Here's Why I Try to Never Keep a Balance in My Venmo Account

These days, I find that having a Venmo account is pretty much a necessity. Not only do I use it to reimburse friends when they pick up things for me at the store, but I also use it to pay for some of my kids' after-school activities. And as the class mom who tends to organize teacher gifts for the holidays and at the end of the school year, it's much easier for me to get paid by parents via Venmo than to have to sort through envelopes of cash.

But while I definitely acknowledge the importance of having a Venmo account, one thing I don't like to do is keep money in there. Here's why.

1. I like earning interest

If you want to earn a high return on your money, then investing it is a good way to go. The stock market has delivered a rather impressive average annual 10% return before inflation over the past 50 years, as measured by the S&P 500, and that's a nice way to grow your money into a larger sum.

However, investing carries risk, and I don't always want to take it on. At the same time, I don't want to earn nothing on my money. And that's what happens when you keep cash in Venmo.

The money in my Venmo account doesn't earn interest, whereas these days, you can earn around a 4% APY by putting your cash into a high-yield savings account. So whenever I get paid via Venmo, I try to make a point to transfer that cash first into my linked checking account, and from there, into my savings account. That way, I'm earning something on it.

2. I tend to treat Venmo money as "not real money"

The money in my checking and savings accounts tends to come from my earnings, whereas often, my Venmo balance comes in the form of people reimbursing me for things or chipping in for teacher gifts I'm organizing. As such, I tend to treat my Venmo balance as "not real money" and have been known, in the past, to spend it carelessly.

That's clearly a mistake. And while I could of course try to change my mentality when it comes to my Venmo balance, I also know that certain habits can be hard to break. So I'd rather just move that money out of Venmo right away so I'm not tempted to spend it.

Venmo definitely makes several aspects of my life more convenient. And I'm grateful the option to pay for things electronically exists. But I still don't think it's a good idea to keep money in my Venmo account, so I try to check my balance every few days and make transfers.

This isn't to say that keeping a few dollars in Venmo is the worst thing in the world. But once my balance reaches $100 or more, I almost always move it over to savings immediately. And if you tend to treat your Venmo balance the same way I treat mine, I would encourage you to do the same.