Overview of the facts
In the modern world of e-payments, e-bills, e-banking, e-trade, and even e-cigarettes, the increasing electronization of payments makes it easier to manage your finances without carrying around cash and checks. If you find yourself needing to transfer funds to another person as a gift or repayment, you may wonder which electronic payment option is best. NerdWallet is here to outline the various costs and speeds associated with different funds transfer methods.
|Type of Transfer||Cost||Speed||Best For|
|Wire Transfer||$15-30||same day||Fast international transfers|
|ACH transfer||$0 within the same bank, ~$3 between two banks||1-3 days||Within-bank transfers and fast domestic transfers|
|PayPal||$0||3-5 days||Slower international and domestic transfers|
|Mobile App||$0||same day||Fast transfers to split bills or pay back friends|
If the recipient uses the same bank that you do, the best way to send money is through your bank.
- Transferring funds between your account and someone else’s account within the same bank is usually free, although this varies with the financial institution.
- Transfers within the bank occur the same day.
- Transfers between bank accounts at two different banks, whether they are both your own accounts or not, are more costly. Wells Fargo charges $15 for incoming domestic wire transfers and $30 for outgoing domestic wire transfers. For electronic (ACH) transfers, the fees are much lower. Wells Fargo, for example, charges $3 per transfer, but some banks don’t offer ACH transfers as an option yet.
- You can’t do an ACH transfer overseas, so a wire transfer is the only option if you want to go through your bank.
If the recipient uses a different bank than you, the best way to send money is through PayPal
Known for their stellar payment security, PayPal is a favorite for online vendors like eBay, Etsy, and Amazon. Plus they have recently partnered with Bump to put out a smartphone app. PayPal is ideal for transferring money to friends and family or transferring amounts less than $500/month between two of your own bank accounts at different banks.
- Domestic Transfers to a Friend: PayPal is free for you and the recipient when you either link a bank account or pay using your PayPal balance. If you don’t want to link your account, you can send money from a debit or credit card for a fee of .30 per transaction plus 2.9% of the amount sent.
- International Transfers: PayPal charges between .05% and 2% for transfers funded by a linked bank account or PayPal balance, and 3.4% to 3.9% for transfers funded by a credit or debit card.
- Two Personal Bank Accounts at Different Banks: PayPal will send up to $500 per month absolutely free. You just need to link both of your bank accounts to your PayPal account. It does take several days to process both payments.
A new option: mobile apps
For money transfers among friends, mobile apps are taking over the market. These mobile apps are ideal for paying a friend back for dinner or concert tickets.
Although it is still in its beta version, Clover is an up-and-coming mobile app designed to facilitate money transfers between peers. Users can send requests to contacts and pay each other directly through their mobile devices. Clover plans to expand to payment through SMS and email as well.
Venmo is similar to Clover in its utility for splitting the dinner bill, and it also comes with a twitter-esque feed of your friends and their recent payments. While the amount of amusement you will derive from viewing your friends’ payment history is debatable, the app itself is fast and easy to use.
Some banks now offer mobile apps that facilitate payments between individuals at no charge to either party. Bank of America, Chase, Citibank, ING Direct and US Bank all allow customers to send money to an individual at a different US-based bank for free. Check out our post, Mobile Banking: An Overview of 15 Banks and Credit Unions for more information.
Other expert opinions
- Gilles Gade, CEO of Cross River Bank, a community bank
“The best way to send money to an individual would be the availability of peer-to-peer payment systems, the mechanism to pay someone directly by cell phone or other mobile devices. This is a good way to go for small payment amounts up to $500. Most people would only be comfortable sending small amounts through mobile devices”
- Mikey Rox, staff writer at WiseBread, host of web series SpendSavvy
“I prefer PayPal – it’s fast, safe, and easy (senders should use the friend option when sending so no fees are charged on either end) – but for people hesitant to have their banking info online, a check in the mail still works just fine.”