What is an online money transfer and how does it work?

Online money transfers are where the old-fashioned concept of money transfer meets modern electronic funds transfer technology, or EFT (Electronic funds transfer). You probably use EFT all the time - it's just a completely electronic way of transferring money from one bank account to another bank account. Data is exchanged, no paper money. Using a debit card at a store transfers money from your checking account to the store's bank account. Direct Funding transfers money from your employer's bank account to yours. Both of these transactions are examples of EFT, as are online money transfers.

But online money transfers are noticeably different from EFT - they are not a way to pay bills over the Internet. Online money transfers are the modern equivalent of money transfers: you can send money to someone instantly by simply transferring money (or data representing that money) from you to another person. Usually, a little more contact information is required to transfer the sending and receiving parties associated with a bank account - for example, a mobile phone number or email address - online money transfers can be made for a small fee from a secure website, a service based on any computer with Internet access. And there is no need to go to a bank branch to transfer funds. Is it safe?

Fundamentals of Online Money Transfer

The main reasons for sending money via an online money transfer service are undeniable: online money transfers are fast, convenient, and secure.

Checks mailed can take several days and can be lost in the mail or stolen. If this money is sent internationally, where the need is most often, there is also the issue of currency conversion fees, which are generally more expensive than money transfer fees. Online money transfers allow almost instant delivery of money - it takes just a few seconds to navigate the Internet - without any physical hassle virtually anywhere in the world.

Numerous security measures are in place to ensure that your money goes exactly where it needs to go. Multilevel data encryption is used for online money transfers. Thus, if a money order is hacked on its way to the recipient, it will be encoded several times, so it will be illogical and illegible gibberish. It's money on screen for you, but as soon as you hit the submit button on a secure money transfer website, it is sent online as encoded data, and once received by the bank or beneficiary's service, it is decoded and deposited in the form of currency.

All online banking transactions, including online money transfer services, are processed by the Automated Clearing House (ACH), an independent agency that offers secure transfer of financial data. Other layers of protection are also offered, such as confirmation phone calls to both parties (which must verify personal information), confirmation emails, and even insurance policies to ensure that your money is sent and your bank accounts are not compromised.

So, it's safe for you and the person who needs money. But how much does it cost to send money online, and where to go to get it done?

Limit on the amount

There are limits on how much money can be sent at a time and how much can be transferred in a given period of time. For instance:

Western Union limits any online transfers coming from the US to $ 3,000 each. You can send more, but it will be broken into pieces.

PayPal allows transactions up to $ 10,000 domestically.

Banks have their own commissions, for transferring to the card of one and the second bank, the amount of commission can differ significantly.

Online money transfers: companies and costs

There are four main online money transfer services. The two have been in the business of sending money for decades. First, Western Union began as a transcontinental telegraph operator in 1851, and in 1871 introduced the transfer of money over telegraph lines or wiring. It was a fairly simple process: you gave money to a telegraph, a message was sent to a waiting friend at another telegraph hundreds of miles away, and they would receive cash. Today, you no longer need to go to the train station or Western Union department - you can send money online through the Western Union website. The service charges are on a sliding scale, so you will be charged 8 to 10 percent of the total money sent.

MoneyGram, another holdover from the money transfer era, also offers instant online transfers at a flat rate of 8 percent regardless of the amount sent. If money is not sent to mitigate the emergency and can wait a couple of days, MoneyGram offers transfer services within three to five days, for which there is a 3 percent fee.

PayPal, owned and operated by eBay, is primarily an online payment system. But it can be used to transfer money. The sender and recipient of the money must have PayPal accounts. Accounts are free but must be linked to a savings or checking account. To send money to PayPal, you simply enter the email address of the recipient who is registered with the service, and the money is transferred from your account to the recipient. Warning: PayPal is not an instant online transfer service. The transaction will take at least three to five business days. On the other hand, it's very cheap: PayPal's commission is 2.9 percent of the amount sent, plus 30 cents.

iKobo, whose business is primarily international, uses downloadable debit cards for its online transfers. Basically, the recipient receives an iKobo bank card, and the sender tells iKobo how much money to put on the card. It's not instant, however - money is available within eight business days. But that is if they already have an iKobo card. iKobo charges a flat fee of $ 8 if the sender uses a checking account. When you use a credit card, fees are charged on a sliding scale of 8 to 30 percent of the transaction.

Online money transfers: credit cards and fees

In some cases, you do not need to have a bank account in order to send money online or even receive it using an online transfer. A credit card is a viable tool in this regard. But note that, as is usually the case with credit cards, this will cost you a certain amount of money. While most online transfer services (Western Union, MoneyGram) treat debit and credit cards the same for the sender of money - this is just a payment method - for example, iKobo can charge up to 30 percent if the sender uses a credit card.

Fortunately, if you use a credit card to fund online money transfers, the credit card companies see it as a purchase and not a cash advance because the money doesn't go to you. As for the credit card company, you buy a service. This is much more cost-effective than using a credit card cash and simply sending the check to the side in need; cash withdrawal fees can be up to 4 percent.

In the CIS countries, besides PayPal, the most popular ways to transfer money are Yandex and Qiwi wallets. There is also a transfer of money in cryptocurrency, in turn, but we will talk about this a little later.

Prepared by: Nikita Smirnov nikita_smirnov@tempting.pro