Happy Near Year all. I was going to post this in Swapping and Selling, but, looks like this kind of post is not allowed there, so thought this would be the best place for it.
People have various opinions on Paypal, their political activism, their taking of fees, etc. Same goes for Venmo. Some like the convenience, some like the recourse and it does have it's advantages. However, I wonder how many people know about other electronic methods to pay for items that are offered for sale here? In this post I'd like to explore a couple.
Zelle
Zelle is a bank to bank payment method that takes money from your account and directly transfers it to another person. Zelle uses ACH (automated clearing house) technology. Unlike normal ACH payments, and like paypal, Zelle acts as the "float" to give you your money immediately rather than wait for it to clear (keep this in mind for the next option). According to Zelle's website, 97% of banks use Zelle, and even if your bank doesn't, there is a third party app you can download to allow you to use it with your bank or credit union. If your bank does offer Zelle, it is likely sitting inside your online account waiting to be activated. I just used it last night for a person here who didn't know about Zelle. He found his bank offered it, he activated it and sent me the money for an item in minutes.
Pros:
1) Zelle is free. Member banks do not impose fees on Zelle transactions.
2) Zelle is fast and easy, the money is in your account in minutes
3) Registration is through your phone or email. You can also send a Zelle generated QR code to the person you want to exchange money with. Zelle shields your account number from the person on the other side of the transaction so all they see if your name.
4) No 1099 events, it is up to the sender or receiver to accurately report their tax burden based on the circumstance
Cons:
1) Like taking money out of your account and handing it to someone, there is no recourse. No buyer protection, no cancellations, once initiated, it's done. You need to be very sure of who you are sending money to. I like to do a "test" transaction by sending or receiving a dollar to make sure everything it right. If it is, the balance can then be remitted
2) There is a daily limit imposed by your bank. It varies between $2000-$3500. If it's a big purchase, it might take a few days to complete the process
Summary: Zelle is a quick, easy and free service to allow people to instantly send money to people they trust using the ACH network
FedNow
Fednow is a new bank to bank payment method that is not yet live but will be available the middle of this year. Fednow is a payment service that is being developed by the United States Federal Reserve to allow member banks, AND THEIR CUSTOMERS to send cash payments to anyone in the Network. Unlike an ACH transaction which in actuality takes days to settle, FEDNOW payments are immediate, like less than 10 seconds immediate. It is my view that when this goes live, Paypal and Venmo will be out of business. The only advantage of using those services in a post Fednow world is buyer protection. I'm not sure how much protection actually exists, but I'm not a huge paypal fan/user, so your experience might vary. This service will be offered by the Federal Reserve to member banks. I expect that there will be development on the member banks side to allow people to sign up and use the service, but it is going to be huge. You can read more about it here
Pros
1) Developed and backed by the Federal Reserve, the Central Bank of the United States
2) Instant settlement of funds, <10 seconds
3) Free service with no fees incurred to buyer or seller
4) No 1099 events, it is up to the sender or receiver to accurately report their tax burden based on the circumstance
Cons
1) Like Zelle, there is no recourse. Once the money is sent, it is gone from your account, so you need to be very sure of who you are sending it to
2) Not yet live, but is slated for mid 2023
Summary: Fednow will be a quick, easy and free service sponsored by the Federal Reserve to it's member banks which will allow rapid transfer of funds and instant settlement.
Now that Congress has tightened the reins on buying and selling reporting of online transactions, these services do provide real advantages to their users by keeping you out of 1099 purgatory for daring to reimburse Aunt Mabel for your share of the pizza at the family picnic. I thought the members here might enjoy knowing about these services if they didn't already. Additionally, at least in my neighborhood, theives have been breaking into the USPS outdoor mailboxes, harvesting checks, altering them and cashing them. So, sending payment via old school paper check is a risky affair. If you still pay like this, please go inside the USPS Post Office in your town and drop the letter there. This is a big problem across America. Using either of the services above can protect you from that kind of graft and corruption.
Pete