Venmo Scams: Tips for Selling and Buying Safely
Venmo Is Safest With Well-Known People and Brands
Venmo is an excellent tool for paying friends and buying products and services from approved merchants. Payments are fast and easy, and the social element can add some fun to the experience. But as with any payment method, you need to be aware of the limitations—and potential risks—of using the service.
Is It Safe?
When dealing with friends or paying a reputable business, Venmo is (for the most part) safe, although it has had issues in the past about misrepresenting its service. The company protects your account information with the typical security features and technology you’d expect from any financial institution. But buying or selling with strangers, whether online or in-person, is risky. Venmo offers no buyer or seller protection.
Money in the Bank
Whenever your money is at stake, it’s smart to monitor your accounts and sign up for alerts so you instantly learn about new transactions. If somebody steals money from your bank account, you might be protected under federal law, but you have to act fast to benefit from that protection. Notify Venmo and your bank immediately if you see anything suspicious.
Safest Funding Methods
The safest way to use Venmo is to use a credit card as your primary funding method (as opposed to using a debit card, or a direct link to your bank account). It may cost more money to use a credit card, but this option protects your daily-use checking account. If a fraudulent charge drains your checking account, you'll have immediate cash-flow problems. But you can clean up an errant credit card charge within two billing cycles and avoid financial losses.
An even better approach might be to leave a small amount in your Venmo account and spend from your Venmo balance instead of drawing from your checking account or credit card.
Getting Paid (Selling With Venmo)
Receiving payments can be risky, no matter what tool you use. To manage that risk, only accept payments from people you know and trust—that’s what Venmo is designed for. Venmo is not meant to be used for your small business transactions or informal sales on sites like Craigslist.
Unfortunately, any Venmo payments you receive can be reversed by the company after they hit your account. After you receive a payment, it looks as if the transaction is complete. The money appears in your Venmo account instantly, and you might even be able to use the funds. However, Venmo only makes that money available under the assumption that everything is fine—sometimes it's not.
If it turns out there’s a problem, the payment can be reversed, and you’ll be responsible for that money. If you haven’t already used the funds, Venmo will take the money back. If you spent the money, you’ll need to replace it.
What could go wrong? The person who paid you might file a claim with Venmo, or even use a stolen credit card number to fund the payment. Eventually, the card’s legitimate owner might complain, and the payment will be canceled.
This might surprise you because other payment platforms provide consumer (and seller) protections, but Venmo doesn’t. You might also believe it’s impossible to cancel a payment—because that’s what Venmo says on its website: "It is not possible to cancel a payment to an existing Venmo account.
However, payments can be reversed. Your buyer doesn’t "cancel" the payment. They may "dispute" the payment—or somebody else does after finding unauthorized activity in their account.
Scams With Venmo
Con artists discovered ways to take advantage of this confusion. Just like with cashier’s check scams, they may exploit your assumptions about how money moves. You think the payment is complete, so you give up whatever you’re selling.
It takes several days for payments to complete (for the money to move from a buyer’s bank account or card to Venmo, unless the recipient pays a fee to speed things up). But payments appear to be instant. In most cases, they might as well be, because there’s no fraud with most payments. Venmo notifies you that you just got paid and displays a little plus sign that suggests the funds are in your account instantly.
In a typical Venmo scam, a “buyer” contacts you about something you’re selling on Craigslist. They ask to pay with Venmo and promptly send the payment if you accept. At that point, you provide whatever you’re selling (whether you ship it, hand it over in-person, or transfer Bitcoin to the buyer), thinking all is well. After a few days, Venmo reverses the transaction, and your buyer is nowhere to be found.
In addition to losing your merchandise, if you spend that money, you’ll have to replace the money you thought you received (by transferring from your bank account, for example).
Venmo generally does not offer assistance in cases like the scam described above. The company specifies that the service is for “payments between friends and people who trust each other,” and that there is no buyer or seller protection.
Venmo also prohibits using their personal service for business purposes unless you have a business partnership with Venmo.
Don’t expect much support from Venmo if somebody takes advantage of you. The company suggests that customers try to work things out with whoever “paid” and took merchandise. Naturally, thieves won’t cooperate, which leaves you with few good options besides contacting law enforcement or bringing legal action against the buyer (assuming you can find them).
If you’re especially privacy-conscious, avoid publishing your activity to the feed. You might not have anything to worry about privacy-wise. However, depending on your situation, you may prefer to keep your transactions hidden. The feed could provide helpful information to hackers or stalkers, or it could reveal more about your finances than you are comfortable revealing. Follow the path as depicted by the red boxes above to make your transactions visible only to you and your recipient.
Alternatives to Venmo
What can you do to stay safe? Don’t use Venmo for anything except payments among friends and payments to approved merchants.
If you’re selling online or on Craigslist, find alternative ways to get paid. Cash is an excellent option when dealing with strangers (just be safe when you’re out and about—inspect the bills, pick a good location, don’t flash the money around, and get that cash in the bank as soon as possible).
PayPal is a potential alternative, but you need to understand the pros and cons of each alternative. PayPal tends to side with the customer if there’s a dispute, so you still risk chargebacks from thieves (although you might prevail in the dispute process if you can prove you followed all of PayPal’s rules).
Checks and Money Orders
You could also accept old-fashioned paper forms of payment from strangers. However, those payments can also be used fraudulently. You’ll want to verify funds if you’re dealing with a stranger, and even then, there’s a chance the payment will bounce.
For large-dollar transactions, it might make sense to go to your buyer’s bank (if that’s practical). Either go through the teller line with them or watch closely if they’re getting a cashier’s check for payment. You can also request a wire transfer, but that can be risky for other reasons. You’ll have to provide your bank routing and account numbers, which can later be used to draw funds from your account.
Buying With Venmo
Venmo was originally built for person-to-person payments. But it can be used to pay for purchases if the vendor is authorized with Venmo. But if you pay somebody selling on Craigslist or eBay, you’re operating outside of Venmo’s rules. There is no buyer protection, so you’ll lose money if the seller gives you fake products (or takes your money and fails to deliver anything).