When you give money to someone else, you have several options for doing so. You can hand deliver cash, a check or a payment card; you can send a check or a payment card by mail; or you can use a person-to-person electronic money transfer system that allows you to send money directly from your bank account to someone else.
With an electronic money transfer system, you don’t have to go to a bank or an ATM, handle bills or coins, find an envelope, a postage stamp, a mailbox. letters or post office, or interact with your recipient face to face. Instead, you can authorize your transaction online or with a mobile device. Funds can arrive in minutes and be available immediately or within days.
“These services are user-friendly and easy to use,” says Michael Hakimi, owner and certified financial planner at Black Dog Financial Planning in Mount Pleasant, South Carolina. “They help people avoid using paper checks, carrying cash, or even risking sending money in the mail.”
Best methods to transfer money fast
Some money transfer systems can be used by anyone with a bank account, debit or credit card. Other systems are reserved for customers of a particular bank or credit union.
Here are five systems that can be used online or with a mobile app. Two of these can also be used in person in brick and mortar locations.
• Zelle. Zelle can be used online, through the Zelle mobile app or through the online banking platforms of participating banks. Most of the country’s biggest banks, including Bank of America, Chase, Citibank and Wells Fargo, have partnered with Zelle. Money can be sent directly from your bank account with the recipient’s email address or cell phone number.
• Pay Pal. PayPal allows you to send, request or collect money online or with the PayPal app. You can also buy online with a PayPal credit, debit, or prepaid card, or a line of credit. PayPal offers both business and personal accounts.
• Venmo. With Venmo, you can send money person-to-person or make purchases at online stores that accept Venmo.
“Venmo has an interface similar to a social network and is very easy to use,” says Hakimi. “It gives you the ability to find your friends and create a profile. Many of our friends use Venmo to split restaurant bills, utilities, or rent.”
Venmo is owned by PayPal.
• Western Union. Western Union allows you to send money online, with the company’s mobile app, or in person with a Western Union agent. Funds can be deposited directly to the recipient’s bank account or collected in person from a Western Union agent.
• Walmart2Walmart. Walmart2Walmart lets you send money online, with the company’s mobile app, or from any Walmart store in the United States, including Puerto Rico. Money can also be picked up at a Walmart store. Walmart also offers Walmart2World and MoneyGram, which let you send money internationally online, with an app, or at a Walmart store.
Transferring Money: Pros, Cons
Although electronic money transfer systems are generally easy to use, you need basic technological skills to create and authorize an account and set up each transaction.
“Peer-to-peer payment systems are convenient for those who are tech-savvy,” says Michael Foguth, founder of Foguth Financial Group, a financial management firm in Brighton, Michigan.
The fees for wire transfers vary depending on the service you use and the type and amount of your payment. For example, Zelle does not charge for sending money, while PayPal does not charge anything for transfers from a bank account but 2.9% from debit or credit cards, and Venmo is free to send money. ‘money to someone from your bank account or debit card but charge 3% to send money from your credit card. International transfers may also involve currency exchange fees. Always read disclosures before sending money.
Another advantage of these systems is that they create an electronic record of your transaction with the date, amount and recipient. There may also be a memo line where you can add a message for your recipient or a note for yourself about the transaction.
Be careful when transferring money
Electronic money transfers also carry certain risks.
“There will always be cybersecurity risks with any kind of online banking products,” Hakimi said. “A malicious person could hack your account and send each other money.”
To reduce the risk, use a PIN code to secure your peer-to-peer payment account, if that’s an option.
Another tip: always check your recipient’s name and email address or cell phone number. If you send money to the wrong person, it is unlikely that you will be able to reverse the transaction.