. The business has existed since 1998, when its original name was "Confinity". 

If you buy products or sell things online or send money online to friends and relatives, you must be already familiar with PayPal.

PayPal has gradually added several features for both individuals and businesses, including e-commerce business benefits and PayPal-linked credit, debit, and cash cards. 

It now owns Venmo, a well-known peer-to-peer digital payment service in the United States, and Xoom, another digital money transfer company.

In this article, we cover PayPal and Venmo, how to send money through PayPal and Venmo, and transfer fees to help you decide which is better for sending money in which circumstances. We also provide several alternatives to transfer money easily and economically.

About PayPal

PayPal, a financial technology company, was established in December of 1998. It merged with X.com in 2000. 

eBay bought PayPal in October 2002. This collaboration made it possible for eBay buyers and sellers to send and receive payments more quickly and securely than with checks or money orders. It separated from eBay in 2015.

PayPal acts as the middleman between individuals and companies to securely transfer money online. There is no exchange of card or bank account information, so your online transactions happen without disclosing any financial details to merchants. 

With PayPal, you can also buy and sell things online, send and receive digital payments in 25 different currencies, and pay for goods and services. No wonder it is a widely accepted payment method for online retailers, auction sites, and buyers.

PayPal now operates in more than 200 countries and regions. As of 2021, it has an astonishing 426 million verified users and merchants.

How To Use PayPal

You can sign up for a personal or business account with PayPal. You must use your email address or mobile number to create your account for free on PayPal's website or their mobile app. Before you can make a transaction, you must first verify your account. 

Personal Accounts

With your PayPal personal account, you can 

  • Receive money from people via your email address. You have the option of keeping the funds in your PayPal account, transferring them to your bank account, or using them for PayPal purchases and personal payments.
  • Send money online to anyone with a PayPal account using their email address or phone number.
  • Shop online by selecting the PayPal logo at checkout on online stores. Payments will either be debited from your linked payment method or your PayPal balance based on your payment preference.
  • Have your salary added to your account through direct deposit.
  • Manage your money in the PayPal app.
  • Get linked cards for spending.
  • Invest.

Business Accounts  

With a PayPal business account as a merchant, you can do the following:

  • Utilize integrations on websites to accept payments online.
  • Get paid in person.
  • Pay your employees and vendors.
  • Managing risk and detecting fraud.
  • Streamline operations in the workplace.

People selling online or on marketplace sites frequently use PayPal business accounts. It can also be utilized for offline sales.

Once your account is set up, your company can use checkout features, an email alias for customer support, and other benefits. Additionally, loans and finance are available to PayPal business customers.

Just bear in mind that costs for PayPal business accounts will differ from those for personal accounts.

How To Open A PayPal Account

You can follow these steps to create a PayPal account:

  • Visit the PayPal desktop website or download the PayPal app
  • Click “sign up”
  • Confirm your account type: personal or business account
  • Tap "get started"
  • Follow the instructions to fill in your details
  • Get verified, and you are good to go.

Depending on the sort of account you are opening, you will need to fill out specific details. For example, personal accounts only ask you to provide your name and contact information, whereas commercial accounts additionally demand you to provide information about your company or business.

The verification process involves linking your bank account or card and a few other steps.

How To Send Money Through PayPal Internationally

Once your account is created, you must link it to your bank account, a debit card, or a credit card to fund the money transfer.

Then enter the recipient's email address or phone number and confirm the payment information to send money to their PayPal account.

Select the payment method of your choice, then click "Send." The funds will often be deposited into your recipient's PayPal account, often immediately.

You can use Xoom to send money directly to your recipient's bank account if they don't have a PayPal account. Since PayPal owns Xoom, the two operate seamlessly together.

To send money using Xoom using your personal PayPal account, you will be directed to Xoom's website, where you can register an account. 

You can use your PayPal credentials to sign up with Xoom and fund the transfer using either your linked bank account or your Paypal account.

The great thing about Xoom is that you can transfer money overseas to a bank account directly, send cash for pickup, pay foreign bills, or recharge a prepaid mobile phone from countries like the U.S. and Canada in 131 countries.

How To Receive Money With PayPal

Payments made to you using PayPal are automatically put into your PayPal account.

If you don't have a PayPal account already, you will get an email or message with a link requesting you to open an account with PayPal. To create an account and start receiving payments with PayPal, you have to click the link.

How Long Does It Take To Send Money Through PayPal?

It simply takes a few minutes to send or receive money using a PayPal account before you can see the funds placed. 

However, withdrawing money from your PayPal account to your linked bank account can take up to 5 days if you use PayPal's free standard service. 

