Venmo’s new credit card offers rewards based on how you spend your money. But many consumers might earn more lucrative rewards elsewhere.
Venmo recently announced its first credit card. It’s a no annual fee Visa card issued by Synchrony Bank, that offers tiered rewards based upon your spending habits: 3% cash back on your highest spending category each month, 2% on your second biggest category and 1% on everything else. The 3% and 2% categories are capped at $10,000 in combined annual spending.
What makes this card unique is that these rewards are calculated automatically. Other cards let you choose your top category or categories – such as the Bank of America® Cash Rewards credit card* (which resets monthly) and the U.S. Bank Cash+™ Visa Signature Card (which resets quarterly) – but they require you to select them in advance. That involves more work, and it’s possible that your projections won’t be accurate.
The Venmo Credit Card’s 3% and 2% categories are: grocery, bills and utilities, health and beauty, gas, entertainment, transportation, travel, and dining and nightlife. Some transactions don’t fit into any of these categories and are labeled as “other,” earning 1%. “Bills & utilities” is an unusual credit card rewards category, but it’s not as much of a catch-all as I first suspected. It’s defined as “telecommunications, internet service providers, ongoing delivery of television/radio/streaming content on a subscription or fee basis, subscription products or services (such as magazine/newspaper subscriptions), electric or gas power, water supply, and refuse disposal or other utility services.”
This card sounds better than it really is
The Venmo Credit Card’s $10,000 cap is an important piece of fine print, and the categories aren’t defined as broadly as I hoped. As I learned more about the card, my initial excitement waned. Most people would probably be better off with a flat, no annual fee 2% cash back card like the Citi® Double Cash Card (which gives you 1% for every purchase and an additional 1% when you pay it off), the PayPal Cash Back Mastercard (PayPal, of course, is Venmo’s parent company) or the Fidelity Rewards Visa Signature card.
It’s possible to get an unlimited 3% cash back on travel, dining, gas, transit and select streaming services with the no annual fee Wells Fargo Propel American Express card*. It gives 20,000 points (equal to a $200 statement credit) after new cardholders spend $1,000 in their first three months. Venmo does not currently offer a welcome bonus.
If 3% cash back on groceries with no annual fee appeals to you, the Blue Cash Everyday Card® from American Express offers 3% cash back at U.S. supermarkets. The $95 annual fee Blue Cash Preferred® Card from American Express ups that to 6%. Both cards cap their higher cash back rates at $6,000 spent per year, then it’s 1% cash back. Blue Cash Everyday offers an introductory bonus worth $200 after you spend $1,000 in your first three months as a new cardholder, while the Blue Cash Preferred offers a limited-time bonus of $300 after you spend $3,000 in the first six months and waives the $95 annual fee for the first year (offer expires 12/10/20). There are lots of other examples. The main idea is: It’s not hard to top Venmo’s rewards.
The Venmo Credit Card’s interest rates are pretty typical, compared to the current average APR on new credit offers. The card does not charge foreign transaction fees. Like other credit cards, if you use the Venmo Credit Card to send peer-to-peer payments through the Venmo app, you’ll be charged a 3% fee.
See related: How to send and receive money using Venmo
The broader ecosystem is a strength
Venmo has two big things going for it: A loyal following and a holistic platform. There’s a good chance you already use Venmo for peer-to-peer payments, and you may also get your wages deposited there. Some people even use Venmo to pay businesses directly. If you love the brand and use it frequently, the Venmo Credit Card may appeal to you. Venmo cardholders get a special QR code printed on their card which makes it very easy for your friends to scan the code and pay you back (or request money).
As we’ve seen with Apple Card, a beloved brand can attract lots of customers, even if its rewards aren’t at the top of the heap.
Have a question about credit cards? E-mail me at email@example.com and I’d be happy to help.
All information about the Bank of America® Cash Rewards credit card and the Wells Fargo Propel American Express card has been collected independently by CreditCards.com and has not been reviewed or approved by the issuer.