Venmo Cons Every Business Owner Should Be Aware Of

As a business owner, you're likely familiar with Venmo, the popular peer-to-peer payment app. However, there are some key cons to be aware of.

Venmo charges a 3% fee on credit card transactions, which can add up quickly. This is a significant drawback for businesses that rely on credit card payments.

If you're not careful, your Venmo account can become a mess. Without proper organization, it's easy to lose track of payments and transactions.

Venmo's limitations can be a real hassle for frequent travelers. You need a U.S. phone number and be physically located in the U.S. to use Venmo, which can be a problem for those who live in border cities or are stationed overseas.

Venmo accounts don't earn interest, unlike traditional checking or savings accounts. This means you won't earn any interest on your money while it's parked in your Venmo account.

If you do need to transfer money to or from your bank account, Venmo has some limitations. You can transfer up to $19,999.99 per week to your bank account, but the per-transfer limit is only $5,000.

Here are some key transfer limits and fees to keep in mind:

Venmo also has some security concerns, particularly when it comes to sensitive financial information. If you're using Venmo to collect rent, you may be putting yourself at risk of data breaches or other security issues.

Venmo's customer support is lacking, as evidenced by a caterer's experience with a client sending payment to the wrong Venmo account.

Several hours were spent with Venmo's support team, and even then, the issue was only resolved after talking to the account holder who received the money.

The caterer's experience highlights the need for more robust buyer protection and dispute resolution services that other established business payment platforms offer.

Your money doesn't go directly into your bank account when you get paid on Venmo. This can cause a cash flow nightmare, especially if you're not used to it.

Cash flow is the total cash minus expenses flowing into and out of your account at any point in time. If you're spending more money than you have on hand, you'll have a negative cash flow.

You have to manually transfer money out of your Venmo account to access your funds. This adds an extra step if you use a business credit or debit card separate from your Venmo account.

Instant transfers cost 1.75% of the amount transferred with a minimum of $0.25. Fee-less transfers can take one to three business days.

There's a $5,000 cap per transfer, which means you'll have to manually transfer money in smaller amounts if you receive a large payment.

Using Venmo for business payments can be unprofessional. Many business owners have used Venmo for payments, but it's not a recommended practice.

Receiving payments through Venmo can blur the lines between personal and professional relationships. I've taken payments for bartending catering services through Venmo myself, but I no longer do.

Digital payment platforms like Venmo can be convenient, but they often lack the professionalism and accountability of traditional payment methods. This can lead to issues with tracking payments and resolving disputes.

Using Venmo for business payments can also make it difficult to separate personal and business finances. This can lead to tax and accounting headaches down the line.

Venmo lacks the features essential to help manage your business. This was painfully evident when a caterer's experience with Venmo for business resulted in hours wasted on email exchanges, phone calls, and app use to resolve a simple payment issue.

Lack of integration with popular accounting software is a major drawback. The caterer's experience highlights the problem of app-jumping, which can complicate bookkeeping and financial management.

Detailed transaction reporting is also missing, making it difficult to manage a business efficiently. This is a crucial aspect of running a business, and Venmo's absence of it can lead to financial headaches.

Venmo originated as a peer-to-peer payment platform, and it shows in its limitations for business transactions. It's primarily used for casual transactions between individuals, not for business use.

Venmo invoices don't represent your brand, and that's a problem.

The Venmo look, with its blue accents and gray and white background, is what your clients see when you request payment through the app.

This inconsistency can hinder your ability to reach a broader customer base.

Relying solely on Venmo may impact how clients and partners perceive your brand.

Figuring sales tax can be a real headache, especially when you're using a platform like Venmo.

You can't include sales tax for payments sent directly to your business profile by another Venmo user.

Venmo doesn't auto-calculate sales tax for services or goods, so you have to check those tax rates every time you charge a client.

This can be a hassle, especially if you're dealing with multiple clients and transactions.

As of July 2024, you'll be charged 2.99% on payments in your personal Venmo account identified as goods and services.

Venmo's seller transaction fees can add up quickly, especially if you're trying to attract new clients. If you receive payments in your Venmo for Business account, the fees are slightly lower: 2.29% + $0.09 for Tap to Pay payments, or 1.9% + $0.10 for other digital transaction types.

These fees are nonrefundable, so be prepared to absorb the cost even if a client redeems a promo.

Transaction fees and limits can be a major hurdle for businesses looking to scale. HoneyBook's transaction fees are designed to compete with major credit card processing apps like PayPal, with credit card processing fees of 0.09% + $0.24 less than PayPal's.

Venmo, on the other hand, has a complex fee structure. For Venmo to Venmo transactions, the fee is 1.9% + $0.10, but for credit card transactions, the fee shoots up to 3.49% + $0.49. This is 0.59% + $0.24 higher than a one-time credit card charge using HoneyBook's payment platform.

Venmo also sets transaction limits for all users. For users with a verified identity, the limit for transferring money to a bank account is $19,999.99 per week, with a maximum single transfer amount of $5,000. For those who haven't completed the verification process, the limit is $999.99 per week.

Here's a breakdown of Venmo's transaction limits:

Venmo's transaction limits can be a major limitation for businesses looking to scale.

As your business grows, you may find that Venmo's features and limitations don't scale well with increased transaction volumes.

Investing in a more robust payment solution early on can save time and resources in the long run.

