PayPal vs. Venmo vs. Zelle: In a time when I’m trying to simplify, both digitally and physically, I’m almost embarrassed to admit that I use all three. If I’m shopping, I send funds via PayPal. Paying the babysitter or splitting the tab with friends at dinner? Venmo all the way. (Love those emojis.) As for reimbursing my mother-in-law? That’s strictly limited to Zelle. (Her rules, not mine.)
But which peer-to-peer payment system is best? We weigh the pros and cons—and talk to a financial consultant—to decide.
PayPal
How PayPal Works: While the service is known for its help with online purchases and e-commerce, it also offers peer-to-peer money transfers. To set it up, you’ll first need a PayPal account, then—as long as the person you’re sending money to is also enrolled—you can use their name, email address or phone number to send or request cash. (If the recipient doesn’t have an account, they’ll get an email alert that funds are available and they need to set one up to receive.)
Pros: One of the number one benefits of PayPal is the extremely high transfer limit. You can send up to $60,000 in a single transaction (some limits may apply, depending on your currency and account status), but that’s a significant amount. You can also use multiple methods to fund your account—a debit card, a credit card, PayPal balance (cash sits in your account until you transfer it to your bank) and a PayPal credit (a credit line offered by PayPal). Security features abound—including account monitoring and encryption—and funds can be sent internationally for a fee (varies based on the country).
Cons: There’s a 3 percent transaction fee for credit cards (a linked bank account or a PayPal balance are free), and transferring money from PayPal to your bank account can take up to five business days. If you want the funds to go to your account immediately, you have to pay a fee of 1 percent. (Maximum fee is $10.) You can also only cancel a PayPal transaction if it’s yet to be completed/claimed.
Sending Limit: $60,000
Venmo
How Venmo Works: Just like PayPal, both the sender and the recipient need to have Venmo accounts. But a primary difference is that Venmo is mobile only, allowing you to “text” cash, so to speak, simply by searching for the recipient’s username, phone or email. There’s also a social element: Users can opt to make transactions public (it shows who’s being paid and for what, but not the amount) so that they appear in a timeline, allowing friends to like and comment on purchases, if you’re into that sort of thing.
Pros: A nice-to-have (similar to PayPal) is the fact that you can hold a balance in your Venmo account, which you in turn tap into to send cash or transfer to your checking or saving account. (If you don’t have a balance, funds are drawn from your linked bank account.) The app is also free to use and no fees are charged as long as you pay with your Venmo balance, linked bank account, debit card or prepaid card. Fund transfers are free and speedy (they typically take one business day) and accounts are protected by bank-grade security and encryption. (You can also set up a PIN for additional protection.)
Cons: Much like PayPal, users are charged a 3 percent fee for transferring funds from a credit card, and Venmo also charges a 1 percent fee if you need an immediate transfer of cash to your account. As for security, Venmo encourages you to only send/receive money from those you know and trust. And if you accidentally pay the wrong person, you may be hard-pressed to get that money back. (Venmo can only reverse purchases with explicit permission from the recipient.) Finally, Venmo doesn’t offer international transactions at this time.
Sending Limit: $5,000 a week
Zelle
How Zelle Works: This app/mobile banking feature allows you to send money using cell phone numbers or email addresses—as long as participants have a U.S. bank account. To participate via the app, you’ll need to link your Visa or Mastercard debit card. But if your bank participates (Chase, Citi, Capitol One, Bank of America and many others do), you simply need to activate the service within your bank’s existing mobile app.
Pros: As long as both you and the person you’re transacting with are enrolled, transactions are speedy and funds transfer almost immediately. Zelle also doesn’t charge any fees and neither do the banks that participate in the network. Zelle also uses top-notch security to keep transactions safe, and if you go through your bank’s app to use Zelle, you’ll most likely benefit from your bank’s existing protections. (Zelle still says to exercise caution and only send money to people you know and trust.)
Cons: If you need to transfer cash to anyone internationally, you’re out of luck. Zelle also doesn’t accept credit cards as a form of payment and users have reported extreme challenges with cancelling any transactions in process. (Your only out is if the recipient hasn’t yet enrolled in Zelle.)
Sending Limit: It depends on your bank.
Final Verdict
All three services check out when it comes to security and ease of use, so we tapped Priya Malani, financial planner and co-founder of Stash Wealth, to weigh in on which app is best and why. “At the end of the day, they’re all good and free, so it really depends on what you’re buying or who you’re paying.”
Her recommendation: Use PayPal for international transfers and Zelle if you want to cut out any middleman (transactions go direct from one bank account to the other).
That said, Venmo is still her favorite: “It’s widely used, but it’s also a spectator sport. It combines a social feed with the ability to quickly split a utility bill or bar tab.”
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