28 year old's startup wants to completely kill credit cards

[Evo]

I am paying everything by bank transfer, not moving from the computer - everything done via internet. I pay 1 PLN for each transfer in Poland (that's about $.30) or nothing if the target account is in the same bank. As far as I can tell (and I just checked to be sure) charge doesn't depend on the amount transferred.

Charges in other banks in Poland are different, but not by much.

It gets more expensive if I am not using internet - whenever teller is involved it is 7 PLN (transfer to other bank, around $2) or 3 PLN (same bank, around $1).

Edit: oh, and the money rarely travels longer than several hours. It is a little bit complicated as it depends on the timing of "incoming and outcoming transfer sessions" of banks (when batches of transfers are sent/fetched to/from intermediate computers), but if I give instruction to transfer money before 12 a.m. it lands on the receiving account the same day always. And they plan to make it much faster, as there will be no sessions, but transfers will be done in the real time all day. At the moment transfers are immediate only in both accounts are in the same bank.

I make bank transfers all of the time and they are free if it's within the same bank and they are instantaneous. I haven't made a transfer to another bank in awhile but it was similar to your experience.

 

[rhody]

I make bank transfers all of the time and they are free if it's within the same bank and they are instantaneous. I haven't made a transfer to another bank in awhile but it was similar to your experience.

Evo, Borek,

Here is the difference in my case, the amount was over 10,000 US dollars, that is a whole new ball game with a whole new set of rules. For relatively small transactions of a couple of thousands of dollars, I would imagine that the two day rule would not apply. Evo says that is not true. I didn't dig deep into their policies and have used PayPal in the past with no problems, I have sold items using PayPal and had to pay the 2.9 % fee, which obviously I would have preferred not to do. I say, let dwolla evolve and grow and see if in fact in a year or two their transaction fees remain at $ 2.50, and if merchants on a wide scale embrace them.

Rhody...

 

[Evo]

Evo, Borek,

Here is the difference in my case, the amount was over 10,000 US dollars, that is a whole new ball game with a whole new set of rules. For relatively small transactions of a couple of thousands of dollars, I would imagine that the two day rule would not apply. Evo says that is not true.

No, I said within the same bank it's instantaneous, and that I hadn't made an outside transfer in awhile, but it was similar to Borek's examples.

There was one time that a bank transfer to an out of state bank disappeared. They put a tracer on it, so it was about a week before they gave up and deposited the funds into my friend's account, I don't know if they ever found the money, but I did not have to fight with them, they automatically covered it.

 

[DoggerDan]

My landlord requires payment in one of three ways:

1. Cashier's/counter check. My cost: $3/month. My risk: Negligible.

2. Online via credit card: My cost: $10/month. My risk: Low.

3. Using their system, which gives them unlimited access to either my checking or savings accout: My cost: $0/month. My risk: Ridiculously unacceptable.

I've approached them repeatedly about getting with the program and implementing a PayPal system, but they refuse, claiming it's "expensive" and "too risky for their tenants." Clearly, they haven't actually looked into PayPal, as it's the least risky option, and the same cost as getting a counter check from my bank.

 

[rhody]

No, *when* I make a purchase, I give paypal the exact amount of my purchase and the funds are made available immediately. I don't have to send money to Paypal to hold for me incase I wish to make a purchase in the future.

So what is the difference then 2.9% charged (with PayPal) instantly or sitting in limbo for 2 days and making interest in those two days ? The net effect is the same, dwolla and PayPal make their fees just in a different way, and with dwolla you won't see money deposited to you for two days. I am pretty sure if money is in your PayPal account and you want to transfer it to your bank account they charge you another transaction fee as well.

Rhody...

 

[Evo]

So what is the difference then 2.9% charged (with PayPal) instantly or sitting in limbo for 2 days and making interest in those two days ? The net effect is the same, dwolla and PayPal make their fees just in a different way, and with dwolla you won't see money deposited to you for two days. I am pretty sure if money is in your PayPal account and you want to transfer it to your bank account they charge you another transaction fee as well.

Rhody...

Using PayPal doesn't cost me anything. Did you anger someone?

