How to Transfer Money to Someone Else’s Bank Account
January 6, 2022
When businesses send money to vendors, contractors or employees, they need a means of getting funds from one bank account to another. Traditionally, this is as simple as executing a bank transfer through the Automated Clearing House (ACH) system. But as the circumstances get more complicated, so does the mode of transfer. What if you’re sending a large sum? What if your payee lives in another country? What do you do if they’re unbanked?
As demand for more robust funds transfer solutions has grown, so have the means to transfer money. Here’s a look at how to transfer money to someone else’s bank account, regardless of the circumstances.
ACH (Bank) Transfers
As mentioned, ACH transfers are the gold standard for sending money from one bank account to another. These transfers typically cost nothing and are an everyday convenience provided to accountholders at a banking institution. If you have direct deposit set up or schedule funds transfer from one account to another, you’re utilizing the ACH payment rail. It doesn’t get much simpler.
There are some drawbacks to ACH transfers, however. For starters, your recipient needs to have a bank account! If they’re unbanked, the ACH rail won’t work, since there’s no destination account. There are also transfer limits to consider. Most banks have high ceilings ($20,000) for ACH transfers; however, you could bump up against that ceiling if it’s lower or you’re sending a large lump sum.
ACH transfers abroad can also run into some trouble. Banks are free to put stops or holds on transfers that look suspicious, which can delay them. If you send money to a foreign country you’ve never done business with, it might flag the transaction, forcing approval. A 3-4-day transfer could take more than a week as a result.
Wire transfers are similar to ACH transfers in that they require a destination account. However, they offer several conveniences that simple bank transfers don’t. Transfer caps are much higher ($100,000 per day) and wires are extremely fast—funds can land same-day in domestic transfers. Moreover, they’re great for sending money around the world, since wires are an extremely secure form of payment.
The biggest downfall of wire transfers is their high cost. Most banks charge a fee to initiate the transfer ($5-$50 domestic; $15-$70 international). There might also be a cost to the recipient on the other side of the wire transfer. And, if it’s an international wire with currency exchange, you’ll also need to factor in the cost of conversion. All in all, the cost of wire transfers adds up very fast.
If transferring money to someone else’s bank account fast is the name of the game, wire transfers are difficult to compete against. You have the choice of a bank-to-bank transfer or wire services—both come with pros and cons, but both will get money to the recipient fast.
Digital payments are quickly becoming the preferred method for getting money into the bank account of a recipient. Why? Because they offer solutions for every contingency, no matter the circumstances. Their convenience comes from the fact that they utilize a digital wallet as an intermediary for funds.
Digital wallets are accessible to anyone who wants one, which makes it easy for unbanked contractors, international vendors and other partners to open them. Wallet-to-wallet transfers are fast, traceable and offer a plethora of options that ACH and wire transfers simply can’t. For example, payees can elect the currency they want their funds landed in and keep multiple currencies in their wallet.
The only real drawback of digital payments is that both parties need to have a wallet to facilitate funds. Once they open one, those sending and receiving payments have full control over what they do: transfer funds to a bank, send them to someone else or even make purchases directly from the wallet.
There are other options for transferring money to someone else’s bank account, but the three listed above are the primary means because they offer the fewest barriers. Other services may require memberships or charge high one-time fees to use them. There are also antiquated methods like money orders and checks, which take time to go through the mail and are prone to getting lost or stolen. In the digital age of payments and funds transfer, ACH, wires and digital payments are the primary options.
Choose the Funds Transfer Solutions That Works
How you transfer money to someone else’s bank account depends on the situation. Where are they located? How much are you sending? How often are you sending funds? Do they even have a bank account? Take these factors and more into account as you determine whether ACH, wire or digital payments are the way to go.
Not familiar with digital payments yet? Let Veem be your introduction to the world of transparent funds transfer under any circumstances. Schedule a free demo of Veem today.