Is Venmo Safe?

Mobile payment apps have become the favorite way to transfer money between friends and Venmo app, which is owned by PayPal, is one of the best. With only a few taps, you can settle up with your dining partners when splitting a dinner tab. The instant transfer of funds means there is no need for Venmo users to put cash on the table.

All it takes is to set up a Venmo account, link it with your bank account, credit card or debit card and you're good to go.

But is Venmo safe? Let's see how Venmo works and then look at its potential problems.

Venmo is a mobile payment app that can be set up on iPhones and Android phones and used to send and receive money between individuals in what is known as a peer payment. It's easy to find someone with their phone number, username or QR code.

A unique feature of Venmo is that you can go to the app’s home page and see the transactions made by other people. You can see where anyone else is sending money, not just your friends. While these transactions do not have the amounts transferred, they can be very revealing about other people's lifestyles. Be aware that your own Venmo payments can also be seen by anyone else in the world unless you change your privacy settings.

​Read more​: 6 Best Mobile Payment Apps

Venmo links with your bank account and your debit/credit card accounts. You can also maintain a balance in your Venmo account.

You can use Venmo to draw money from your bank or debit card account or Venmo balance and send it to a friend in a p2p payment. Simply tap the Pay button, select your friend, enter a brief description for the transaction and finalize by tapping the Pay button to confirm the transaction.

You can also make a withdrawal from your credit card to send funds or transfer funds from your Venmo balance to a bank account, but that will cost you a transaction fee.

Even more conveniently, Venmo now offers a debit card that you can use at ATMs and brick-and-mortar stores.

For the most part, Venmo is safe to use when dealing with friends or buying from reputable businesses.

Venmo uses an encrypted application programming interface, API, to process transactions. The company insists its protocols are secure and that users’ personal and financial data is stored in a secure location and is protected. Unfortunately, these measures aren't foolproof.

If someone gets your PIN or details for logging into your account, and you don't have multi-factor authentication, hackers could access your Venmo account to fraudulently take money out of your bank account or any balances in your Venmo account.

Hackers can even change your Venmo linked email address and divert any transaction notifications that take place in your account. This will leave you in the dark until your bank finally informs you about changes in balances in your account. This could be long after the theft has taken place and too late for you to do anything about it.

​Read more​: How do I Electronically Deposit Money Into Someone's Bank Account?

There are several potential risks and limitations you need to be aware of and precautions to take with Venmo when buying or selling items with strangers. Venmo states in its policies that it does not recommend using Venmo for buying and selling products because it does not provide any protection for either buyers or sellers, even for casual sales on Craigslist.

Here's why. Any payments you receive can be reversed even after they are deposited in your Venmo account. It may appear that the transaction is completed, and you can even use the funds. The money is made available with the belief that everything is okay.

However, the person who sent you the money could file a claim or dispute with Venmo leading to a reversal of the transaction. The buyer could even have used a stolen credit card number to send you the payment. Eventually, the rightful owner of the credit card will discover the unauthorized transaction, file a complaint and everything will get canceled.

Meanwhile, you're out of the product that you sold to a fraudulent person, and Venmo wants the money back. Even worse, if you have already spent the money, you will have to find the funds to replace the loss or wind up with more legal problems.

​Read more​: How to Cancel a Payment Made With a Credit Card

Venmo has several features you can use to increase security on the app.

​Create a unique password​ – This may sound obvious by now for internet users, but don't use passwords that might be easy to guess, like your pet’s name or birthdates. Use combinations of symbols, numbers and upper and lowercase letters.

​Set up PIN protection and multi-factor authentication​ – These steps only take a few minutes but will save you in the event your mobile device is lost or stolen.

​Only deal with people you know and trust​ – Venmo tells its users to only send and receive money to friends and family, especially if someone is a new user and doesn't have an active Venmo account. There have been instances in the past where scam artists have processed fake payments through Venmo and later had them reversed.

​Use only a credit card link to your account​ – This suggestion is part good news and part bad news. Linking your bank account and debit/credit card to your Venmo account can give a hacker access to the money in your bank account. You can avoid this possibility by only linking your Venmo account to a credit card. The bad news is that Venmo charges ​three percent​ to make transfers using your credit card.

​Set up account alerts​ – You can set up email notifications to let you know if someone tries to log in to your account. Other options include text notifications for payments sent, received and other charges.

​Don't use public Wi-Fi​ – If you're away from home and need to send or receive money, make sure to use a secured Wi-Fi network. Public Wi-Fi is not password-protected and leaves your account open for hackers to tap into your account.

​Log out after each session​ – Closing out each session reduces the possibility of someone being able to access your information. This can happen when you're outside in a public place, like your local coffee shop.

Overall, Venmo is perfectly safe to use when sending or receiving money from friends and relatives or anyone else you trust. However, you should be very suspicious of any unsolicited funds that you receive or any emails that pop up in your notifications that you don't recognize.