More and more banking is going online, with more and more personal finance apps removing the need to even have a bank account. As you manage your personal finances, you will often be asked to make a transaction online, which can be a payment, transfer or deposit. More and more businesses are dropping their acceptance of checks and paper money. Understanding how online bank transfers work will help you perform them safely and accurately.
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Payment vs. Transfer
When you pay someone, you technically transfer your money to them. However, to make financial transactions more clear, most people use “payment” to mean giving someone money in exchange for goods or services, and “transfer” to mean shifting money from one account to another.
Examples of online payments you can make include paying for groceries, buying items through Amazon or eBay, making recurring bill payments (such as rent, water or electric bills), credit card balance payments, tax payments or loan payments (such as car, student loan or auto payments).
Examples of transfers include moving money from your checking account to your savings account (or vice versa) or sending money to a friend, family member or a business you own.
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Online Transfers Methods
You can transfer money from within your bank’s system. This could include moving money from your checking to your savings account, or from one of your accounts to someone else’s account who banks at the same bank you do. You can also transfer money from your bank (such as a Bank of America checking account) to someone else who banks at another bank (such as a Wells Fargo savings account).
You can use a bank’s online banking system to make a transfer from a website account or by using a digital app. You’ll need to visit the bank’s website and set up your online account or download the bank’s app to set up your access.
You can also transfer money using an ACH transaction or wire transfer. ACH transfers go through a third-party clearinghouse, while wire transfers move money from one bank to another with no third-party service involved. You can make these types of transactions through your online bank account or mobile app, following the steps at the site or app.
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New Non-Banking Apps
A new trend in online personal finance is the use of apps that don’t require you to have a bank account. Your app account is tied to a credit card or stays within the app. One example is Venmo, which offers free transactions if you do them through your bank account and charges a fee if you use a credit card.
Other payment apps include Zelle, Cash App, PayPal and Google Pay. You can link these to your bank accounts or credit cards, or you can keep the money in your app account and use it to make purchases or send money to others.