 

[rhody]

Using PayPal doesn't cost me anything. Did you anger someone?

Cute, no, every bank has it's own rules and my bank imposes fees on PayPal in order to transfer money to/from my account. I will have to double check on all this and report back with facts because I am winging it at the moment. I have two accounts, one at a credit union and another at a bank, and each has it's own rules. Keeping the rules straight is never easy, is it ? This is a useful exercise and may help others assess their financial situations as well. Thanks...

Rhody...

 

[PAllen]

Note there is a big difference between what banks classify (in the US at least) as "electronic transfers" versus wires. In many (most? ; all that I've done) the former are free (including, of course, all those for bill paying that I've ever done). The times for EFTs to go through, are wildly varying depending on the particular institutions and account types involved. I've seen minutes before I can act on the money all the way up to 5 business days. But never have I paid 1 cent for EFTs. The key thing for EFTs that a channel has to be set up beforehand (at least if different institutions are involved), and banks accept less risk, and you are at more risk if your computeR is hacked. With wires, no prior channels is needed, the amounts are unlimited, the bank accepts more risk, national boundaries and currencies can be crossed (for yet more money) and you pay through the nose. I would think $27.50 is a wire not an EFT. Having done both domestic and foreign wires recently, my experience is domestic wires are in $20 range, and international wires are in the $40 range.

If anyone wants, I could get more details on this, as my wife used to program for the EFT and bank wire facilities.

 

[Evo]

Cute, no, every bank has it's own rules and my bank imposes fees on PayPal in order to transfer money to/from my account. I will have to double check on all this and report back with facts because I am winging it at the moment. I have two accounts, one at a credit union and another at a bank, and each has it's own rules. Keeping the rules straight is never easy, is it ? This is a useful exercise and may help others assess their financial situations as well. Thanks...

Rhody...

I only use PayPal as part of the purchase or gift.

 

[Evo]

Note there is a big difference between what banks classify (in the US at least) as "electronic transfers" versus wires. In many (most? ; all that I've done) the former are free (including, of course, all those for bill paying that I've ever done). The times for EFTs to go through, are wildly varying depending on the particular institutions and account types involved. I've seen minutes before I can act on the money all the way up to 5 business days. But never have I paid 1 cent for EFTs. The key thing for EFTs that a channel has to be set up beforehand (at least if different institutions are involved), and banks accept less risk, and you are at more risk if your computeR is hacked. With wires, no prior channels is needed, the amounts are unlimited, the bank accepts more risk, national boundaries and currencies can be crossed (for yet more money) and you pay through the nose. I would think $27.50 is a wire not an EFT. Having done both domestic and foreign wires recently, my experience is domestic wires are in $20 range, and international wires are in the $40 range.

If anyone wants, I could get more details on this, as my wife used to program for the EFT and bank wire facilities.

This sounds right to me.

 

[rhody]

Note there is a big difference between what banks classify (in the US at least) as "electronic transfers" versus wires. In many (most? ; all that I've done) the former are free (including, of course, all those for bill paying that I've ever done). The times for EFTs to go through, are wildly varying depending on the particular institutions and account types involved. I've seen minutes before I can act on the money all the way up to 5 business days. But never have I paid 1 cent for EFTs. The key thing for EFTs that a channel has to be set up beforehand (at least if different institutions are involved), and banks accept less risk, and you are at more risk if your computeR is hacked. With wires, no prior channels is needed, the amounts are unlimited, the bank accepts more risk, national boundaries and currencies can be crossed (for yet more money) and you pay through the nose. I would think $27.50 is a wire not an EFT. Having done both domestic and foreign wires recently, my experience is domestic wires are in $20 range, and international wires are in the $40 range.

If anyone wants, I could get more details on this, as my wife used to program for the EFT and bank wire facilities.

Yes, PAllen it was a "wire" transfer and the two banks had to exchange secure certificates with the third party who I assume will record the money transfer. Three parties are actually involved. Like you said an EFT is not subject to the stringent rules that wire transfers are. A bank can easily absorb a one or two thousand dollar loss, but not hundreds of thousands or more. It makes sense. I could have had a bank check sent overnight Fedex Insured to me instead. I believe that would have cost me less, or have been paid by my realtor.

