The Mystery Of Electronic Transfers

October 8, 2011 6:48 PM

Can you electronically transfer money from one US bank account to another?

This question made me wonder, in the US can you electronically send a payment to any given bank and account number?

Here in Australia, you can send anyone you like a sum of money, using their bank number and account number, directly from online banking. It doesn't have to be the same bank. They can see the funds the next day. I understand most Western countries have a similar service.

Is this service not generally offered in the US? If not, what are the factors behind this? If so, why don't people use it to pay their rent?

posted by dave99 to work & money (25 answers total)

As a recent arrival to Melbourne from Canada, everyone asks me the same thing (uh, for Canada). Short answer is that it's possible, but not done as frequently as in Australia. In Canada, most of my clients pay by PayPal or cheque, I paid my rent by cheque and I paid my utility bills online. Most workplaces will deposit money directly into your account, but for person-to-person transfers, cheques are still standard. I don't know why, since I have used the Interac-transfer-by-email system quite a few times successfully.
posted by OLechat at 6:51 PM on October 8, 2011

Yes, you can, but the rules are made up by individual banks. I electronically transfer money between my ING savings account and my Bank of America checking account very often, and occasionally transfer from my Bank of America account to other people's Bank of America accounts. The B. of A. transfers go through immediately and the ING ones take a couple of days. I don't know how other banks do it.
posted by oinopaponton at 7:04 PM on October 8, 2011

Yes, it is generally available to holders of checking or savings accounts in US banks. It requires the account and routing number of both accounts and generally can only be initiated by the party whose account the money will be taken from. I know several people who send their child support payments by automatic electronic payment from their checking account to the child's other parent's account. I had a tenant who paid her rent this way.

I was somewhat reluctant to allow my tenant to pay her rent this way because in order for her to set up the transfer, I had to give her the routing number and account number (and financial institution information) for the account she would be transferring money into. That meant she could have used those numbers to take money out of that account. I imagine this is why more people don't so this--the leap of faith of handing over your information to another party.
posted by crush-onastick at 7:05 PM on October 8, 2011 [1 favorite]

I also transfer money between my various U.S. banks and credit unions this way, all the time.
posted by crush-onastick at 7:06 PM on October 8, 2011

In my own experience (as a U.S. person) such electronic funds transfers are generally done in one of the following ways:

1. As a means for paying a corporate entity (utility provider, charitable organization, etc.). This is typically done by providing my bank's routing number and my account number to said organization, and they will debit the appropriate amount on the specified date (one-time or recurring). The risk here is that they could make a mistake and withdraw more than they're supposed to, or they could overdraw my account if there are insufficient funds present. The transfer is always initiated ("pulled") from the recipient, rather than pushed by the payer.

2. As a means for transferring money between two separate accounts that I own. This is typically done by providing the routing and account number of account #2 to bank #1. Then bank #1 will make a tiny verification deposit (a random amount less than $1) into account #2, the amount of which I must then report back to bank #1 to verify that I own account #2. After this, I can make electronic deposits or withdrawals from account #1 to account #2.

I have never held a bank account in the U.S. which offered a feature of transferring funds directly to someone else using their routing & account number. Within the past couple of years, many banks have begun to offer person-to-person electronic transfers, but they are typically processed through a PayPal-like intermediary where both parties have to provide their routing & account info to the intermediary, rather than to each other directly. If I were to go up to my landlord or a friend to whom I owed money and ask for their routing & account numbers, they would be incredibly skeptical of my motives.
posted by Nothlit at 7:17 PM on October 8, 2011 [1 favorite]

I have in the past transferred money from my own Wells Fargo bank account to my sister's Wells Fargo account, using their online banking feature. It didn't require any special verification, though this is likely because it was the same bank.

Just last week I opened a checking account at a credit union, and I'm waiting for all of the paperwork to arrive in the mail. I hope that transferring over the funds from my Wells Fargo account will be as easy as just entering the new account info...but I have a hunch that it won't because Wells won't want to make it that easy for me to quit them.
posted by erstwhile at 7:29 PM on October 8, 2011

Taking money out of someone else's account, knowing their BSB (routing number) and account number is about as difficult as reading their email, knowing their email address. It doesn't make the hack much easier. Australian banks use a third number (or alphanumeric string), the customer ID, and to do anything with an account, it is that number, along with the password, that you need to know.

