Personal Finance

Venmo’s New Debit Card: What You Need to Know

On the road to a cashless society, the next big trend is supposed to be fully electronic payments that eliminate the need to carry plastic cards. Venmo has emerged as a leader in this field, yet it's still introducing a debit card that you can use any place in the U.S. that Mastercard is accepted.

How the Venmo Mastercard Works

Venmo account holders can apply to receive a Mastercard debit card that's linked to their account. When making purchases, the Venmo Mastercard will use your Venmo balance, and there are no fees from the transaction.

At this time, Venmo is merely adding account holders to a waiting list, and customers will be notified when their card is about to be shipped so that they can choose a color. The Venmo Mastercard will include an EMV smart chip and be compatible with wireless payment systems that use near-field communications.

This card will also work at ATMs, but it has a $400 daily limit. There's no fee for withdrawals at ATMs that are part of the Money-Pass network, but there's a $2.50 fee for withdrawals made elsewhere, in addition to any fees imposed by the machine's owner. There's a $3.00 fee for over-the-counter withdrawals when a signature is required.

What Does the Venmo Mastercard Mean for Electronic Payments?

Clearly, Venmo introducing a debit card is a concession that a fully electronic payment system isn't ready yet. There are just too many merchants that will only accept credit cards, debit cards, or cash. PayPal, which has acquired Venmo, has long offered its own debit card that's linked to customer's PayPal balance, and the Venmo Mastercard seems to be very similar.

While Venmo has been a leader in peer to peer payments, this new Mastercard offers it a way to make inroads into the retail payments market as well. The current leaders in retail electronic payments are Apple Pay and Google's Android Pay, but they have had limited success in person-to-person payments. Other emerging peer to peer payment systems includes Facebook Messenger, SnapCash, Square Cash, and Popmoney.

Square Cash offers a virtual card for its Cash App that can be added to Apple Pay, and you also order a physical Visa Debit card. SnapChat offers Snapcash as a way of sending money to your friends over its messaging service, but it requires you to link to your existing debit card. Similarly, Facebook Messenger has the ability to send cash to your contacts using your existing debit card.

Should You Get the Venmo Mastercard?

Venmo has become immensely popular among Americans who prefer to transfer funds electronically between each other, especially younger Millennials. But when these Venmo users accumulate a balance, some would prefer to utilize it at brick and mortar merchants where a payment card is required.

If this sounds like you, then the Venmo Mastercard could be a good addition to your wallet or just the little cardholder attached to your smartphone.

But for others who are happy their bank's debit card, the Venmo Mastercard might not add much value. When you transfer funds from Venmo back to your bank account, there's no fee for a standard transfer that takes 1-2 days and a $0.25 fee for an instant transfer.

If you want to use your Venmo funds instantly, the Venmo Mastercard offers you a way around this small fee. But when you need your money in your bank account, the Mastercard doesn't help much. This is important when using your bank account to pay rent, loans, or other bills that must be paid with bank account funds, not a debit or credit card.

By understanding the advantages and drawbacks of the new Venmo Mastercard, you can decide if it's right for you.