How Online Money Transfers Work

Online Money Transfers: Credit Cards and Fees

Credit cards have an interesting history.

In some cases, you don't have to have a bank account to send money online -- or even to receive it from an online transfer. A credit card is a viable tool in this regard. But do note that, as is usually the case with credit cards, it's going to cost you. While most online transfer services (Western Union, MoneyGram) treat debit and credit cards the same for the money sender -- it's just a method of payment -- iKobo, for example, can charge as much as 30 percent if the sender uses a credit card [source: iKobo].

Fortunately, if you do use a credit card to apply funds to an online money transfer, credit card companies view it as a purchase, not a cash advance, because the money is not going to you. As far as the credit card company is concerned, you are purchasing a service. This is far more economically sound than using a credit card cash advance and simply sending the needy party a check; cash advance fees can run as high as 4 percent [source:]. But that's 4 percent on the transaction. The balance of that cash advance then goes on your credit card bill, where it's also subject to the usual credit card monthly interest rate. Payday loan houses, which are appealing because they don't require credit checks, charge even higher interest rates; the annual percentage rate (APR) can run, on average, 400 percent [source: Davidson & Miller].


As stated, iKobo's model uses a preloaded debit card. This is good for sending money to people who don't have a bank account, while offering the flexibility of point-of-purchase ease of use a standard bank-issued debit card offers. The sender can upload an amount onto the recipient's card for as little as $8 if the money comes from a checking account, as opposed to a credit card. The recipient, however, ends up paying for the convenience. The card carries a $1.99 monthly maintenance fee, a $2.25 ATM withdrawal fee, and 55 cents for point-of-purchase, like a store [source: iKobo]. All of these fees come off the balance of the card.

For more information regarding online money transfers and related personal finance topics, visit the links on the following page.

Related HowStuffWorks Articles


  • "Cash Advance Fees." Accessed 15 January 2010.
  • Davidson, Emily and Miller, Valary. "The Truth About Payday Loans." Accessed 15 January 2010.
  • iKobo. "About Us." Accessed 15 January 2010.
  • iKobo. "Fees." Accessed 15 January 2010.
  • MoneyGram. "Corporate - Company Information." Accessed 15 January 2010.
  • MoneyGram. "Internet Money Transfers." Accessed 15 January 2010.
  • MoneyGram. "Pricing Input - USA." Accessed 15 January 2010.
  • PayPal. "About PayPal." Accessed 15 January 2010.
  • PayPal. "Help Center." Accessed 15 January 2010.;jsessionid=ngB6LpTcppG1TJTTkf9jCy6LhVfmW6pndbxp9CyVjpp9TWjKy3Zs!305371145?t=solutionTab&ft=homeTab&ps=&solutionId=11637&locale=en_US&_dyncharset=UTF-8&countrycode=US&cmd=_help&serverInstance=9014
  • PayPal. "Transaction Fees." Accessed 15 January 2010.
  • Western Union. "Estimate Money Transfer Fees." Accessed 15 January 2010.[B@397a83556001872652866200065&sourceSecureKey=1263549211670[B@38c883556001872652866200065&sourceSessionString=SESSION_ID=1263549211670[B@397a83556001872652866200065;SECURE_KEY=1263549211670[B@38c883556001872652866200065&omnitureSessionId=5tiHH6mjKH9Gg9H2nfSw&isLoggedIn=false&nextSecurePage=Y
  • Western Union. "History." Accessed 15 January 2010.
  • Western Union. "Send Money." Accessed 15 January 2010.
  • Western Union. "Western Union Money Transfer." Accessed 15 January 2010.;jsessionid=5HB4yPSFxfIJmeSgvW40EVX?method=load&countryCode=US&languageCode=en&sessionString=SESSION_ID%3D1263549211670%5BB%40397a83556001872652866200065%3BSECURE_KEY%3D1263549211670%5BB%4038c883556001872652866200065%3B&nextSecurePage=Y