If you are one of many using Venmo, it is wise to not owe money. You may be reading this article because you are concerned about your Venmo account. Perhaps you have accrued a balance that you now owe and wonder how it impacts your overall debt and credit health. We’ll show you why you shouldn’t have a balance on your Venmo account.
What Is Venmo?
Venmo is a fairly new digital money-transfer service operated by PayPal. It allows you to pay and request money from people you know. This is sometimes referred to as peer-to-peer transactions. Simply put, it makes it easier to pay others in scenarios such as sharing lunch with friends, paying your rent to a roommate, or paying someone to purchase a yard sale item.
Venmo is convenient and easy to use. You simply sign up and add a bank account, debit card, or credit card to your account. When you want to pay someone, you transfer funds from your Venmo account to theirs. According to Venmo’s website, sending money using Venmo comes with a standard 3% fee, but they waive that expense when the transaction is funded with your Venmo balance, bank account, or debit card. They do charge that 3% fee if the transaction is funded with a credit card.
How Can You Have a Negative Venmo Balance?
It is so easy to connect Venmo to your bank account and credit cards to pay others. However, you don’t necessarily have to have funds in your Venmo account to make a transfer. What if your bank account has insufficient funds? Or what if there is a glitch with your credit card? Or what if you dispute a fraudulent charge? How does this impact your Venmo account?
Once you transfer money from your Venmo account, the funds will show up in the recipient’s Venmo account pretty instantly. Meanwhile, it can take a day or two for the funds to actually be removed from your bank account or credit card. Therefore, if there are any problems, you could end up owing money to Venmo. Hence a negative balance.
What Happens If You Owe Venmo Money?
Simply put, if you have a negative balance with Venmo that you don’t pay promptly, they can and will try to collect. According to a Wall Street Journal article, Venmo has communicated to users that they will put the debt through a collection agency if needed. Also, according to Venmo’s Terms and Conditions, Venmo can recover money its customers owe by seizing it from their other accounts at PayPal. Unfortunately though, unlike credit companies who diligently communicate to users should an account go into default, you may not realize that your Venmo account is in arrears.
Unlike traditional banks, Venmo is not set up to recoup money from unpaid balances. It is evident they are working to make changes to be able to manage when accounts go negative. According to the Wall Street Journal’s report, “Venmo is designed for payments between friends and people who know and trust one another, and our User Agreement states that the platform should not be used to accept payment from (or send payment to) another user for a good or service.”
Conclusion
Use Venmo to make payments to friends and family but make sure you have the funds to do it. It is certainly convenient but don’t let convenience get you into debt trouble. Most importantly, only pay people you trust through Venmo. If ever you run into a scam and pay via Venmo, it’s much more complicated should you want to dispute the payment. Heed our advice and you can avoid debt and potentially a ding on your credit.