If you are active in reselling or manufactured spending along with a community of friends, you might find yourselves sending money to eachother in high volume. What’s the best way to send money between friends?
We all start out paying each other with Paypal, Venmo, Facebook, Google Wallet, Square Cash, any-other-electronic-wallet-out-there. After getting shut down or frozen by one too many electronic wallets, we’ll start looking for alternatives.
P2P Bank Transfer
The first step people typically use after graduating from electronic wallets is P2P bank transfers. Most banks have systems in place to allow transfers between people. The transfer often goes instantly for transfers within the same bank (e.g. sending from your BofA account to someone else’s BofA account), and will take a few days when sending outside the bank.
This option might be found under the Transfers tab or under the Bill Pay tab (‘Pay People’). There might be other possibilities as well. Poke around and you’ll find most banks have some system, and it’s typically free on personal accounts.
You’ll usually have to do an initial ‘account linking’ with some sort of verification, and subsequent transfers go quicker. If you’re making a one-off payment to a friend, it might not be worth the hassle, depending on whether your bank requires linking accounts or not.
In some cases, banks process the payments as part of a network of banks. Notably, Chase’s QuickPay system and Capital One’s P2P payment system use the same ClearXchange platform.
These P2P payments often have weekly or monthly limits. One bank might have a $2,000 monthly limit, another might have a $1,000 weekly limit, etc. Aside from the official limits, some banks might look askance at continuous transfers in high volume, and you might be forced to move onto other options.
One underestimated method for paying friends is the good old paper check. While this might sound primitive, banks traditionally don’t ask questions about paper check deposits, regardless of volume and amounts. Apparently, large electronic transfers are more susceptible to fraud and are thus flagged whereas checks are not.
Consider mailing a paper check to your friend. It might even be possible to send a check electronically somehow.
A similar option is to use the check payment option in your online banking found with Bill Pay. Many banks will allow you to pay any bill, even those not in their system, and they send it out via physically mailed check. Saves you the postage and the hassle of dealing with physical paper, but of course the recipient still needs to agree to take a physical check.
This is an extension of the check idea, but is quite apropos to the hobby. Consider mailing a money order (perhaps purchased with a prepaid Visa or Mastercard) to pay friends. These can be deposited by anyone like an ordinary check, and some banks might even allow it to be deposited via mobile deposit.
People often shy away from depositing it in their own accounts since it looks a bit suspicious that someone is buying themselves money orders, but when deposited by someone else it’s more innocuous, and is actually the intended purpose of money orders.
Business Bank Transfer
Another option is to open a business checking account.
Most business bank accounts will have some sort of ACH payment system available, and these are specifically designed for sending large sums of money on a consistent basis for payroll or vendor payments.
While personal banks usually allow free ACH payments, business bank accounts commonly have fees for each ACH payment, or even for each transaction made in the account (deposit, withdrawal, etc.). Before opening a business bank account, research the fee structure well and, particularly, ask about ACH payments if you plan on using that feature.
One caveat here is that banks treat business bank accounts quite seriously. Though it’s generally easy to open a business credit card for an eBay business using your SSN, a business checking account will usually need an EIN at the least (which, incidentally, can be gotten quickly and freely online), and sometimes a trade certificate from your city or county. Also note, business bank accounts are typically opened up in-branch, and they might ask a lot of questions about your business during the opening process.
Bill Pay Service
There are numerous businesses who specialize in sending out payments. Some might only allow payments to vendors found in their system (like the now-defunct EvolveMoney) while others might specialize in vendor payments for businesses. Do some research and you’ll find many such services.
Another example is Plastiq who charges 2.5% to send payments to a business. You will have to prove to them that the payment is for goods or services, and not just sending money to a friend.
Do you pay your friends in $500 Visa gift cards? Have any other good methods for sending large sums of money to friends and acquaintances? Let us know in the comments below.