Like other peer-to-peer (P2P) payment apps, Venmo makes sending money to family, friends or businesses convenient, quick and secure. When setting up an account with Venmo, you link and verify a bank account from which your digital payments will be sent.
But what if you don’t want funds to be drawn from your checking or high-yield savings account? With Venmo, it is possible to link payments to a credit card, including your favorite rewards credit card—but it may not be worth it.
Here’s what you need to know about using a credit card with Venmo:
The most sensible way to use a credit card on Venmo is when you are trying to meet minimum spending requirements to earn your credit card’s sign-up or welcome bonus.
Also, if you’re strapped for cash, you can use a credit card to pay someone over Venmo without risking overdrafting your checking account or keeping your friend waiting. Just be sure to pay off your credit card as soon as possible so that you won’t owe hefty interest charges and end up in debt. Doing so will also help boost your credit score.
On the other hand, there are drawbacks: fees.
When using a credit card on Venmo, you’ll be charged a 3 percent fee when making a payment. No fee will be charged if using a debit card or bank account. So, even if you pay with a rewards credit card like a 2 percent back card, you will likely lose money on Venmo payments linked to credit cards.
Also, when sending payments to friends and families with a credit card over Venmo, your card issuer may code the transaction as a cash advance, resulting in more fees and a higher interest rate. According to Experian, the most common cash advance fee structure is 5 percent of the advance amount or $10, whichever is more, but it ultimately depends on your card issuer.
Venmo may not recognize some cards. For example, Health Savings Account cards may be difficult to link to your Venmo account.
Remember that most peer-to-peer payment apps do not offer fraud or purchase protection as a credit card might. Moreover, the cash you keep in the app is usually not insured by the Federal Deposit Insurance Corporation. Readers should also be cautious of apps’ offers to take out Buy Now, Pay Later loans or to convert cash to Bitcoin.
A better option: Consider using Apple Cash; when linked to the Apple Card, Apple Cash charges no fee and gives you cash back.
Venmo is mostly safe—but with some important caveats. Like other peer-to-peer payment apps, Venmo is increasingly vulnerable to scammers, and customers have complained about how the company has handled these problems.
Venmo encrypts your account details, and the app also uses multi-factor authentication to confirm your identity. You can also set up a unique PIN code and/or use Touch ID to provide another layer of security to your account.