Rhody...

 

[Evo]

Yes, PAllen it was a "wire" transfer and the two banks had to exchange secure certificates with the third party who I assume will record the money transfer. Three parties are actually involved. Like you said an EFT is not subject to the stringent rules that wire transfers are. A bank can easily absorb a one or two thousand dollar loss, but not hundreds of thousands or more. It makes sense. I could have had a bank check sent overnight Fedex Insured to me instead. I believe that would have cost me less, or have been paid by my realtor.

Rhody...

I always did bank checks when I bought homes, costs $10, but it's not something you do everyday, putting things into perspective, paying ten times that wouldn't be an issue.

 

[turbo]

When my wife and I bought this property, we paid with a personal check. Same with the last two new vehicles that we bought (Subaru Forester and Honda Ridgeline). There is no good reason to allow banks to charge you for access to your own money. We haven't had any loans for over 20 years, and though we have bought some used vehicles during that time, those were all paid for in cash, as well.

Bank-credit is expensive. If you can afford to make the banks facilitate your transactions without paying them anything, go for it. Eventually, they will start trying to charge you other fees, and then you should move all your money to a credit union. If you have more money than can be insured by one credit union, move it to two or more credit unions!

 

[DoggerDan]

My landlord requires payment in one of three ways:

1. Cashier's/counter check. My cost: $3/month. My risk: Negligible.

2. Online via credit card: My cost: $10/month. My risk: Low.

3. Using their system, which gives them unlimited access to either my checking or savings accout: My cost: $0/month. My risk: Ridiculously unacceptable.

I've approached them repeatedly about getting with the program and implementing a PayPal system, but they refuse, claiming it's "expensive" and "too risky for their tenants." Clearly, they haven't actually looked into PayPal, as it's the least risky option, and the same cost as getting a counter check from my bank.

Dwolla's $0.25 per transaction puts it in the least costly option for those options with an acceptable level of risk. So, why not? Perhaps I'll forward my complex manager the Dwolla link and see if they'll bite this time.

 

[rhody]

When my wife and I bought this property, we paid with a personal check. Same with the last two new vehicles that we bought (Subaru Forester and Honda Ridgeline).

WHAT ! Personal check ! You do live out in the sticks, don't you Turbo. That won't fly around here. It must be nice to have such trusting businesses and realtors in your area.

Rhody... dumbfounded...

 

[turbo]

WHAT ! Personal check ! You do live out in the sticks, don't you Turbo. That won't fly around here. It must be nice to have such trusting businesses and realtors in your area.

Rhody... dumbfounded...

The realtor's representative squealed like a pig when I started writing out that check (outside the office, sitting on the front step), and my attorney ( a very nice lady maybe about 10 years younger than me) broke character and said "Shut up and take the check." He did.

She has been handling our legal affairs for over 20 years now. If you have a lawyer that you can trust, stick with him/her. I did IT work for her, setting up her office about 25 years ago, so we have a level of trust that you might not expect to get in a city.

 

[rhody]

The realtor's representative squealed like a pig when I started writing out that check (outside the office, sitting on the front step), and my attorney ( a very nice lady maybe about 10 years younger than me) broke character and said "Shut up and take the check." He did.

She has been handling our legal affairs for over 20 years now. If you have a lawyer that you can trust, stick with him/her. I did IT work for her, setting up her office about 25 years ago, so we have a level of trust that you might not expect to get in a city.

What you are saying if I understand correctly, is that your lawyer, you being the buyer convinced the seller's realtor to take your personal check for the purchase of the house, correct, and were satisfied once that check cleared ?

Rhody...

 

[turbo]

What you are saying if I understand correctly, is that your lawyer, you being the buyer convinced the seller's realtor to take your personal check for the purchase of the house, correct, and were satisfied once that check cleared ?

Rhody...

She told the real-estate agent to shut up and take a personal check. The agency could have paid for an Equifax evaluation of our account, but was apparently unwilling to do so. This was during the run-up to the real-estate boom, so properties were flying around like crazy. Luckily, we were able to sell our own place at the height of the market.

