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Think Venmo is a bank? Think again! Learn smart ways to use payment apps like Venmo, Zelle® and PayPal® while keeping your money safe and growing.
Key Takeaways
You’ve probably used the Venmo app to pay friends back for coffee or split movie tickets. It’s fast and easy. But the truth is Venmo is not a bank – and treating it like one could put your money at risk.
Person-to-person payment apps (also called P2P payment apps) like Venmo, PayPal, Zelle®, Cash App and Google Wallet can be useful tools for splitting bills, paying people back or having them pay you. No cash? No problem. With a P2P app, you can send and receive money through your phone. These P2P services can be great for quick transfers, but they’re not designed to hold your cash long-term.
Security
When you keep your money in an FDIC-insured bank, up to $250,000 is protected by the Federal Deposit Insurance Corporation (FDIC). That means if the bank unexpectedly closes, you still get your money. If you keep your money in your Venmo account and the company fails, your cash could be gone.
Venmo does have something called pass-through FDIC insurance, but it’s limited. That means if you meet certain conditions, such as having an active Venmo Mastercard® Debit Card, Venmo keeps your funds at one or more of its program banks. FDIC insurance protects against the failure of a program bank but does nothing if PayPal or Venmo fails. (PayPal provides Venmo services and is not FDIC insured.)
In addition, fraud like imposter scams, where criminals pretend to be someone you know to trick you into giving them money, are a growing problem on P2P payment apps. While these apps typically use several security measures to keep your information and transactions safe, you do need to be extra careful to make sure the person you’re sending money to is really who you mean to pay.
Interest
If you keep your money in a savings account (and even some checking accounts) at a bank, you can earn interest. So just by letting your funds sit there, you can grow your money over time without having to do anything.
Perks
Bank accounts often offer extra perks for opening a checking account that payment apps typically can’t match.
At Gate City Bank, for example, new checking customers can get a special gift, instant-issue debit card (even one that shows off your school spirit), and rewards like cash back1 just for using your card. If you want to completely personalize your card with photos of your pet, you and your friends or an amazing vacation, you can customize your card, too. Plus, you have access to thousands of free ATMs, get reimbursed up to $250 in out-of-network ATM fees2, and if you have direct deposit, you can get your paycheck up to two days early3 – as soon as we receive notice from your job!
Venmo does offer a debit card that lets you earn cash back and receive paychecks early under certain conditions, but the app also has purchase restrictions. You can customize your Venmo debit card, but only to certain colors. And while they have thousands of free ATMs, there is no reimbursement option for out-of-network ATMs.
Payment apps can be handy for quick transfers, but they’re no substitute for a real bank account when it comes to peace of mind, growth or extra features.
Wondering which online payment service is the best? That depends on what you need it for.
Regardless of how you plan to use it, none of these top P2P apps should replace a bank account.
When using payment apps, take these simple steps to stay safe and be a savvy spender.
Think about your timeline
Link to a bank account to move your money back and forth quickly and easily. Pay attention to how quickly you need your money, though. At Venmo, for example, free standard transfers can take up to three business days, and if you need your money within 30 minutes, you’ll pay a 1.75% fee.
Keep it private
If you use a payment app like Venmo that also shares the details of your transactions with friends or the public, make sure to change your settings to private so others can’t see who you’re paying and why.
Stay low
Keep as little money in your Venmo account as possible. When someone pays you, transfer it to your bank account right away.
Double-check those digits
If you’re sending money to someone for the first time, contact them outside the app and verify their username to make sure you’re sending it to the right person.
Bottom line: Venmo can be great for quick P2P payments, but it’s not a safe place to keep your cash. Treat it like a tool – not a bank. To really level up your money game, open a bank account to keep your funds protected and give them a chance to grow.
When it comes to checking accounts, you have options. See which works best for you!
Find out
Whether it’s saving you a trip to the ATM or paying back a friend for coffee, enjoy a fast, safe and easy way to send money with Zelle®! Simply use our mobile app or online banking to get started.
No minimum balance. No monthly service charge. No problem. Discover all of the perks of Totally Free Checking – perfect for students!
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1 Points aren’t earned on ATM transactions or some person-to-person payments.
2 Enjoy free access at any Gate City Bank ATM, as well as at over 85,000 MoneyPass® and Allpoint® operated ATMs worldwide. Personal account customers can receive up to $250 in automatic fee refunds at out-of-network ATMs per year. Please see our Schedule of Fees for details.
3 Early paydays! Isn’t that neat? Your funds will generally be accessible the same day we receive a deposit notice from your payer, up to two days earlier than your scheduled payment. Direct deposit is required, and early access is subject to the payer’s timing in submitting funds.
4 Payment requests to persons not already enrolled with Zelle® must be sent to an email address.
Zelle® and the Zelle®-related marks are wholly owned by Early Warning Services, LLC, and are used herein under license.
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