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How online money transfers work

RedX

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Western Union, one of the major money transfer operators today, began as a transcontinental telegraph operator in 1851.

Online money transfer is where the old-fashioned money transfer concept converges with modern electronic money transfer technology, or EFT. You probably use EFT all the time - it's just a completely electronic way of transferring money from one bank account to another. Data exchange; no paper money. Using a debit card at a store transfers money from your checking account to the store's bank account. Direct Deposit Salary transfers money from your employer's bank account to yours. Both of these transactions are examples of EFT, as are money transfers over the Internet.

But online money transfers are very different from EFT - they are not a way to pay bills over the Internet. Online money transfer is the modern equivalent of transferring money: you can send money to someone instantly by simply transferring money (or data that represents that money) from you to another person. Typically, little more than contact information — such as a mobile phone number or e-mail address — is used for the sending and receiving parties tied to a bank account — service through any computer with Internet access. There is no need to go to a money exchange point, a telegraph office or even a bank.

This is how you send money. But why do you need this ... and is it safe?

Online money transfer basics
The main reasons for sending money through a money transfer service are undeniable: transferring money over the Internet is fast, convenient and secure.

Postal checks may take several days to arrive and may be lost in the mail or stolen. If this money is sent overseas, where it may be most needed, there is also the issue of currency conversion fees, which are generally more expensive than the money transfer fees. Online money transfers provide near instant delivery - it takes seconds to transfer data online - without any physical problems to virtually anywhere in the world.

There are numerous security measures to ensure that your money goes exactly where it needs to go. For online money transfers, several levels of data encryption are used. Thus, if by accident the data is stolen or hacked on the way to the recipient, it will all be encoded several times, so this is illogical, unintelligible chatter. For you, it’s money on screen, but once you click “Submit” on a secure money transfer website, it is sent to the Internet as encoded data, and once received by the bank or beneficiary's service, it is decoded and deposited as currency.

All online banking transactions, including online money transfer services, are processed by the Automated Clearing House (ACH), an independent agency that offers secure transmission of financial data. Various services offer other layers of protection, such as confirmation phone calls to both parties (which must confirm personal information), confirmation emails, and even insurance policies that ensure your money gets sent and your bank accounts don't. compromised.

Okay, so it's safe for you and the person who needs the money. But how much does it cost to send money online and where can you do it?

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

  • Western Union caps any online transfer originating from the US at $ 3,000 each. You can send more, but it will be broken into parts.
  • MoneyGram limits transfers to $ 899.99 with a maximum amount of $ 3,000 in a 30-day period.
  • PayPal allows in-country transactions up to USD 10,000.
  • iKobo limits use of the pre-loaded map to $ 500 per day.

Online money transfers: companies and costs
There are four main online money transfer services. Two of them have been sending money for decades. First, Western Union began as a transcontinental telegraph operator in 1851, and introduced wire transfers, or wiring, in 1871. Sent to a waiting friend at another telegraph office hundreds of miles away and they got cash. Today, you no longer need to go to the train station or Western Union outpost - you can send money online through the Western Union website . For example, Money in Minutes transfers money from one person's bank to another's account in minutes. The service fee has a sliding scale, so you will be charged 8 to 10 percent of the total money you send.

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

Owner and operator of eBay, PayPal is primarily an online payment system. But it can be used to transfer money. Both the sender and the recipient of the money must have PayPal accounts. Accounts are free, but must be linked to a savings or checking account. To send money via PayPal, you simply enter the recipient's registered email address and the money is transferred from your account to the recipient's address. Warning: PayPal is not an instant online transfer service. It will take at least three to five business days to complete the transaction. 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 to process its online transfers. Basically, the recipient receives an iKobo bank card, and the sender tells iKobo how much money to put on the card. However, this does not happen instantly - the money is received within eight working days. But this is if they already have an iKobo card. Obtaining a card increases the term by at least a week. iKobo charges a flat $ 8 fee when the sender uses a checking account. When you use a credit card, the fee is based on a sliding scale of 8 to 30 percent of the transaction amount.

Online money transfers: credit cards and fees


Credit cards have an interesting history.

In some cases, you don't need to have a bank account in order to send money over the Internet - or even receive it via an online transfer. A credit card is a good tool in this regard. But keep in mind that, as is usually the case with credit cards, it will cost you. 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 - iKobo, for example, can charge up to 30 percent if the sender uses credit. card.

Fortunately, if you use a credit card to deposit funds for an online money transfer, credit card companies see it as a purchase and not a cash advance because the money isn't going to you. As for the credit card company, you buy the service. This is much more economical than using a cash advance on a credit card and simply sending a check to a party in need; cash withdrawal fees can be as high as 4 percent. But this is 4 percent of the transaction amount. The remainder of this cash advance is then deposited into your credit card account, where it is also subject to your regular monthly credit card interest rate. Payday loan houses, which are attractive in that they do not require a credit check, charge even higher interest rates;

As mentioned, iKobo uses a pre-installed debit card. It is convenient for sending money to people who do not have a bank account, while at the same time offering the flexibility and ease of use at the point of purchase that a standard debit card issued by a bank offers. The sender can load the amount onto the recipient's card for as little as $ 8 if the money comes from a checking account rather than a credit card. However, the recipient ends up paying for the convenience. The card is charged a monthly service fee of $ 1.99, an ATM withdrawal fee of $ 2.25, and 55 cents per purchase, such as at a store. All these commissions are deducted from the card balance.
 
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