And no, I wouldn't have accepted a personal check from that couple. They lost the place in about 2 years, and it resold for a bit less than half of what they paid for it.

 

[Moonbear]

I haven't really gotten enough information about what this "new" idea is that explains why it's different than writing a check or using a debit card. I understand the credit card fee structure, and that this could save retailers money (and could potentially lower costs, or at least keep them from rising again, if enough people use it), but I'm not sure it's going to work long term. The main thing is their low fee structure might kill them before they get off the ground. You need to make money from providing a service. One of the things that inspires people to pay the fee for the service of using a credit card is that they usually come with fraud protection if someone steals your card or counterfeits one using your card number and goes on a spending spree. It doesn't sound like this new service offers that protection, which means they are one hacker and lawsuit away from bankruptcy. Personally, I would NEVER consider a transaction by cell phone to be a secure transaction (is it done over bluetooth?), and nothing I've read about this convinces me that they are secure.

I also can't really figure out how this is different from using a debit card or an electronic payment. My bank already let's me pay bills by electronic checking that costs me nothing extra (if the vendor won't accept an electronic check, then they cut a paper check...the only difference seems that this is more like the debit card in terms of immediately debiting my account, but even credit card transactions can take a day or two to process, so I'm not sure that's essential).

 

[PAllen]

I haven't really gotten enough information about what this "new" idea is that explains why it's different than writing a check or using a debit card. I understand the credit card fee structure, and that this could save retailers money (and could potentially lower costs, or at least keep them from rising again, if enough people use it), but I'm not sure it's going to work long term. The main thing is their low fee structure might kill them before they get off the ground. You need to make money from providing a service. One of the things that inspires people to pay the fee for the service of using a credit card is that they usually come with fraud protection if someone steals your card or counterfeits one using your card number and goes on a spending spree. It doesn't sound like this new service offers that protection, which means they are one hacker and lawsuit away from bankruptcy. Personally, I would NEVER consider a transaction by cell phone to be a secure transaction (is it done over bluetooth?), and nothing I've read about this convinces me that they are secure.

I also can't really figure out how this is different from using a debit card or an electronic payment. My bank already let's me pay bills by electronic checking that costs me nothing extra (if the vendor won't accept an electronic check, then they cut a paper check...the only difference seems that this is more like the debit card in terms of immediately debiting my account, but even credit card transactions can take a day or two to process, so I'm not sure that's essential).

A debit card is really different from a vendor's point of view - that is the whole point. Debit cards rip off the vendor a couple of percent of the purchase amount. EFT transactions (including all online bill paying) cost neither you nor the vendor anything.

 

[AlephZero]

No, *when* I make a purchase, I give paypal the exact amount of my purchase and the funds are made available immediately. I don't have to send money to Paypal to hold for me incase I wish to make a purchase in the future.

PayPal make their money by one of two ways. If the seller has a PayPal business account (or whatever they call them this week), they pay transaction commission and/or a monthly fee to run the account. If they don't have an account, PayPal holds the money for 2 or 3 days and earns short term interest on it before they pass it on to the seller.

But once Paypal have accepted the buyer's offer to pay, they guarantee to pay the seller even if the buyer then defaults on the payment. So the goods will probably be despatched immediately even if the money transfer takes a few days to complete.

If you regularly use Paypal both as a buyer and a seller (e.g. you are an EBay trader or you run your own e-business) then you can use a paypal account exactly the same way as a (non-interest-paying) bank account, and make "lump sum" payments and withdrawals to the account rather than separate transactions for each individual trade.

 

[AlephZero]

My landlord requires payment in one of three ways:

1. Cashier's/counter check. My cost: $3/month. My risk: Negligible.

2. Online via credit card: My cost: $10/month. My risk: Low.

3. Using their system, which gives them unlimited access to either my checking or savings accout: My cost: $0/month. My risk: Ridiculously unacceptable.

Clearly there are differences between countries here. In the UK, the risk to the customer from giving "unlimited access" by direct debit instruction is zero, because unlimited risk of fraud or error is carried by the bank, so that is no different from the "systemic" risk that the bank goes bust.