If you are in a hurry and need to receive the money in minutes from your PayPal account to a debit or a credit card or your linked bank account, you will have to pay a fee of 1.5% of the transfer value. 

What Are The Fees For Sending Money Through PayPal?

PayPal fees can change depending on your location, the country you are sending or receiving money from, whether you are using a personal or business account or if you are transferring money domestically or internationally, or using a credit card or debit card to pay for the transactions.

PayPal is free when:

  • Sending money to friends and family within the U.S. from your PayPal balance or linked bank account or AmEx Send account, as long as there is no currency conversion involved.
  • Purchasing from an online store or in-store that doesn't involve currency conversion.
  • Withdrawing or transferring money from PayPal to your local bank or debit card you've linked to your account.

PayPal Charges Fees When:

  • Receiving payments from your customers or sending payments to your suppliers or staff.
  • Using PayPal's instant transfer service instead of standard processing times.
  • Making transfers using a credit card, debit card, or PayPal credit card.
  • Using a PayPal Cash Card for international transfers along with various reload and withdrawal fees.
  • Sending money internationally.

Domestic credit or debit transfer is subject to a 2.9% fee and includes a fixed $0.30 transaction fee.

PayPal charges fees for buying and selling cryptocurrencies.

PayPal's Fees For International Money Transfers

When the transfer is funded by a PayPal balance, the fees for sending money straight to another PayPal account are 5% of the transaction value, with a minimum fee of $0.99 and a maximum fee of $4.99. 

If it is funded with a credit card, debit card, or PayPal credit, an additional fixed fee (based on the currency used) plus a funding fee of 2.9% are added.

PayPal's Currency Conversion Fee

The currency conversion cost for sending money in a different currency is 4%, or a different percentage amount if disclosed to you during the transaction.

Paypal charges a conversion fee of 3.5% for US and Canadian dollars and 4% for all other currencies. Additionally, PayPal charges a conversion service fee of 4.5%. Remember to account for this cost when you convert currencies before you send.

Unlike the fixed percentage cost for sending money to another PayPal customer, Xoom adds a markup to the real exchange rate when you send money through the service. 

You must factor this cost into your payment because the recipient will get less than the market exchange rate.

Learn more on how to get the best exchange rates.

PayPal Merchant Fees

Regarding its fees, PayPal is open. All of its rates and fees are thoroughly broken down on its Merchant Fee page.

Here is an example of PayPal merchant fees for certain types of transactions.

Accepting digital payments 3.49% plus a fixed fee of $0.49 per transaction 
Sending or receiving money for goods and services 2.89% plus $0.49
Standard Credit or debit card payments2.99% plus $0.49
Alternative payment methods 2.59% plus $0.49
Invoicing 3.49% plus $0.49
QR code transactions1.90%-2.40% plus $0.49
Pay with Venmo 3.49% plus $0.49
Donations 2.89% plus $0.49

How To Send Money Through PayPal Without Fees?

  • Ask your business clients to send money to you via the "Friends and Family" option. It will be free for you and your client if they pay using their PayPal balance or their linked bank account.
  • Since PayPal can charge you for accessing your money from PayPal:
  • Withdraw money from PayPal to your bank account. Standard transfers come with no fee.
  • Apply for a PayPal Cash Card. With this card, you get more than 32,000 fee-free MoneyPass ATMs.

Read more here to know ways to avoid paying PayPal fees.

 

About Venmo

In 2009, Andrew Kortina and Iqram Magdon-Ismail created Venmo, a peer-to-peer text messaging payment system. The company unveiled a platform with a built-in social network in 2012.

Venmo was purchased by Braintree, a mobile payment system, in 2012 for $26.2 million. In 2013, PayPal paid $800 million to acquire Braintree. Before its 2015 separation from e-commerce behemoth eBay, PayPal was a developing division of that company. In the division, PayPal acquired Venmo.

The Venmo app is available on iPhones and Android Phones. Venmo users can use the service to send and receive money without incurring any fees, or they can use it to make purchases from specific merchants. The transfer can be funded using your bank account, debit card, or credit card.

Venmo is incredibly convenient for dividing bills, rent, and other utilities. However, for the transfer to work, the users must be Venmo users.

There are more than 80 million users of Venmo. The overall volume of payments processed in 2021 was $230 billion, an increase of 44% from the previous year.

How To Send Money Through Venmo

Online registration for a Venmo account is possible at venmo.com, and both iOS and Android users can download the Venmo app.

