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Zelle against. Venmo: which one to use and when

TThese days, cash apps let you move money as fast as you can spend it. Two of the most popular apps are Zelle and Venmo. But although they are both members of the money apps family, they look more like cousins ​​than twins. Each app works differently, and each may work better for you than the other.

In the Zelle-vs.-Venmo contest, one app is not a clear winner. The winner of this competition depends on what you are looking for in a mobile payment app.

How does Zelle work?

Zelle (rhymes with sell) is a peer-to-peer or person-to-person application that lets you send money quickly from your bank account to anyone you choose. Typically, Zelle functionality is built into an application from a bank or credit union. Over 1,000 banks and credit unions in the United States offer Zelle in their apps.

In 2020, Zelle users sent $ 307 billion through 1.2 billion transactions. Zelle’s technology comes from Early Warning Services LLC, owned by seven major US banks: Bank of America, BB&T (now Truist), Capital One, JPMorgan Chase, PNC Bank, US Bank and Wells Fargo.

You must have a US checking or savings account to use Zelle. Zelle does not charge a fee for using its service.

Once you are registered with Zelle, all you need is a US email address or cell phone number to send money directly from a banking app to your friends and family. Zelle says her app “can be used to send money to almost anyone you know and trust with a bank account in the United States.”

You can also sign up for Zelle through its app if it is not available from your financial institution. You will need to download the app from the App Store or Google Play, then enter your cell phone number and the number of a Visa or Mastercard debit card.

Whichever route you take, you’ll enter the amount you want to send into the app. If the recipient has already registered with Zelle, the money will appear in their bank account within minutes. If they have not yet registered with Zelle, they will be informed of how to get the money. It can take one to three business days for someone to receive the money after signing up with Zelle.

In addition to sending and receiving money through Zelle, you can accept payments through the app. This can include money owed to you by government agencies, schools, or businesses.

What are the advantages of Zelle?

Zelle offers several advantages over Venmo. Among them are:

  • No charges
  • Available at over 1,000 banks and credit unions in the United States
  • Fast money transfers; Usually, money sent via Zelle is available to the recipient within minutes
  • Opportunity to earn interest on money held in Zelle-linked checking or savings accounts

What are the disadvantages of Zelle?

As with any application, Zelle has drawbacks. They include:

  • Inability to cancel a payment after it has been sent if the recipient is registered on Zelle
  • No Zelle branded debit or credit card availability
  • Zelle account cannot be linked to a credit card
  • No ability to maintain a cash balance with Zelle

When to use Zelle

If you need to send or receive money fast, Zelle could be your go-to payment app. Beyond that, however, the Zelle app is not a full utility player in the same way as the Venmo app.

How does Venmo work?

Some people might think that Venmo is just a Zelle clone. It’s not. Yes, Venmo allows you to send and receive money, just like Zelle, to pay your best friend for your share of a joint gift you gave or to cover your half of the monthly rent, for example.

But Venmo is more flexible than Zelle. For example, a Venmo user can:

  • Use Venmo’s Mastercard debit card to make purchases in the United States
  • Buy from Venmo partners through mobile apps and websites
  • Make an in-store purchase with Venmo using a QR code
  • Directly deposit your paycheck into your Venmo account and access money up to two days before your regular payday

There are three basic conditions you need to meet to get a Venmo account:

  1. Be at least 18 years old (in most cases)
  2. Be located in the United States
  3. Have an American cell phone capable of sending and receiving text messages using short codes; US shortcodes are five or six digit numbers used to send and receive text messages

The Venmo app is available on the App Store and Google Play. Owned by PayPal, Venmo had over 80 million users as of November 2021.

Unlike Zelle, Venmo charges for certain services. Its basic offers are free, with no monthly or annual fees. These include sending money from a linked bank account, linked debit card, or Venmo account, and making a regular transfer to your linked bank account.

But premium features come at a price. Want to use your credit card to send money to someone? You will pay a 3% fee. Want to instantly transfer money from your Venmo account to a linked bank account or debit card? You will need to pay a 1.5% fee (minimum 25 cents, maximum $ 15).

What are the advantages of Venmo?

  • No monthly or annual fees
  • Ability to use the Venmo app for online or in-store purchases
  • Availability of Venmo-branded debit and credit cards
  • Ability to maintain a cash balance on the Venmo account
  • The app’s social media style features may appeal to some users

What are the disadvantages of Venmo?

  • Fees for some services
  • Privacy can be compromised if you don’t adjust privacy settings
  • Money is not available instantly unless you pay a fee
  • No opportunity to earn interest on money deposited with Venmo
  • Transaction limits, such as a weekly maximum of $ 4,999.99 for person-to-person payments (Zelle also has transaction limits, but these are set by your bank or credit union, not Zelle.)

When to use Venmo

If you are looking for more flexibility then Venmo might be a better choice than Zelle. This is because Venmo’s offers are more extensive, such as the ability to make purchases in-store and online. It is a particularly attractive app if a lot of your friends and family are already using the app.

But while the Zelle app doesn’t charge any fees, the Venmo app does add fees for several features. Also, you might not have access to cash as quickly as with the Zelle app.

Is it safe to use Zelle and Venmo?

Overall, Zelle and Venmo are safe to use. Both integrate security features into their apps, such as data encryption, purchase verification, multi-factor authentication, and fraud protection. Additionally, Zelle and Venmo stress that you should only send money to trusted recipients, not strangers, to avoid getting scammed.

Despite these guarantees, Zelle and Venmo users are likely to fall victim to scammers.

In October 2021, the Federal Office for Financial Consumer Protection (CFPB) warned payment technology providers that their business practices are under further scrutiny, in part to protect consumers from payment fraud.

“Scammers use mobile payment services to trick people into sending money or goods without delaying their deal. For example, a crook can sell you concert or sports tickets but never give them to you afterwards, ”warns the CFPB. “Or a scammer might buy an item from you, appear to send a payment, and then cancel it before it reaches your bank account.”

Among other steps, the office suggests setting up password, PIN, or fingerprint capabilities on an app like Zelle or Venmo to add an extra layer of protection.

Final result

Neither Zelle nor Venmo is a bad option for digital payments. Both work well as cash applications. The choice between Zelle and Venmo comes down to what you want a payment app to do for you – Venmo being more robust than Zelle – and whether you’d rather pay no fees (Zelle) or are comfortable with pay a fee for premium offers (Venmo).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.