Text me a dollar! The facts on P2P money transfers

P2P payments can be sent by email, text or by bumping smartphones.Ever wish you could pay the babysitter by tapping a screen, or reimburse your roommate for utilities without writing a check?

Peer-to-Peer (P2P) payment transferring allows you to send money to another person’s bank account by text, email, or even bumping smartphones.

Your bank may offer this service (Bank of America and Wells Fargo do, for example), as do a handful of third-party websites and apps, including PayPal, Popmoney, and Venmo.

As easy and convenient as P2P payments are, there are a few details to consider before choosing a provider:

•   Banks versus third parties: Your bank may offer a P2P service connected to your checking or savings account, or you can choose a third-party service, such as PayPal, Popmoney, Venmo, Dwolla or Amazon WebPay. One advantage of going through your bank is that you don’t have to give your account information to a third party.

•   Funding and payment: Some services require linking to a bank account or credit card, while others allow you to deposit, send and receive money by setting up a P2P account. Keep in mind that you’re only covered by whatever protections exist under your bank account, credit card or debit card—there are no special protections in place for P2P payments. Liability for fraudulent payments funded through a stolen phone or debit card connected to your bank account is $50 if you report it to your bank within 2 days, but can grow to $500 or more if you don’t. Credit cards offer even better protection, limiting liability to $50, which may be waived by the card issuer. Funding payments with money deposited in a P2P account may offer no protection, and there’s no limit to the amount you could lose.

•   Security: P2P payments through your bank or financial institution have the advantage of not sharing any of your account information with a third party. Be wary of linking apps to social media—some providers offer the option of posting to Facebook or Twitter when you make a transfer.

•   Fees: Watch out for service charges and transaction fees. (Ex. $1 per transaction, or a 3 percent fee for funds accessed through credit cards).

•   Limits: If you’re looking to transfer large amounts of money ($1,000 per month or more), find out first if the service imposes limits on the amount you can transfer or receive.

Have you used a P2P service? Let us know your experience in the comments!

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