The Internet has revolutionized the way we bank. With an online back account a customer can monitor all account activity instantly online and receive and send money to any other bank account in the world. There are a variety of different transfer methods available from banks today, each designed for use in a different situation.
Direct debits are the most popular day-to-day electronic transfer. The account holder registers the details of where and when the money is to be sent. On a set day each week, or month, the money leaves one account and become available in another. This system is useful for regular payments such as utility bills, rent or loan repayments. Companies use a system called direct deposit, which works in the same way, to pay wages to their employees.
Wire transfers are one-time payments to another bank account, often in a different country. They can be handled through banks or via a credit agency, such as Western Union. At the other end, the receiver can either collect the money from a bank account or in check form from the credit union. Fund delivery can be slow. The system has been criticized for a lack of regulation and for losing people's money.
Paying for goods with a credit or debit card is a widespread type of financial transaction today and is classified as a transfer payment. With a debit card, by entering a PIN number or signing a name, the card owner is giving authorization for the company to take a specified amount of money out of their bank account. With debit cards the transaction is almost immediate. Credit cards work slightly differently. The card issuer pays for the transaction and the card owner pays the issuer, the credit card company, back, usually with interest. Another payment type, store cards, allow the consumer to use a card issued by the store and pay the store back later, or put a pre-paid amount on the card and debit from that amount.
There are a number of variations of these systems used for different kinds of transactions. Larger money transfers are dealt with through bank drafts, which are similar to wire transfers, but are carried out between major financial institutions and so do not carry the same risks. Internet money transfers are a combination of direct debits, wire transfers and cardholder transaction and involve the use of an e-mail account with no bank details. Internet payment systems like PayPal use this. Money orders are also similar to wire transfers although no money is directly transferred from one account to another. Instead, it's an authorization allowing the withdrawal of funds.
- Bank of America: Frequently Asked Questions
- University of Missouri- St Louis: e-Commerce
- FX Compared: Methods for Sending Foreign Currency Abroad
- Wells Fargo. "The Ins and Outs of Wire Transfers." Accessed March 30, 2020.
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- Federal Trade Commission Consumer Information. "Using Money Transfer Services." Accessed March 30, 2020.
- Venmo. "Instant Transfer FAQ." Accessed March 30, 2020.
- PayPal. "Disputes, Claims, Chargebacks, and Bank Reversals." Accessed March 30, 2020.
- Bank of America. "International Wire Transfers." Accessed March 30, 2020.
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- Nacha. "Sample Authorization for Direct Payment via ACH (ACH Debit)." Accessed March 30, 2020.
- Federal Financial Institutions Examination Council. "Online Person-to-Person (P2P), Account-to-Account (A2A) Payments and Electronic Cash." Accessed March 30, 2020.