Should You Pay for a Used Car With Venmo?
Convenient? Yes. Secure? Maybe Not.
Manuel Carrillo III/Capital One
A growing number of online payment services are available that make it simple and easy to send cash electronically. One of these — Venmo — is a popular option for friends looking to split the check at a restaurant or for roommates settling the bills at home.
Is it also a good way to pay for a used car? Let's take a closer look.
What Is Venmo?
Venmo is an online payment system designed to make it simple to transfer cash between two people, or to make a purchase without having to use cash or checks. Each Venmo account is linked to a bank account or a credit card (and sometimes both), which transactions are deposited into or deducted from.
Payments are sent via a smartphone app that connects buyers and sellers based on an email address, a phone number, or a Venmo username.
Using Venmo to Buy a Used Car
When purchasing a used car, some buyers might not be comfortable carrying a large amount of cash to meet a stranger in a private-party sale. It is inconvenient to go to the bank and have a cashier's check drawn up — a service that typically comes with a fee — or to arrange a wire transfer, which also incurs fees. A seller might not accept a personal check or an actual credit card for such a transaction.
Using an app like Venmo solves each of those problems. It can also allow you to pay for your automobile even if the seller isn't physically present. This can be handy if you can only pick up the car or truck outside of business hours, when a dealership might be closed but still able to leave the keys in a lockbox for you.
Are There Risks to Using Venmo?
Unlike using a credit card directly or writing a personal check, Venmo doesn't offer any built-in fraud protection if you send money to a personal profile, which can leave you exposed to scams. In Venmo’s peer-to-peer financial transfer model, there's no central authority to turn to if the vehicle you paid for turns out to be not as described, or perhaps doesn't exist at all. Only transfers explicitly tagged as payments or sent to Venmo-authorized business profiles are eligible for purchase protection.
Venmo provides a list of common ploys to help users avoid being scammed. As the app was designed primarily to be used between friends, it's risky to use for transactions with strangers using personal profiles. In fact, the service itself recommends against using Venmo to buy something from a stranger if you are not able to indicate in the app that the transfer is a payment.
How Does Venmo Compare With Cash or Check?
There's one more major difference between using Venmo versus cash or check: Venmo features a maximum weekly spending cap of $6,999.99, which means any vehicle purchase would have to be under this amount.