Venmo is a popular peer-to-peer mobile payment app from PayPal that makes it easy to send and receive money. Apart from being a popular peer payment app, Venmo also offers a direct deposit account feature. You may have the question – is your Venmo account a checking account or savings account that we will answer in this post?
The Venmo account is offered through Venmo’s banking partner: The Bancorp Bank. It comes with an account number and routing number that you can check on the Venmo app.
With that context, let’s now get to the meat of the article.
Is Venmo a Checking or Savings account
In a nutshell: The Venmo account is considered a checking account with limited functionality. You can only use your Venmo direct deposit account for receipts and not to make any outgoing purchases or payments.
So the Venmo account is not a full-featured checking account and can be used only for incoming payments. But unlike a traditional checking account, the Venmo checking account cannot be used for withdrawals and your normal expenses.
It is certainly not a saving account. In fact, you don’t even earn any interest on your Venmo balances.
It can get very confusing. TL;DR- You cannot treat payment apps or digital wallets at par with full-fledged bank accounts.
You do get some benefits like your direct deposit funds being FDIC insured courtesy of Venmo’s banking partners.
And of course, the “up to” 2 days early pay with a direct deposit is becoming a standard norm with prepaid apps, online banks, and even some traditional banks now.
But at the end of the day, you are not a customer of the bank but Venmo’s customer. You don’t get any online banking credentials and you cannot use Venmo as a bank to link in either Plaid or Zelle. In fact, if you look at the Venmo terms, there are actually two banks playing different roles in Venmo’s Direct Deposit feature.
Funds added to your account via Direct Deposit, including funds added using a Bancorp account and routing number, are transferred to and held by Wells Fargo Bank, N.A. where they are eligible for FDIC pass-through insurance
So while the Venmo account number and routing number are of The Bancorp Bank, the funds are held by Wells Fargo bank.
It is a unique arrangement and with the increasing trend of fintech collaborations, we are seeing all kinds of permutations and combinations.
You can access your Direct Deposit information only on the Venmo app. Further, you don’t get any paperwork or documentation on your Direct Deposit information. There is no checkbook either.
Let’s answer a few ancillary questions on this topic.
Is Venmo a bank account?
Venmo is a digital wallet from PayPal, not a bank account. It does offer a few banking services like a prepaid card and direct deposit account through banking partners- The Bancorp Bank (and Wells Fargo where your direct deposit funds are held and eligible for pass-through FDIC insurance).
Most banks can be linked with services like Plaid or Zelle, which is not possible with Venmo.
The Venmo card is also considered a prepaid card and is not at par with a bank account-issued debit card.
How does Venmo work with banks?
When you have a Venmo account, you can link an external bank account to Venmo using either the bank debit card or the account details. Note: Venmo only accepts a checking account and will not allow you to link a savings bank account.
You can then add money to Venmo from your bank account (only if you have the Venmo card). Further, the funds sitting in your Venmo balance can be cashed out to your external bank account. You can use either transfer instantly (with a 1.75% fee) or do a standard ACH transfer to your bank account (free but can take up to 3 business days).
So it’s actually more of a wallet (akin to Apple Pay) where you hold a small balance for your daily payments, or sending money to friends, and family, or split your payments.
However, this trend is changing with the increasing adoption and more and more use cases being added to Venmo. In one way, the wallets are competing with banks but also work in collaboration with them to offer most of their features.
So to conclude Venmo is considered a checking account. However, in the real sense, it does not equate to a bank checking account and only supports limited features like incoming payments.