October 25, 2013

Best Way to Send Money: It Depends

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Need to pay back that $20 you borrowed but won't see the friend who gave you the loan for awhile? Want to send some dough to a family member who lives far away? Modern technology has widened your options considerably though the likes of PayPal and online money transfers. While cheaper, checks are old-school and not as secure as other options. Nowadays, you can even send money through your phone.

Here’s a rundown of the common ways to send money, including their costs and potential downsides:

Cash

Old fashioned but effective. It’s probably best to limit using this method for only when you’re making a transfer in person, but, of course, cash can be sent by mail as well.

The cost: Free, or the cost of postage if mailed.

The downside: This is the least secure way of sending money. Cash that’s lost is probably lost for good, especially if sent through the mail, and you won’t have any record of having sent it.

Check or Money Order

Checks and money orders are basically the equivalent of cash but provide a bit more security for the person sending them. Both checks and money orders can be canceled if they get lost, and both come with some proof that the sender sent the money.

The cost: Checks come free with some checking accounts. The price of money orders varies. U.S. post offices offer them for as little as $1.10, but some financial institutions will charge $5 to $10.

The downside: Cashing a check or money order may be inconvenient for the recipient because it requires a trip to a post office or bank. If sent through the mail, this is also one of the slower methods of transferring money.

Prepaid Debit Cards

Basically a high-tech alternative to the first two options, a number of companies offer prepaid debit cards that can be used just like cash by the person receiving it.

The cost: It depends on the card. Usually there will be some charge for processing the card and shipping it to you – the general range is $5 to $10 – plus sending it to your lender.

The downside: It will likely be a few days before the card reaches you, making this another slow way to send money. The receiver may also prefer the flexibility of cash to a debit card that comes with some limitations on how and where the money can be used.

Western Union

Several companies – Western Union is the best known – let you send money to other cities, states, or countries. Money can be sent online, over the phone, or through a physical store.

The cost: Varies with the amount being sent, but fees start at $5. International transactions cost more.

The downside: If using the lowest cost option, your receiver may have to wait several business days for the money. There are express options that can make cash available in minutes, but the fees for these services can be quite high.

PayPal

PayPal is a very convenient way to quickly send money. Money, which can be transferred online or through PayPal’s mobile app, is usually available for spending or withdrawal within minutes. Confirmation emails are automatically sent to both the sender and receiver, and the updated balances will instantly show up on PayPal’s website or app.

The cost: 2.9% of the transaction amount plus a flat fee of $0.30 to be paid by the person receiving the money. International transactions cost more. Money can be sent for free on non-business transactions when the sender is taking the funds from his or her PayPal balance (not a credit or debit card) with an PayPal account that is linked to a bank account.

The downside: Both people involved must have PayPal accounts. You also need to have the PayPal email address of the person who will receive your funds.

Mobile Apps

Many banks now offer their own apps that allow you to send money through your phone. Once you’ve downloaded the app and connected your account to it, you can simply send the funds over. You just need the recipient’s email address or phone number. If your bank doesn’t have one, standalone apps not linked to specific financial institutions are beginning to become available. Sending money through mobile apps is both quick and convenient for the sender and receiver.

The cost: If you’re transferring money from your bank account through that bank’s proprietary app, there likely won’t be any additional charge. Some of the standalone apps are free as well, while others charge a small fee for each transaction.

The downside: Some of the bank-specific apps require both the sender and receiver to have accounts in that particular bank.

Bank Wire Transfer

This is the most secure way to send money. You can have your bank transfer money directly into someone else’s bank account, even if that person uses a different bank.

The cost: It varies among banks but is generally within the $10-$30 range for wire transfers in the US. The cost to transfer money internationally can be much higher. Some banks charge for both sending and receiving wire transfers, so both the sender and receiver may be charged a fee from one transaction.

The downside: Bank transfers are the best option for high value transactions because their security can’t be matched by any other method. For everyday transactions, though, using a wire transfer is likely overkill. Besides the high cost, the sender must have both the account number and bank routing number of the receiver to complete the transaction.


The best option for sending money will depend on the amount of money being sent, how quickly it needs to get there, and how secure you want the transaction to be. In most cases, the cost should not be the primary determinant of which method you use – low cost options can become very expensive very quickly if the money you’re sending is lost or stolen. Make sure to carefully consider your options to decide which one is best for your situation.

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