Your name, phone number, and email address are required to register. As an alternative, you can log in to the platform using your Facebook credentials. To begin trading money with other Venmo users, simply link your Venmo account to your bank account, credit card, or debit card.

You can also carry out the following tasks using Venmo:

  • Use your Mastercard debit or credit card to make purchases with Venmo
  • Make online purchases at Amazon and other authorized Venmo partners
  • Withdraw money from your Venmo account at an ATM
  • Use a QR code in-store
  • Cash some checks at home
  • Enroll in direct deposit so that your paycheck will be sent to your Venmo account directly
  • Buy and trade cryptocurrencies on the app

How To Add Money To Venmo

Only Venmo users with an approved Venmo Mastercard Debit Card have to option to add money from a verified bank account directly to their Venmo balance.

You can add money to your Venmo balance in the app. Follow these steps:

  • Go to the "Me" tab and tap “Manage Balance” at the top of the app
  • Tap "Add Money" and enter the amount you want to transfer and tap “Next”
  • Confirm the bank account you'd like to transfer money from
  • Review the transfer information and expected arrival date 
  • Tap "Add (transfer amount) now"

You can still fund your transfer to other Venmo users from a linked funding source. You don't need to have money in your Venmo account to make a transfer. 

You don't have to worry about adding money as long as your Venmo account is tied to your bank account and your bank account has sufficient funds. 

How Long Does It Take To Send Money Through Venmo?

Money transferred from your Venmo should appear instantly in your recipient's Venmo account. From there, the recipient can spend the money with the Venmo app or a Venmo debit card. They can also transfer the money from their Venmo account to a linked bank account. 

However, adding money from your Venmo balance to your linked accounts or withdrawing money from your Venmo account can take 1 to 3 business days. 

But with Instant transfers, you can send money to any eligible U.S. bank account or Visa/Mastercard debit card within 30 minutes. You will have to pay a 1.75% fee (with a minimum fee of $0.25 and a maximum fee of $25) from the transfer amount for each transfer. 

This service only works with U.S. bank accounts or Visa/Mastercard debit cards that are part of the instant transfer services (like Visa Fast Funds or Mastercard Send). 

What Are The Fees For Venmo?

Venmo doesn't charge fees to send and receive money. Venmo has no monthly or annual fees. 

Fee-Free Service From Venmo: 

  • Transferring funds to your Venmo account from a linked bank account or debit card.
  • Getting money into and taking money out of your Venmo account.
  • Making a routine transfer to your linked bank account.

Venmo's Fees For Certain Transactions:

Payments using a credit card 3%
Instant transfers from Venmo balance to a bank account or debit card 1.75% (min-$0.25, max-$25)
Using check-cashing feature (payroll & govt. checks)1% (min $5)
Check-cashing feature (non-payroll & non-govt. checks)5% (min $5)
Purchase & sale of cryptocurrency $0.50-1.50%

How Much Money Can I Send Through Venmo?

For registered users without identity verification, the person-to-person sending limit is $299.99 on the total payment and purchases per week. 

Can I Send Large Amounts Of Money Through Venmo?

You can send larger amounts of money with Venmo once your accounts get verified.  For verified accounts, the weekly rolling limit is $4,999.99. Read here about the limit and how to verify your identity.   

Can I Send Money Abroad With Venmo?

Venmo does not offer international money transfers. Only Americans can use Venmo (including some US territories such as the US Virgin Islands, Puerto Rico, and Guam).

If you attempt to use Venmo outside of the United States, an error message will appear.

In contrast to PayPal, which offers international money transactions, users of Venmo must meet the following criteria to use Venmo's services:

  • Must be an American citizen.
  • Age requirement of at least 18 years.
  • The phone number cannot be linked to another Venmo account already.
  • Sender and recipient both need to have American bank accounts.
  • You must have a U.S. cell phone that supports shortcodes for text messaging (shortcodes are 5- or 6-digit numbers for texting)

PayPal Vs. Venmo

PayPal is a very practical payment solution for businesses or sending money, whether domestic or international and is accessible in practically all countries. 

Compared to other payment processors, PayPal is a great option for many businesses.

Whereas Venmo only works within the U.S. However, it is a fantastic peer-to-peer payment app for splitting bills for food, drinks, rent, etc., especially for younger people or college students.

Money can be sent and received fast and without any costs. The social networking tools that enable users to text and chat with emojis are an added plus.

The better option for sending money will come down to the service you are looking for. Each has its specific uses and benefits.

Fortunately, the money transfer market is a competitive marketplace, and there are several alternatives to PayPal and Venmo for your transfer needs. 

