Is Venmo FDIC Insured? [Complete Picture]

If you use the popular payment app Venmo, you may run into an obvious question “Is Venmo FDIC insured“, especially if you hold a decent amount of money in your Venmo balance. In this post, we will go into the details is Venmo FDIC insurance available for the funds that you hold in your Venmo account, what is covered and what are the limitations.

FDIC insurance is a standard facility for any bank savings or checking account. FDIC insurance means the money you hold in your saving account or checking account is insured against bank failure or theft for upto $250,000 per individual.

However, it is not the same for online wallets like Venmo or Cash App who are not subject to the same regulatory requirements (and people don’t hold a lot of money in there)

Coming straight to the point:

Is Venmo FDIC Insured? The answer is No, unless you have the money added by direct deposit or check deposit.

So there is a limited possibility that the money you are holding in your Venmo account is FDIC covered.

This requires a reading of the fine print of Venmo terms of use.

Is Venmo FDIC insured?

The money in your Venmo account is not FDIC insured, unless the money is added by way of direct deposit or cashing a check on Venmo.

In fact, the money that you hold with Venmo is treated very differently depending upon if the money is added via direct deposit or check deposit (covered under FDIC) vs money that you get in Venmo from other sources (not FDIC insured).

For not FDIC insured funds, Venmo clubs it with other Venmo holders money and it earns money on these funds in its own name, by investing the money in certain liquid investments permitted by law. The interest earned here is Venmo’s own income as per terms of use.

But again, do note Venmo mentions in their terms that they will keep these funds separate from their own corporate funds and never use these funds for their own operating expense. They even state that they wont voluntarily make payment using these funds to their creditors in event of bankruptcy (see below on the relevant extract of terms, although these are Venmo’s own terms and can be changed in future)

On the other hand, FDIC insured money is held by Venmo as custodian or agent.

Relevant extract of Venmo terms of use

Your cash funds held in a Venmo account are eligible for Federal Deposit Insurance Corporation (“FDIC”) pass-through insurance, but only if you have bought cryptocurrency or have added money to your Venmo balance using Direct Deposit or remote check capture. 

If your Venmo account is not eligible for FDIC pass-through insurance, we combine the money in your Venmo account with the Venmo money of other Venmo account holders and invest the money in liquid investments in accordance with state money transmitter laws. We own the interest or other earnings on these investments.

These pooled amounts are held apart from our corporate funds, and we will neither use these amounts for our operating expenses or any other corporate purposes nor will we voluntarily make these amounts available to our creditors in the event of bankruptcy.

If your Venmo account is eligible for FDIC pass-through insurance, we will hold these funds as your agent and custodian, and you will be the ultimate beneficial owner of the funds. We will deposit your funds into one or more custodial accounts we maintain for the benefit of eligible Venmo account holders at one or more FDIC-insured banks (currently Wells Fargo Bank, N.A. or The Bancorp Bank).

Should you be worried on Venmo money not being FDIC insured?

In general, it is always advisable to avoid holding a lot of funds in Venmo as you don’t earn any interest on it, apart from it not being FDIC covered.

While FDIC insurance is welcome, one must understand the scope of it. It only kicks in when there is bankruptcy or collapse of financial institution that holds your money.

Venmo is product of PayPal and has more than 80 million users, with growing revenue. So its not likely to face a solvency issue that easily.

That being said, there is no incentive for you to hold funds in Venmo. You can use an online bank or traditional bank to keep your money. You can link the account in Venmo as it allows you to make payments directly from such linked bank account.

Is Venmo a Checking or Savings account

Venmo is neither a checking or a saving account but an online wallet.

Will Venmo refund money if scammed

This is a case to case situation. If you have participated in the transaction or violated Venmo terms of use, the chances of getting refund are very rare.

Also, note that if you use Venmo to pay directly from a linked bank account or credit card, you can always check with the bank or issuer of credit card if there is any refund option, if eligible as per the bank terms.

Venmo does offer Buyer Protection, in case you paid to buy goods or services over Venmo. This is for specific scope and payment should have been made to a Venmo business profile or marked for goods or services to be eligible for refund.

It is better to avoid using Venmo to send or receive money from strangers and use it only with your circle of trust i.e. family and friends. Also, be aware and update your knowledge on various scams running on Venmo.

Are Other Payments Apps FDIC insured?

Cash App provides FDIC insurance through its partner banks if you have a Cash Card.

if you are using Apple Pay, Apple Cash account balance is FDIC insured through its partner bank.

Google Pay Wallet does not have FDIC insurance.

Wrap Up

So Venmo has a very limited FDIC insurance cover. If you don’t have a direct deposit or check deposit on Venmo, your Venmo balance is not FDIC insured. However, it does not make any sense to hold a large balance in Venmo since there is no interest that your earn on your balance.

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I have a passion for finance and technology. On this blog, I share helpful information on products and services that we use in our daily lives and simplify things I learned the hard way.

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