At my credit union, I can get free bill paying, where they mail a check to whoever I designate. But if I want an electronic transfer, I’m charged $20.
Does it really cost that much more to move money electronically? I would think the labor of printing a check, sticking it in an envelope, and stamping it would cost far more than a few mouse clicks and keystrokes.
What am I missing? Do they charge that much because they can? Or is there another reason?
The labor of printing & mailing a check is less than you think.
There are lots of methods for printing a check right within the envelope, so no labor involved in that. Or there are automatic inserting machines. It’s probably not stamped, but mailed with a bulk indicia pre-printed on the envelope. You can purchase mailing systems that do all of this automatically; just feed them a file of checks-to-write info and the completed mailers come out the other end.
But on an electronic transfer, every bank in between takes a cut – those fees add up. A credit union probably has a correspondent relationship with a major bank, then they send it to the Federal Reserve, then to the recipients’ bank (and thru another correspondent bank if the recipients bank happens to be a small local bank). Note that in Europe, the banking system is set up much differently. It’s designed to encourage electronic transfers rather than transporting, depositing, & returning physical checks. So electronic transfers are much cheaper, and are commonly used for things that we write & mail checks for in the USA.
If the middle men are so expensive, then why can Paypal do an electronic transfer out of my bank account at much less than $20 for me?
I second what was said about direct transfers in Europe. It’s the absolute standard for sending money domestically, and recent EU legislation mandates that the banks charge the same amount for intra-EU transactions and for domestic ones - essentially cutting the intra-EU fees to zero since most banks will do domestic transfers for free. Physical checks have become nearly obsolete since the abolition of the once popular eurocheque system a few years ago - and even eurocheques were used primarily for shopping or withdrawing money from another bank than the one you had your account with. Sending money to absent persons has been done by direct transfer for decades - formerly by filling out the appropriate form and dropping it in a mailbox in the bank, nowadays mostly online.
I guess the reason for this is that the banking systems in European countries are more centralized. There are strong central banks on the national level, providing clearing services for transactions between the various banks. The American system of regional Federal Reserve Banks involves more middlemen.
And following on from that, my bank allows me to make electronic transfers such as bill payments without charge within the UK. The money takes 3 days to reach the payee.
I’ve never needed a same day transfer but if I did there would be a fee. I don’t know how much my bank charges for this service but the industry range is between $30 and $100. The actual cost to the bank of providing a same day transfer is about $6.
A little more on UK same day transfers, also known as CHAPS (Clearing House Automated Payments System). From here:
This probably explains why the site lists a couple of banks which make no charge for a CHAPS transfer.
Citibank offers both services (mail a check and EFT) for free on all their checking accounts.
This could possibly be a confusion of terminology. My bank will do electronic checks for free, or nearly free (as well as other types of electronic transfers, such as credit card and debit card transactions and ATM withdrawals). I can also do transfers within the bank into other accounts. However, if I want a wire transfer into a numbered account at some other bank, that’s going to cost me $20-$30. Just a WAG but one might go through ACH and the other all the way through SWIFT.
It’s rare that my job actually qualifies me to post anything on SDMBs so forgive me for gratuitously adding extra info that you probably don’t care about anyway…
Bill payments will soon happen in real time in the UK. The official date is Nov 2007 but personally i don’t think it will be quite that soon.
It’s still to be determined how each bank will use the new system, but i suspect that they won’t charge for this service and as such three day bill payments and paying for same day transfers will become a thing of the past.
http://www.fastpayments.co.uk/?gclid=CPX5jrTmgIkCFRkcEAodTjLV_g
I like my bank but they have a similar practice that boggle my mind. I have a Visa Check Card for my checking account. If I use it for POS purchases I generally can use it either as a credit card where I need to sign a slip or as a debit card where I just enter my PIN . Used as a credit card it is free. Used as a debit card I get charged $0.75.
Silly huh?
I know that on credit card charges, the merchant pays a fee. Is the same true fo debit card purchases? Could that be the difference?
I hadn’t thought about all the “middlemen” but why should that even matter? I pay my electric bill by permitting the company to yank the amount I owe directly out of my checking account - how does that differ from me going to my credit union and asking them to transfer the money to the electric company’s account?
I have no problem with fees being assessed for certain services - after all, the financial institutions are businesses and as such, they need to make a profit, but some fees seem excessive for the amount of effort they require. You’d think they’d want to encourage electronic transactions as much as possible. But what do I know - I’m an engineer…
groman has it right. Go back to your CU and have them explain the difference between a ETF and a wire. At my CU, the ETF is free but it takes 2 or 3 days to transfer the funds. If you need the money transfered right away, you use a wire and pay for it.
For routine bill paying, ETF is fine.
It’s rare to encounter such modesty on these boards. 
I didn’t know and I do care.
Huh… that actually makes sense. Thanks.
Bingo.
PIN-based debit card transactions cost you what your bank charges.
VISA/etc-processed credit/debit card transactions cost the merchant about 35 cents plus 2-3% of the transaction total.
Your credit card may charge you per transaction, but I usually only see that in cases of “cash advance” style transactions.