Here we list some of the popular international money transfer companies to send money internationally

XE Money Transfer

XE money transfer enables international wire transfers to an overseas bank account in more than 60 different currencies and over 130 different countries. XE is a great option for significant bank-to-bank transfers. There are no fees for transfers of $500 or more.

Wise

Wise offers online international money transfers from 59 countries to over 80 destinations with transparent costs and real exchange rates (the rates seen on Google). As a result, your beneficiary will get more money. Additionally, Wise provides a multi-currency account that enables you to hold 50 or more different currencies and convert them for a fair price.

Skrill

Skrill enables you to send money online in over 180 countries and 40 different currencies to a bank account, Skrill mobile wallet, email address, or phone number (all options may not be available in all countries). For an international money transfer to an overseas bank account, Skrill charges no transfer fees.

Remitly

Remitly offers international money transfers from 21 sending countries to more than 100 different countries. They offer a range of payment options, including home delivery, mobile money, cash collections, and bank deposits. Remitly provides excellent promotional rates for first-time customers. You can receive referral bonuses if you recommend Remitly to your friends.

Instarem

Instarem facilitates online money transfers to over 55 countries through its network of over 8000 institutions around the world. Instarem also offers real-time exchange rates. For small transfers, Instarem is especially well-liked because it is less expensive. You receive InstaPoints for each transfer, which you may then use to fund another one.

Panda Remit

Panda Remit provides low-cost online international money transfers to more than 30 nations. Credit cards, bank accounts, or both are acceptable forms of payment. For transfers funded through bank transfers, there are no fees. If you are not quite happy with the service, they also provide a money-back guarantee.

Pangea

Pangea offers international money transfers from the U.S. to 40 other countries. Pangea is an excellent method for sending money to Asia and Latin America. Not all states in the USA have Pangea available. Most funds are transferred in less than 24 hours, but if you use a US debit card to make the payment, the process is completed within 30 seconds. 

You can transfer funds to a recipient's bank account, debit card, mobile wallet, or address for cash pickup. Bank-to-bank transfers can only be received by recipients in Mexico. 

Revolut

You may send money in more than 30 currencies to more than 100 countries using Revolut, a powerful financial app. You may keep up to 30 different currencies on your account at no extra charge, which helps make international payments. When exchanging foreign currencies, Revolut employs real exchange rates. 

There is no markup on the real rates for the majority of currencies. The transfer can happen instantly or take up to two working days, depending on the recipient's country and the currency being sent.

In conclusion, thanks to the availability of a variety of alternatives, it is super convenient to compare several transfer companies at once to get the best deal on your money transfers. It is also easy to switch between them based on your needs and situations.

It is recommended that you always compare the top money transfer businesses using an online comparison tool like CompareRemit to find the one that offers the best exchange rates, lowest fees, and fastest transactions.