Venmo's security practices have improved, but you should still take precautions when using the platform. Venmo stores personal information on third-party servers located in the United States, protected by physical, electronic, and procedural safeguards.

You can help protect yourself by never sharing your login information, using a strong password, and setting your account to private. This will keep your future transactions away from the public eye, but you'll need to manually change past transactions to private as well.

Venmo uses firewalls, encryption, and physical access controls to limit access to the data, and will attempt to notify affected users in case of a data breach. However, it's worth noting that PayPal, Venmo's owner, recently settled charges with the Federal Trade Commission for misrepresenting its security system and failing to fully disclose information to customers.

Venmo's security practices may seem good on the surface, but a closer look reveals some concerns. Venmo stores personal information on third-party servers located in the United States.

The company claims to protect this information with physical, electronic, and procedural safeguards, although the exact measures aren't discussed. This lack of transparency can be unsettling.

Venmo uses firewalls, encryption, and physical access controls to limit access to the data, which is a good thing. However, the company's history of misrepresenting its security system raises questions about its reliability.

In 2014, Venmo was accused of not having a written information security program, and it didn't notify users of password and email address changes on their accounts until 2015. This kind of oversight can put users' personal and financial information at risk.

The Federal Trade Commission required Venmo to submit to third-party compliance audits every two years for the next decade following the settlement. This is a positive step towards improving Venmo's security practices.

Here are some key points to consider when evaluating Venmo's data security:

Don't share your login information with anyone, as it's linked to your bank account or credit card. This is a major no-no when it comes to digital safety and well-being.

Use a strong password that's not easy to guess, avoiding common combinations like birthdays, anniversaries, and names. Consider reading up on creating a strong password for more tips.

Set your Venmo account to private to keep your transactions out of the public eye. This can be done by going to Settings, then Privacy, and selecting Private. You'll also need to change past transactions to private.

Lock your Venmo app with a PIN and enable multi-factor authentication to prevent unauthorized login attempts. This will add an extra layer of security to your account.

Only transact with people and businesses you trust, as there's no guarantee you'll get your funds back if someone scams you. Be cautious and only deal with those you know.

Don't hold large balances in your Venmo account, as only funds added via direct deposit or remote check capture are FDIC-insured. Your money is safer stored in your bank account.

Use an identity theft protection service like IdentityGuard, which uses IBM Watson artificial intelligence to detect possible identity theft. This can give you peace of mind and protect your personal info.

Here are some key safety tips to keep in mind:

Venmo has its limitations and disadvantages. Transaction fees and limits are a significant drawback, with commission charges on instant transfers, credit card transactions, and seller's commissions.

Venmo also sets transaction limits for all users, varying from $300 to $60,000 per week depending on verification status. For example, verified users can transfer up to $19,999.99 to a bank account per week, while unverified users are limited to $999.99.

Venmo's customer support is also limited, only offering to ask the recipient to return a wrong payment, and requiring their agreement to cancel the transaction. This can lead to frustrating experiences, as a caterer's story illustrates, where hours were wasted emailing and talking to Venmo's support team to resolve a simple payment issue.

Venmo's lack of robust buyer protection and dispute resolution services is another disadvantage, making it a less secure option for sensitive financial transactions, such as rent collection.

Here are some key limitations of using Venmo for rent collection:

One major disadvantage of the Venmo app is that it's not designed for business transactions, so it lacks essential features for managing your business.

Venmo originated as a peer-to-peer payment platform, which is why it's primarily used for casual transactions between individuals. This means it's not suitable for business use.

You can't use Venmo for international transfers, which is a significant limitation if you need to send money abroad.

Here are some specific disadvantages of the Venmo app:

Additionally, using Venmo for business transactions can be frustrating due to the many steps required to get paid, and it doesn't integrate with popular accounting software and other apps that businesses need to run their daily operations.

Venmo's customer support is limited in its capabilities. In case of a wrong payment, you'll be offered to ask the recipient to return the amount to your account.

The service can only cancel the transaction itself if the recipient agrees to cancel the transfer, there are funds in their Venmo account, and their account is in order.

I've seen firsthand how this limited support can be frustrating for businesses. A caterer I know had a client send payment to the wrong Venmo account, and it took hours of emailing back and forth to resolve the issue.

This experience highlights the need for more robust buyer protection and dispute resolution services, which Venmo currently lacks.

Identity verification can be a double-edged sword. Companies like Venmo that hold consumers' personally identifiable information are prime targets of data breaches.

There were 1,862 data breaches in 2021, according to a nonprofit organization that specializes in identity theft. This staggering number highlights the risks associated with identity verification.

83 percent of those data breaches involved sensitive information, such as Social Security numbers. This is a disturbing statistic that underscores the importance of protecting personal data.

Venmo may seem like a fun and simple way to move money around, but it's essential to remember that it's a complex system that can affect your privacy, digital safety, personal data, and finances.

To stay protected on Venmo, you should remain vigilant against scams and fraudulent activity. Some common tactics include tricking users into sending payments for non-existing products or services, phishing, and account takeovers.

Avoid oversharing personal information, as it can put you at risk of being targeted by scammers. Never send money to unknown or unconfirmed sources, and use the app's security features to your advantage.

Making your account private can help prevent unauthorized individuals from seeing your transaction history. This is a simple step that can go a long way in keeping your financial information secure.

Using common sense is one of the best things you can do to protect yourself from scams on Venmo. It may sound cliché, but it's essential to be cautious and think critically when using the app.