The old school, traditional method is to use cash. You can simply receive cash from someone, or pay someone in cash. This is a money transfer. There are many problems with this method of payment, including the most common one, which is the lack of cash in your wallet (that’s me). Another problem arises when you owe your friend $17.48 for dinner. It isn’t likely that you will have the exact amount, so you probably end up paying your friend more. Paying for a $17.48 meal with a $20 bill probably doesn’t seem like a big deal. If someone makes a big deal about, you would probably consider them cheap. But, if you do this often, you end up paying a lot more than you are actually spending. The $2.52 difference can quickly add up.
Another way to send or receive money is by using a check. Most of the time, writing a check is a way to give payment to other people or institutions. Using checks as a payment method is pretty convenient because you can specify the exact amount you want to pay. However, most people find receiving a check as a hassle as you have to go to the bank to deposit it. Often, when someone gives you a check for $5, you might not even deposit it because it may not be worth a trip to the bank. That is $5 lost.
A money order is a payment order for a pre-specified amount of money. Because it is required that the funds be prepaid for the amount shown on it, it is a more trusted method of payment than a personal check. The U.S. Postal Service issues money orders for a small charge at any location.
Direct deposit is a great, convenient method to receive your hard earned money from an employer. With direct deposit, funds are directly deposited into your account, so there is no hassle with running to the bank to deposit a paper check. If you feel a bit wary about not actually seeing a paper check stub as evidence of your earnings, realize that your employer still provides you with records of your pay. They either issue you paper stubs, or send you an electronic version. Nevertheless, when you want to pay your friend for dinner, you can’t direct deposit to your friend!
Electronic money transfers are the future. Credit and debit card payments are the most convenient methods of payments between customers and merchants. But, you probably can’t pay your friend for dinner unless she carries a transportable card processor on her, which isn’t likely.
PayPal is a great way to send and receive money. I find it is really convenient for transferring money to other people, plus I can electronically transfer balances to and from my bank account or credit card. You specify the exact amounts of cash you want to transfer by simply sending an email. This is also a convenient method of transferring money internationally. The only disadvantage to PayPal is that you might not always have access to the internet, but how often does that really happen anymore? You can access PayPal by using visiting their website with your computer or with your cell phone, but remember that some older phones might not support the website feature.
Not a lot of people know about this method of sending money. This service is offered by Amazon.com, and it allows you to send money to people by sending a text message. Almost all cell phones support text messaging so there isn’t the same web browser support problem like there is with the PayPal method. TextPayMe can be the best way to pay your friend for dinner. You simply send a text message to TextPayMe with the amount you need to transfer to your friend ($17.48 instead of $20).
Western Union Money Transfer
Sender goes to a Western Union office and presents funds (plus fees) for "Next Day" or "Money in Minutes" service. Sender provides his/her name and address, the recipient's name, and a designated payment city or town. Western Union provides the sender a 10-digit Money Transfer Control Number (MTCN) that must be transmitted separately by sender to recipient. Recipient then proceeds to a Western Union agent office in the designated payment location, presents the 10-digit MTCN, and a picture identification document. Money then is paid out to recipient. If recipient lacks identification document(s), a pre-arranged password may suffice. Funds are paid out in cash. If payment exceeds a local maximum or cash on hand, then a check is issued. Alternatively, sender may forward funds online to recipient by visiting westernunion.com and following instructions.
You need to figure out which options work best for you. Honestly, I don’t usually mind paying a friend a bit extra for lunch if she puts the bill on her card. Sometimes, though, money is really tight, so that $2 is a big deal. If you are trying to save money, that $2 can be very important to you.