PayPal is less secure, since the account code and the access ID are the same.

That said, normal business practice in Australia is to open accounts for the purpose of customers paying invoices into them, ie an "income" account, from which money is funnelled into the business's "working" account, tax account, etc. Since money can come in from anywhere but is intended to only go out to one or two places, it's easier to detect any tampering.

As a business practice it beats the hell out of cheques. I get a couple cheques a month and it's a hassle to bank them. Same with cash. EFTPOS and direct deposit greatly simplify bookkeeping.
posted by aeschenkarnos at 7:30 PM on October 8, 2011 [1 favorite]

My bank (Bank of America) allows me to transfer funds domestically to anyone if I know their routing and account numbers. I must also know their name and address and type of account. It is faster (same day) for transferring within my bank as opposed to another bank (notable exception, Wells Fargo has an agreement with BofA for transfers that will I can only send money to them as a "within the bank" transfer). The person I send money to would need to initiate something at their bank to send me money. It is as safe as sending a check through the mall but rarely used except between people who trust each other (sending $ to kids at university, repaying friends/family loans etc).

I was invited to be in a test BofA was setting up where they were going to allow mobile transfers using a phone number or email but I didn't have anyone to send money to at the time. The big mega banks in the US are all working on "PayPal killers" that would ideally be better accepted by the public than the routing number/account number method and based on the megabank or visa/mastercard/amex instead of those fucks at PayPal. Of course, the banks will charge a fee for this. They might start out making it free to get more people to get comfortable with it, but then attach a fee when it becomes a daily thing like using a debit card.
posted by birdherder at 7:54 PM on October 8, 2011

I'm glad you asked this, dave99, because I was similarly perplexed. As an Aussie who pays everything online - rent, pay-tv (cable), phone, electricity, gas, new tyres, even repaying loans from friends - I couldn't understand why it's relatively rare in the US.

I was somewhat reluctant to allow my tenant to pay her rent this way because in order for her to set up the transfer, I had to give her the routing number and account number (and financial institution information) for the account she would be transferring money into. That meant she could have used those numbers to take money out of that account.

posted by crush-onastick

Don't you require passwords to login to a US bank account online, to withdraw/transfer cash out? Or an authorised signature (and perhaps relevant paperwork) if doing it over the counter in a bank branch? This is what I don't understand. Here, we hand out BSB (bank, state, branch) numbers and account numbers quite freely, because without the passwords or authorised signatures, you can't make a withdrawal from the account, but anyone can deposit into the account.

(And some may argue that it isn't safe, but I've been doing it for over a decade and have yet to lose one red cent to a hacker or scammer or thief. Perhaps that's more due to appropriately weird passwords than anything else...)
posted by malibustacey9999 at 9:34 PM on October 8, 2011

Yes, but it costs a shit ton of money. When my parents had to rush me some cash, it was a 30$ flat fee plus a percentage of the amount transferred.

Even within the same bank there is still a fee, which is fucking stupid.

It's sadly, easier and cheaper to pay via paypal if it's just to a friend. Or if it's to people who don't accept e-payments at all (or, you know, parents who haven't embraced e-everything) to send a check.

It's ridiculous and baffling and I hate it.
posted by misanthropicsarah at 11:05 PM on October 8, 2011

To clarify some more: I am easily able to transfer from my TD account to ING, or vice versa. And I can pay bills online no problem. But it's transferring money to another person that's the problem. Even if I had accounts at two different (non-ING) banks, it would be a hassle. I'd have to write myself checks. Or pay a huge fee to e-transfer it to myself.

Because US banks are fucking assholes, that's why.
posted by misanthropicsarah at 11:08 PM on October 8, 2011

Yes, but it costs a shit ton of money
pay a huge fee to e-transfer it to myself

This is what I don't get. The banks charge a lot for electronic transfers which are cheap to process, yet offer free checks which are expensive to process. Why is this? If anyone working in a US bank can shed some light it would be great.
posted by dave99 at 11:18 PM on October 8, 2011

My bank (Bank of America) allows me to transfer funds domestically to anyone if I know their routing and account numbers...It is as safe as sending a check through the mall but rarely used except between people who trust each other.

