Stuff happens. And when it does, you're going to need a way to send money -- fast. Whether your college-aged kid needs a couple hundred bucks for books or you have only 48 hours to pay for the ultimate "Star Wars" collectable that you won in an online auction, you're going to need a safe way to send money. Luckily, the process is easier and simpler than it used to be. Instead of physically going to a bank or transfer company and filling out ample amounts of paperwork to get the job done, all you need is a bank account or credit card and a connection to the Internet.
Of course, not all online money transfer options are created equal. They vary by fee and delivery time, so what may be a quick, economical solution in one situation may not work for another.
Read the next page to learn about a method of transferring funds that is both pricy and free.
Wire transfers -- also known as a bank wires -- are a relatively hassle-free way to send money online. They're transfers of money from one bank account to another, and all you need is your and your recipient's account and routing numbers. When compared to the fees associated with other methods of online money transfers, wire transfers are kind of pricy. Or free. It all depends.
There's usually no cost for transfers between account holders at the same bank, though a few do charge for the service (be sure to check with your financial institution of choice). The process starts getting more expensive when you're transferring funds between accounts at different banks. The fees average around $20 to $25, but we've seen some that cost as much as $50. Not surprisingly, the recipient also often has to pay a fee, though the cost is lower -- usually between $5 and $15. There's typically no fee for recipients of transfers from the same bank [source: MyBankTracker].
Also, even though it's online, the process isn't instant. It takes several hours for a wire transfer to go through -- especially if the funds are going to a different bank -- as all the information has to be verified before the transaction can take place.
We know, $25 doesn't sound like such a large price to pay for transferring funds between banks on your computer, and it's not if you're moving numbers with multiple zeros or need the transfer completed in hours, not days. But if you're only sending a few hundred dollars -- and the recipient doesn't mind waiting a day or two -- there are much cheaper options out there, one of which we'll discuss on the next page.
Online Money Order
Traditional money orders are pretty easy to buy since they're available at post offices, grocery stores and banks, but did you know you can also purchase them online? The majority of banks and transfer services don't offer an option to pay for money orders over the Internet, but there are several companies who do.
Generally, online money orders -- which can be sent domestically or internationally -- are much smaller in amount than those purchased in person. For example, the online service Payko has a $200 daily limit on money orders, whereas a paper order purchased at a post office can be bought in multiple $1,000 increments. Also, online money order fees tend to be a little higher, at $3 or $4 per order, plus up to 5.49 percent of the amount you're sending, depending on how much you buy and where it's going. A physical money order will only run you $1.50 [source: Bank of America].
Online Bill Payment
No one enjoys paying bills, but at least it's not a lengthy process if you pay them online. It wasn't long ago that people had to waste multiple hours each month keeping a detailed ledger of bills, due dates and amounts, then writing checks, licking stamps and stuffing envelopes. Online bill payment systems have virtually eliminated this monthly chore for millions of Internet-connected customers.
The beauty of online bill payment is that most banks will allow you to set each bill up on a recurring cycle. That way, your bills are paid every month with no hassle, and late payments and fees much easier to avoid. After the initial setup, all a person really has to do is sit back and monitor the accounts for upcoming due dates or any questionable activity. Some people opt to enter the amount to be paid manually each month, as some bills -- such as those for water and electricity -- fluctuate. Even so, it's as fast and easy as a mouse click to send in the payment when it's due.
Online banking also creates an automatic backlog of payments, so if a provider disputes whether or not you've paid in full, you can pull up the account to prove them wrong. As an added bonus, online bill pay has drastically reduced the postage needs of households everywhere, as well as the environmental toll of countless paper bills.
E-commerce Payment Service
Remember the old days when you thumbed through a paper catalog, picked an item, filled out an order form and mailed a check in for payment? A mere four to six weeks later, your front porch was graced with a gift, as if by magic. Fast-forward to the current digital age, when you can purchase a good or service almost instantly via the Internet and receive it within days of the initial order. Some online stores take plain old credit or debit cards as payment, but plenty of others rely on e-commerce payment services, like PayPal, to complete the transaction.
It's an amazingly easy way to send money online, and after setting up an account, paying for items is as simple as signing in. Your account is linked directly to a credit or debit card or is debited directly from your bank itself. These services swear by their security and privacy, which is vital, since they store your payment information -- including credit card and bank account numbers -- all so you don't have to input the information each time you use the service.
E-commerce payments have helped companies like eBay thrive, thanks to their ease of use and security. Small business owners also enjoy the fact that they only have to fork over a small fee (typically less than 3 percent) to receive payments. There's no credit check, monthly fee or start-up costs, and because all payments go through a trusted third party, customers don't have to worry about their information being compromised or stolen.
Money Transfer Services
Sometimes, you have to pay with cash. Of course, this is impossible over the Internet, but using a money transfer service like Western Union or MoneyGram is the next best thing. It's an excellent option for recipients who don't have bank accounts or prefer to pick up cash (or in some cases receive a check or prepaid credit card). The rates might be steeper than if you just transfer funds between banks, but when wiring isn't an option, these services are usually fast, easy and effective.
Western Union, for example, allows you to transfer money online to a prepaid Visa card if the recipient is in the U.S. If the person has used the service before and already has a card, they can use it within minutes. If this is their first time receiving funds, the card will be delivered to their home or office within 24 to 72 hours, depending on when the money was transferred. In the U.S., Mexico and Brazil, deposits can also be made by Western Union directly into the recipient's bank account, although it takes two to five business days for the money to transfer. Of course, the funds can also be picked up as cash at any one of the company's numerous locations [source: Western Union].
Fees vary depending on where and how you're sending money, but it's safe to say that these services don't come cheap. You can expect to pay as much as 10 to 20 percent of the amount you send to your transfer service of choice.
Is this the payment method of the future? No cash, no credit card, just your smartphone and your finger? Find out how Square works at HowStuffWorks.
- Anderson, Gordon T. "The Return of the $2 Bill." CNN Money. June 12, 2003. (Sept. 30, 2011) http://money.cnn.com/2003/06/12/pf/banking/new_two_bill/
- Bank of America. "Sending Money to Friends and Loved Ones." 2011. (Sept. 29, 2011) http://learn.bankofamerica.com/articles/money-management/sending-money-to-friends-and-loved-ones.html
- Bankrate. "Bankrate's Financial Glossary." 2011. (Sept. 30, 2011) http://www.bankrate.com/glossary/glossary-terms.aspx?ChannelId=23
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- MyBankTracker. "Comparing Bank Wire Transfer Fees." Sept. 28, 2010. (Oct. 08, 2011) http://www.mybanktracker.com/bank-news/2010/09/28/comparing-wire-transfer-cost/
- Payko. "Payko Help Center." 2011. (Sept. 29, 2011). http://www.payko.com/help.aspx#7
- Swann, Ben. "Reality Check: Why the postal service has to make cuts." CNN Money. Sept. 28, 2011. (Sept. 30, 2011) http://www.fox19.com/story/15564367/reality-check-why-the-postal-service-has-to-make-cuts
- Wells Fargo. "Transfer Questions." 2011. (Sept. 30, 2011) https://www.wellsfargo.com/help/faqs/transfers_faqs
- Western Union. "Online Money Transfer Options." 2011. (Sept. 30, 2011) http://www.westernunion.com/WUCOMWEB/staticMid.do?pagename=optionsPage2&countryCode=US&languageCode=en&pid=USHP_Header_Pre&method=load&nextSecurePage=Y