Venmo me tomorrow.

Based on certain sources, I am considered a millennial, although I'm at the end of the older spectrum. My sister on the other hand is at the opposite side of the spectrum so it's interesting to see her take on certain things: Venmo is one of them. I actually use Venmo and find value in it, but perhaps not to the extent that the younger generation does so I asked her to provide some best practices for using Venmo. Here are some tips on how to use Venmo safely and wisely.

If you are not familiar, Venmo is a mobile payment service owned by Paypal. It allows a quick and easy way to transfer money via a mobile app or desktop.

Watch Your Balances

Venmo has it's own balance. The Venmo balance is used to pay only when there is enough for the entire amount. You can link a bank account, but for a fee of 3% of each transaction, you can link a credit card. Because Venmo accesses the linked bank account if there is insufficient funds, it's important to check the balances on both Venmo and the linked bank account. If both places have insufficient funds, this can cause a chain reaction of withdrawals and overdraft fees. While Venmo is great for being able to pay small amounts, it still requires diligence to ensure that the funds are managed properly. You don't want to be paying an extra $35 in overdraft fees for a $1 coffee.

Pay and Request Right Away

When using Venmo to split bills, make sure to pay and request your share immediately. Get descriptive with what is owed and paid so that you can track it later. I see a lot of emojis being used as payment descriptions and while this is nice and easy, it can make it very hard to track where your money is going. While Venmo seems like a fun app to use, it's important to also look at Venmo like any other financial account. If at some point, you need to analyze your spending habits, don't forget to take Venmo into account.

Make sure you also know who you are paying to. Double check usernames, email addresses and if needed, use the "Scan Code" feature to verify identity.

Keep It Secure

I've seen memes being circulating of people requesting or sending money through Venmo without the owner's permission. It's easy to do as long as you have the owner's phone unlocked. It's easy to search for a recipient using the Venmo search function. Venmo, like any other financial account should be kept secure. To do this, enable the Security Pin and Fingerprint for Venmo. This ensure a few more layers of security to access your account. It will reduce the likelihood of you becoming a victim of a drunk practical joke with no money come morning. Note that Venmo does not have similar protections in place if money is somehow transferred or "stolen" as a debit or credit card so it's doubly important to keep it secure.

Keep Payments Private

Venmo has a social component to the way that it lists and shares transactions. Like any social media, use caution and keep your transactions private. Public transactions can lead to others knowing your location or the people that you are with. It's good to be diligent with the information that you share so that you don't jeopardize your privacy.

Keep The Balance Low

It's good to have an appropriate balance in Venmo so that you can pay friends right away, but do not keep large amounts of money in Venmo. Because Venmo is not a savings account, keeping money in Venmo has no advantage. Parking money in Venmo means you lose out on potential returns than if the money was in a higher yield savings account or a brokerage account. Plus, keeping money in Venmo may signal to you that it is OK to spend that money when it should be saved for the future.

Vendor Purchases Through Venmo

Venmo does support merchant payment, but keep in mind that for certain transactions where there is an exchange of goods, you may not have the same protection on your purchases as when it is done through a credit card. Venmo is easy to use but re-consider using it for large purchases where you may need additional protection, warranties, etc. 

Final Thoughts

Venmo is a great tool to facilitate payment transactions and while it seems like an easy to use app, let's not forget that it does involve money and we need to treat it securely. Without actual dollars being exchanged, we can easily forget that Venmo involves cash money.