If I were to go up to my landlord or a friend to whom I owed money and ask for their routing & account numbers, they would be incredibly skeptical of my motives.

Why?

Is it really that easy to get access to a stranger's account just with the routing number and account number?
posted by dave99 at 11:25 PM on October 8, 2011

Aussie here, new to the US. I was the one who posted the rent payment question. Having spent four months trying to figure this out, I can confidently say that Americans don't have access to the kind of banking convenience I have experienced in Australia, NZ, Japan, Switzerland and the UK. There is no system common to all banks which allows easy, free, fast transfers between accounts at different banks. The only common option is a wire transfer which carries high fees at each end (like $15 or $20 charged by EACH BANK) and takes up to five business days for funds to appear. After some digging, I was excited to find that my bank offered an electronic bill pay feature. But to make the payment, the bank debits my account, prints a check and mails it to the payee. This seemed ludicrous to me but everyone here accepts it as normal. I scoffed when my bank offered me a checkbook (I haven't had once since I was a teenager) but it's absolutely necessary. Some banks have different kinds of services. Chase has a PayPal-like service that only works if the person making or requesting the payment has a Chase account. But generally, yeah, banking here is pretty much like banking used to be for the rest of us in the early 90s. You can see why services like PayPal are so widely used here - they really need it.
posted by yogalemon at 11:33 PM on October 8, 2011 [2 favorites]

The situation is generally absurd in my experience compared to the UK. I have accounts with two major US banks. In one direction, transferring money between my accounts is one of the main options offered on the main menu screen, and takes a few days (as it does in the UK) but is free and straightforward. In the other direction, it is not mentioned anywhere on the bank's website, and when I called into the bank to ask how to do it, there was utter confusion, much consulting of computers, a call to head office, and a promise to get back to me (which never happened).
posted by oliverburkeman at 1:48 AM on October 9, 2011

Yes, you can.
posted by dougrayrankin at 3:29 AM on October 9, 2011

You can, but our system is different.

In Australia, I believe you use a BSB number, which is a six-digit number that identifies the bank, state, and specific branch.

In the European Union and a few other countries, banks use IBAN and BIC. The IBAN identifies country, bank code, and account number. The BIC identifies similar information, but includes the city. The number of digits varies but is about 15-20 digits. There are over 40 different numbering schemes, so it's not completely standardized. I believe this system is still in flux, and might be replaced by SEPA?

In the US, we use Fedwire (which is related to our Federal Reserve), EFT (electronic funds transfer) and ACH (automated clearing house). Instead of an IBAN or BSB number, we have a routing number. The routing number identifies where the bank is, within the US. In the US, we are using EFT when we use our ATM card to make payments, and ACH is common when we have payroll checks automatically deposited.

Most (all?) banks worldwide use SWIFT for communications, and this is used if transferring money internationally.
posted by Houstonian at 5:01 AM on October 9, 2011

oliverburkeman, I used to have a contract with a company in the UK. They insisted that they needed a IBAN number to wire my money to my bank. My (US) bank could not provide it. We went round-and-round for a while, because the UK bank was used to working with banks that are part of IBAN, and American banks are used to the US system, so none of the first-line people could tell me what to do. What I learned was, the UK bank needed me to give them my US bank's SWIFT number, routing number, and account number. This worked.
posted by Houstonian at 5:08 AM on October 9, 2011

In Hong Kong, online, I can transfer to and from my own HSBC accounts and transfer money to other account holders as long as I have their account number. Just choose which personal account to deduct from and which account to transfer to. Confirm and go. For money transferred to another account holder, HSBC sends me a text message a fraction of a second after such a transaction has taken place telling me the who and how much. The text message "hides" some of the account details of the recipient.

Same goes for bank accounts with other retail banks with in Hong Kong. Online, HSBC has a drop-down menu with about 40 local retail banks, select a bank and enter an account number. Confirm and press go. Again, within a fraction of a second, HSBC texts me with a transfer notification. For transfers to non-HSBC there is a small charge and the actual transfer seems to take place the next banking day.