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There may be fees for card replacements, balance inquiries, inactivity fees, or other reasons. The Consumer Financial Protection Bureau issued a rule in April 2019 that paycard issuers must disclose all the fees to cardholders.Employees must be informed of the potential fees. The paycard issuer is required to give you disclosures on such fees before you sign up for a paycard or a payroll card.Also, paycards are regulated by state laws, so you might have to check for additional details depending on your state. Some states are making efforts to reduce fees that affect employees.As you can see, paycards fees mostly affect employees. In the case of direct deposits, employers are the ones who have to pay fees for setting up the payroll distribution system and a transaction fee for each time they transfer wages into an employee's account. The payroll software may also charge a fee for their service.Can Employers Save Money When Using Paycards?Since paycards are reloadable cards, employers can have the banks reload the paycards with their employees' wages for the pay period, avoiding the costs and hassle of issuing paper checks, mailing them, or re-issuing lost checks. The savings may not be a substantial amount but they can add up gradually.Can Employers Choose between Direct Deposit and Paycards?While there is no mandate that employers can only offer either direct deposit or paycards to their employees for their wages, it is safe to check with your state's law on payroll distribution.One-third of states allow employers to require employees to have bank accounts for direct deposit. In such a case, paycards may not be needed. Also, there is no law preventing employees with bank accounts to opt for paycards as their payment option.Though generally, employees tend to prefer direct deposit because of its efficiency and the least costly method of payment, as a business owner or an employer, it is better to give options instead of imposing only one method.Ask your employees about their preferred method of payment and what benefits (convenience, low fees, etc.) serve them the best.In fact, Federal law requires employers to offer alternative payment methods like paper checks or direct deposits.Should Employer Provide Pay Stub?Pay stub provides details of the employees' pay for each pay period. Employers are not required by federal law to give employees their pay stubs. However, many states have laws that require some form of written pay statement.Even if your state doesn't need you to provide pay stubs, you are still required by the Fair Labour Standards Act to keep track of your employees' working hours.For employees, a pay stub gives a record of their wages, deductions, contributions, and other information. It is also proof of income or employment, which is often needed when applying for a loan, credit card, or housing.For employers, a pay stub is useful for tax purposes, and it can be used to resolve any discrepancies with employee pay.Is it Possible for Paycards to be Overdrafted?Usually, paycards works like debit card, allowing cardholders to withdraw up to the limit of the loaded amount. However, there are paycard that allows overdraft for employees. But it can come with hefty overdraft fees if employees use funds over the limit in their account. Usually, you should be able to prevent misuse by subscribing to an overdraft protection service.Will Paycard Affect Credit Score?Paycards, like all prepaid cards, do not affect an employee's credit score.What is a Paycard Gets Lost or Stolen?A replacement card can be issued in such cases. The employee needs to notify the employer, and then the employer should immediately notify the card issuer. The employee is not liable for the incident as long as the issue is timely reported. Paycards come with similar protection as that of a prepaid card.The reporting time is determined by the card issuer. If you wait longer to report after learning of the loss and theft, the fraudulent charges may increase. You may have to pay a fee for the replacement card.Pros and Cons of PaycardsProsA win-win situation for unbanked employees and their employers.Green alternative to paper checks.Immediate payment to employees.No hassle of cashing a paycheck.No monthly or maintenance fees.Added security when assessing their funds (paycards require a PIN).Employees can report to the issuer if funds are used unauthorized.Paycards can be reloaded during each payday, saving money on issuing paper checks.Added efficiency for the employer as the employer would not have to physically present or mail paychecks to unbanked employees.ConsEmployees may incur fees for several reasons. Be aware of such potential fees.Employers have certain responsibilities to educate employees about the usage of paycards.Limited range of services and flexibility in managing your funds compared to bank accounts and other prepaid cards.The best paycards programs are easy to set up, have lower fees, quick access to funds, and provide a range of benefits such as cashback and discounts. We have made a list of popular paycards providers for businesses:Wisely Paycard by ADPOnline portal and mobile appCompatible with Apple Pay, Samsung Pay, and Google PayZero cost sign upNo hidden feesNo credit checkNo overdraft feeZero cost direct deposit of pay and other sources of income (including government benefits)Accepted wherever Visa is acceptedKeep track of spending and account balances 24/7 on the appGet cash back at major retailersSurcharge-free ATM withdrawalsFDIC insuredSecurity features include instant card lock, purchase protection, and travel alert notificationsRapid PaycardDirect Deposit onto rapid paycardLoad funds from approved checks with Ingo Money mobile appsNo fee for cashing paycheck24/7 account access with rapid! Access mobile appNo credit checkCan be used at ATMs, merchants worldwide, wherever Debit Mastercard or Visa debit cards are acceptedPay bills and make purchasesBook airline and hotel reservations onlineEarn interest on savings accountGet cash back rewardsFDIC insuredMoney protected with Zero Fraud LiabilityKittrell PaycardNo fees to use (there are fees for certain situations)Fee-free ATM network with MoneyPassWebsite and Kittreall AppGet real-time alerts and push notificationsCash back at point-of-sale terminals2-way texting to manage your card and accountCompatible with Apple Wallet, Google Pay, Samsung PayEasy portability (Get direct deposit of stimulus checks, tax refund, benefits)Freeze or unfreeze card on-demandSkylight PaycardZero sign up feeNo credit checkNo minimum balance Personalized your card with a family photo or unique imageManage money anywhere on Mobile AppDirect deposit your government benefits, tax refundsUse anywhere where Visa Debit & Debit Mastercard are acceptedFDIC insuredZero liability protectionPay bills onlineEarn interest on savings accountEarn cash back with Payback RewardsSend money to or receive money from friends and family with Netspend cardsSet text alerts about transactionsRefer a friend and boost your card balanceSkylight overdraft limit is $100 & 3 times/ monthConclusionOverall, paycards can be convenient and cost-effective for employees and employees when compared to paychecks or for those employees with no bank account. And the paycard fees are becoming more transparent and competitive.While paycards can be challenging at times, especially when you are employed in multiple jobs and have a separate paycard with each employer, your funds are scattered in multiple cards so it becomes difficult to manage your finances. Some may prefer to put all their money in one place, like a checking account.However, if you can't open a bank account, a paycard is a great option to get paid. Read the fine prints before signing up for a paycard and know the potential fees that come with it.

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