Q: If I want to send money to a customer at another bank, what’s cheapest way to do this? I know there are various ways to transfer money. Do I have to pay for a wire transfer or is it free of charge?

– Sobirjon T.

A: In general, there are three main electronic methods of transferring money to a customer of another bank: ACH transfer, wire transfer and electronic transfers via third-party systems.

Ways to Send Money

Ways to send moneyCost
ACH TransferUsually free
Wire TransferAverage of $29.50 at the top 10 U.S. banks
ClearXchangeFree
Western UnionVaries by amount, location, and transfer method
MoneygramVaries by amount, location, and transfer method
PayPalFree with bank account; 2.9% fee with debit or credit card
VenmoFree with bank account, debit card, or prepaid card; 3% fee for credit cards
Google WalletFree
Square CashFree
Chase QuickPayFree
FacebookFree

ACH Transfers Are Cheap

ACH stands for Automated Clearing House, an electronic network used by financial institutions to process transactions in batches. Because ACH transfers are automated, they are rather inexpensive for banks and they tend to be free for customers (but some banks and institutions may impose a small fee, depending on the transaction).

The typical ACH transfer takes a few days to clear because it requires confirmation and by the receiving party.

Examples of ACH transfers include payroll direct deposit, online bill pay, distribution of Social Security benefits and person-to-person (P2P) payments.

Wire Transfers Are Fast

Unlike the batching-processing nature of ACH transfers, wire transfers are designed for individual transactions. Wire transfers involve more interaction between the institution that sends and receives the money, which is why wire transfer fees (usually a flat fee ranging from $10 to $50 or a percentage of the transferred amount) are typically more expensive than other forms of money transfer. Wire transfer fees may be charged to the sender, the recipient or both.

The biggest benefit of wire transfers is speed. You can send money to a person located halfway around the world in a matter of minutes instead of days.

Banks, credit unions and some financial services providers (e.g., Western Union and MoneyGram) offer wire transfers — their fee policies may vary. Wire transfers to foreign institutions tend to cost more than domestic wire transfers.

Third-Party Providers

Other portals to send money electronically include e-commerce entities like PayPal, Venmo, Google Wallet, and others. These companies allow users to send and receive money, possibly without fees associated with other transfer methods. However, many consumers don’t use them because of the time and effort to set up accounts. Also, people may not have heard of them before.

PayPal is well known because it is the preferred payment option on eBay, where many consumers go to buy things. It doesn’t impose a fee when a customer sends money to another PayPal user through a linked bank account. PayPal does charge a fee to the recipient when the transaction involves a sale of goods or services. For regular payments to family and friends, it is free.

More and more major tech giants have entered the market to provide simple and easy personal payments. Google, Facebook, and Square have introduced services that let members send money to others for free. Venmo also allows people to send money instantly — it was so popular that it was acquired and, now, Venmo is owned by PayPal.

Banks Cut Out Middlemen

Recognizing the high demand for quick and free person-to-person transfers, banks introduced services to fulfill this customer need.

Chase QuickPay is an example of how a big bank is simplifying personal payments. With this feature, Chase customers can send money to any other Chase customer instantly with the email address or phone number tied to his or her Chase account.

The largest U.S. banks have also partnered to form ClearXchange. With this personal payments platform, customers of the participating banks will be able to send money instantly to each other without any other third parties. So, a Chase customer can instantly send money directly to a Bank of America customer without worrying about transfers to a middleman.

Which Transfer Method For You?

As for the cheapest option to send money to someone, it would most likely be ACH transfer. Wire transfers would be the way to go if a transaction is urgent. Personal payment services like those from Venmo and banks could be a better option if you and the recipient have user accounts.

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  • Mac

    Very interesting and somewhat understandable. I did not see any reference to international transfers.

    • Roallin

      It is covered under wire transfers.

  • Jhon

    Is it possible to use ACH for fund transfer to banks outside the country. Esp if I want to pay someone outside my country. I’m from USA.

    • Simon Zhen

      No, the ACH network only facilitates financial transactions in the United States. If you want to pay someone internationally, you may have to go with wire transfers or PayPal.

  • bitcoin.org

    Or you could use bit coins to send money anywhere in the world instantly for 4cents.

  • carlos bello

    Hey ,first of all thanks for this post it had allowed me to understand the different types of transactions. Im kinda worried cuz i transferred an amount of money i had from paypal to my boa account using the wire routing number. Did that on last thursday at 5:17 pm the thing is i still not see the upcomming amount in my boa account. If it’s supposed to be fast, how come i dont see my money yet?. I emailed them and the answer was like ” wait for 4-3 days” its the third day and still not seeing it.. what do u think may be the possible reasons of the delay?

    • Roallin

      PayPal uses ACH payments to tranfer to a bank account. Like the article says, these are paid in batches and can take up to 5 bussiness days to complete.

  • Sam Schmidt

    Thanks for a very concise comparison and contrast of the different methods!

  • mary

    Hey, thanks for this post. I agree that a convenient way for international transactions is so called “third party” providers. I am making international transfers on a regular basis, therefore opening an account for me did not seem as too much hassle. I am using paysera account for that as they usually have a good deal for transfers to my destination. Also there is transferwise for such transfers.
    These ways work better if you transfer money to someone with a bank account.

  • Justin Nahin

    You can use Venmo or Bitcoin. Venmo is great, all free!

  • Rakesh

    Thanks for the informative information. I have question that.. How to use ACH to build service like dwolla?

    Thanks in advance.