Plus, its easy-peasy to pay utilities online, too.
posted by Mister Bijou at 5:21 AM on October 9, 2011

The reason that people are wary about giving their personal routing and account numbers is because those are all someone would need to print up a check and steal some money. Yes, the owner of the account is ultimately protected because it won't be their signature on the check, but it is a hassle.

Answering the question, it depends on the bank. My bank's online banking system is pretty slick in that regard. If I want to send someone some money, I fill in the form giving all the information I know, and the website figures out how to send the money. If there is no electronic way of doing it, they print a check and send it out. The only downside is that it isn't terribly fast. If both sides of the transaction are not backlogged, I believe it can happen as fast as overnight, but that's rare in my experience.

As far as why it can't be fast also, I think that is mostly historical. The US banking regulations are pretty conservative and old-fashioned. The bank does all of its business, closes up for the day and has to balance out for the day. Then overnight, the processing is done to trade money back and forth, including processing checks. (That's how it is done logically- physically, I believe the processing is usually done the next day except for the really large branches and the Federal Reserve banks.)

Why is it hard to modernize? First, history. The US is pretty conservative about banking regulations, despite what it might seem like (and remembering that investment banking is different). Second, there are 7500 different banks in the US. If Wikipedia is to be believed, there are 55 in Australia. It's a problem of scale.
posted by gjc at 5:30 AM on October 9, 2011

We tried transferring a small amount of money (~$100) to a friend for some painting that he'd done for us and it took three days for the transaction to complete, even though we both have accounts in the same bank. The annoying thing is that they debited our account immediately but didn't credit his account for three days. Writing and depositing checks is just faster.
posted by octothorpe at 6:24 AM on October 9, 2011

My banks don't charge for the EFT or the ACH.

As for taking money out of the account, I did not mean my tenant could have accessed my online banking with my routing and account number, but that she could have taken money out of the account with my routing and account number. I haven't looked at any electronic pay by check services recently, but at the time, all that was required to pay by check electronically was the name of the account holder (which was on the lease) and the account and routing number (and financial institution name, which she needed to set up the transfers). Once she had that information, she could have used it to pay out of my account.

Of course, it would have been easy to trace and a crime and grounds for eviction, blah blah. But it is something that makes people uncomfortable.
posted by crush-onastick at 8:08 AM on October 9, 2011

Don't you require passwords to login to a US bank account online, to withdraw/transfer cash out?

Yes... but what's the Australian password scheme like? In the US, it may simply be a username (or account number) and password. In Germany - the only other system I have experience with, where direct transfers are common - there's the extra security of a variable transaction authentication number (TAN) above and beyond the account password/PIN. (I'm not sure whether there are legal differences that provide better insurance in the event of illegitimate access to an account, but I got the feeling that this was the case too.) I've often thought a system like that might make people feel safer with the whole electronic transfer thing, but I don't think there's any indication that US banks are considering it.

The reason that people are wary about giving their personal routing and account numbers is because those are all someone would need to print up a check and steal some money. Yes, the owner of the account is ultimately protected because it won't be their signature on the check, but it is a hassle

And of course, this may be more plausible in the US, where checks are still common. Here's an old AskMe question that covers some of the fraud scenarios that Americans are afraid of.
posted by ubersturm at 9:41 AM on October 9, 2011

The reason that people are wary about giving their personal routing and account numbers is because those are all someone would need to print up a check and steal some money.

But don't all cheques have this information printed on them anyway? So why are they safer?
posted by ComfySofa at 12:05 PM on October 9, 2011

I'm an american who was amazed when I moved to Australia and found out how easy banking could be and that I could throw away my checkbook! I think the reason bank transfers are more or less non-existent in the US is a legacy of banking legislation that until about 15 years ago prevented banks from operating interstate (this was to prevent the banking consolidation that occurred earlier in the 20th century). As a result, banks simply don't share readily compatible systems and protocols that allow for seamless transfer. Even though many US banks are once again becoming interstate/national, it seems like we still have a long way to go to get the kind of system standards you enjoy in Australia.
posted by amusebuche at 9:55 PM on October 9, 2011