There are hardly any transactions done by cheque (check) any more in the UK. I haven't written a cheque for any payment for at least 15 years. I either use cash from an ATM (no withdrawal charges from ATMs at supermarkets, etc), a bank debit card, electronic banking over the web, or a credit card from another financial institution (not my bank).

The web banking is secured by a personal credit-card-sized device that generates a one-time password for each login. So even I can't even access my own account electronically, unless I physically have the security device with me.

The US banking system seems to be far more fragmented than the UK, where every retail bank is national, and most are international.

 

[Evo]

I remember when I lived in Texas and branch banking wasn't allowed. That meant that you could only do business at the location you opened your account, it didn't matter that the bank had a dozen locations, you couldn't go to them. It was the stupidest law I'd ever heard of.

 

[AlephZero]

I remember when I lived in Texas and branch banking wasn't allowed. That meant that you could only do business at the location you opened your account, it didn't matter that the bank had a dozen locations, you couldn't go to them.

My "branch" has been about 150 miles from where I live for more than 30 years now.

In fact I don't even know where it is physically any more. I got a letter years ago saying it had moved and its new address is just a Post Office Box number, not an real street name. (And the phone calls are always answered by nice people with Indian accents...)

 

[DaveC426913]

My "branch" has been about 150 miles from where I live for more than 30 years now.

In fact I don't even know where it is physically any more. I got a letter years ago saying it had moved and its new address is just a Post Office Box number, not an real street name. (And the phone calls are always answered by nice people with Indian accents...)

Y'know...



One day your money may have a hiccup. And you'll be on hold, asking those nice people with their accents where it's gone. Perhaps it's time to move your home branch to a slightly more bricks & mortar, flesh & blood management?

 

[Borek]

I haven't written a cheque for any payment for at least 15 years.

What is a "cheque"?

 

[leemadison11]

This is news to me and i am hoping to switch into Dwolla as soon i get other options. The benefit of this scheme is that my transaction is only being charged and that too at a minimal rate of $.25. Now let say i have to transfer $ 1000 to another account through PayPal, then it would mean that $30 plus extra, but if i do the same on Dwolla, it would be only $.25. So i am saving $30 or more per transaction. The revenue of Dwolla seems to be on number of transactions made and not on the amount per transaction.

 

[Evo]

This is news to me and i am hoping to switch into Dwolla as soon i get other options. The benefit of this scheme is that my transaction is only being charged and that too at a minimal rate of $.25. Now let say i have to transfer $ 1000 to another account through PayPal, then it would mean that $30 plus extra, but if i do the same on Dwolla, it would be only $.25. So i am saving $30 or more per transaction. The revenue of Dwolla seems to be on number of transactions made and not on the amount per transaction.

Get a bank account and transfer money for free, much quicker than dwolla, much safer than dwolla.

Did you read this?

The way it works is that you set up an account with them then transfer money from your bank to sit in your dwolla account, waiting for you to use it. Since it is a bank transfer

Why is my deposit taking so long to show up in my Dwolla Account?
Last Updated: Nov 08, 2011 01:41PM CST

It takes 2 - 4 business days to transfer funds from your bank account to your Dwolla Account or to withdraw funds out of Dwolla to your bank account. This process may take longer if the timeframe includes a weekend. Please note, due to varying bank processing timeframes, you will see the funds subtracted from your bank account prior to them posting to your Dwolla account.

http://help.dwolla.com/customer/por...king-so-long-to-show-up-in-my-dwolla-account-

Oh, and of course there will never be mistakes. Your money will never accidently get credited to someone else's account, or "lost", between your bank, dwolla, and the company due to receive the money.

 

[pmghss]

They all seem like a scam. A man in the middle who does nothing except accept money.

If it is so easy, and there are a lot of pay alternatives, then why can't everyone be there own man in the middle?

 

[turbo]

They all seem like a scam. A man in the middle who does nothing except accept money.

If it is so easy, and there are a lot of pay alternatives, then why can't everyone be there own man in the middle?

FDIC is one reason. You want your deposits to be insured in case the bank fails. It used to be that FDIC would only insure your deposits for up to $100K/person. That is doubled now, but that limitation could force you to use several banks/credit unions to avoid exceeding the limits on one or two accounts.