You have to pay your roommate rent. Your family overseas needs money. You have student loans at a foreign university. Whatever the reason, chances are that at some point you’ll need to send money to someone.
Lucky for you, it’s easier to do than ever before. All it takes is a few clicks on a phone or computer and your money’s on its way. But sending money online has its downsides. If you’re not careful, you might end up paying more than you expect, or the money might not make it to its destination. Here are three mistakes to avoid.
1. Using a credit card
You generally have three payment options for online transfers: a bank account, debit card and credit card. Which one you choose matters. Hint: Don’t pick the credit card.
Person-to-person payment apps like Venmo and Square Cash charge 3% of the transfer amount when you use a credit card. Transfers using their services with a debit card are free.
This isn’t universal, though; providers like Western Union and MoneyGram don’t charge extra when you use a credit card for online transfers.
However, your credit card issuer might charge you. If your issuer considers the transaction to be a credit card cash advance, the cost is twofold: You’ll pay a cash advance fee, either a fixed amount or a percentage of the transaction amount. Then you’ll pay interest on the transfer amount, generally at a 2% to 5% higher rate than your card’s regular rate.
2. Using a savings account
When you fund a transfer with a bank account, choose your checking account instead of a savings account. Some payment apps like PayPal and Google Wallet let you link up a savings account, but it’s not the wisest choice.
Here’s why: Savings accounts have a limit of six “convenient” withdrawals or transfers per month, per federal regulations. This includes all automatic bill payments, overdraft protection transfers and telephone, online or mobile-initiated transfers from a savings account. You don’t want to add another transfer to that list.
If you go over the limit, some banks charge an excessive-transfer fee, also called an excess activity or withdrawal fee, of up to $15. If you repeatedly make more than six transfers in a month, your bank may convert it into a checking account or even close it.
3. Getting the details wrong
This is standard for any kind of online transaction, but it’s especially important for money transfers. Double-check all the details you type in before you confirm the transaction. Getting the amount wrong or sending hundreds of dollars to an account number one digit off from your intended recipient’s can be expensive errors.
Transfers, unlike many store purchases, don’t have a simple refund process. If a transfer has been received, you’ll generally have to contact the person who got your money and try to work out a return transfer, if that’s possible.
If the money hasn’t been received, you have the right to cancel transfers of more than $15 that go outside of the U.S., within 30 minutes. Some companies, including TransferWise, make it easy with a “cancel” button, but it’s not always that convenient.
The technology to send money at home and abroad is at your fingertips, but so are opportunities for fees and errors. Pay with a debit card or checking account and make sure all the transfer details are correct so everything goes as planned.
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