The Venmo Scam You Need to Know About

December 22nd 2016

Americans will spend hundreds of dollars this holiday season on gifts, meals and social gatherings, which could mean more money exchanges with the popular personal payment app Venmo

However, the Council of Better Business Bureaus (BBB) warned about a way scammers could take advantage of the app's users. 

Venmo is an app that allows users to send and request money, using a "venmo balance" or a money transfer from a bank account or credit card. Larger purchases that exceed the "venmo balance" are paid through transfers from the bank account or credit card linked to the account. 

VenmoVenmo - google.com

After a Venmo transaction is sent, it can take a couple of days for a transfer to process, and that processing time leaves an opportunity for a scammer to stop the transfer, according to the BBB. 

"Like any online financial service, users should monitor their account regularly and report any discrepancies immediately," Katherine Hutt, BBB's national spokesperson, told ATTN:. "Users also need to understand that transactions show up in your account before the money is actually transferred, and senders can easily reverse a payment."

The organization's website has a Scam Tracker feature where people can report potential fraud to the BBB. 

"BBB Scam Alerts are based primarily on what is new in scams rather than what we see the most activity on," Hutt explained to ATTN:. While the tracker only shows seven U.S. reports of possible fraud involving Venmo users this year, there are various media reports and anecdotal stories on message boards like Reddit about reversed transactions. 

Here's a hypothetical Venmo scam situation: 

Let's say there's a seller with a deluxe holiday candy cane set, and this person finds a buyer through a message board online. The buyer uses Venmo to pay for the item, and the seller receives a notification that the payment has been sent, as you can see in the screenshot below. The seller, in turn, gives the candy to the buyer. 

Notification of Venmo transaction. Venmo/Kyle Jaeger - apple.com 

However, the seller hasn't actually received the payment yet because it's still processing.  

Venmo transaction processing. Danielle DeCourcey

But the buyer has the candy canes, now, and has the ability to cancel the transaction before the Venmo payment has even finished processing so that it won't post to the seller's account. ATTN: only used a dollar for the example, but if this was a payment for an item worth a larger dollar amount, the faux sale could potentially be devastating to a seller. 

To stay safe, only use Venmo with family and friends.

Josh Criscoe, head of corporate affairs and communications at Venmo, said that the app should only be used with people users know and trust. 

"Venmo is designed for payments between friends and people who trust each other," he wrote in an email to ATTN:. "This is detailed in our User Agreement and on our website. We strongly caution Venmo users to avoid payments with people they don't know, especially, if it involves the sale for goods and services (like event tickets and Craigslist items)." 

Criscoe explained that using Venmo for transactions with strangers could leave users without a payment, adding, "These payments are potentially high risk, and you could lose your money without getting what you paid for."

RELATED: 5 Ways to Avoid Scams on Venmo

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