This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Wednesday, May 14, 2008

How do you pay YOUR pals?

Posted by Matt

Have you ever made a purchase on eBay? If so, you probably paid for it via PayPal, right? Paypal is a company whose website allows its users to transfer money to each other electronically. I've had an account with PayPal since 2001, but only used it a handful of times, partially due to the limitation of only being able to send money to other PayPal account holders.

Whenever I need to send someone money these days, I can just log into my bank's website and have the bank mail them a check. Easy, right? I was also a recipient of these types of payments when our previous renters added us as a payee in their bank's online bill pay system and then set up a recurring monthly payment. I appreciated the regular payments, but when we got our new renters this year, I thought, "there must be some way to automate this even further." I like to think of myself as efficient; some readers will call me too lazy to even cash a check...it's all the same to me.

Anyway, I wanted to share what I learned. My bank offers an option called "Bank by Mail" and here's how it works:

Our renters added us as a payee in their bank's online bill pay system. For the payee address, they listed my bank's bank-by-mail address (a PO box). They then added our bank account number as the account number for the payee and set up a recurring monthly payment. Each month on a set day, their bank prints and mails a check to my bank. My bank then processes the check and deposits it into my account. (My guess is that banks will eventually set something up to replace the snail mail/paper check part of the process with an Internet transaction of some sort. My bank has gotten as far as allowing me to transfer electronically to other individuals within the same bank already.)

The point of all this is that, after the initial setup, the transfer is completely automatic from the perspective of the sender and recipient. Fantastic as this is, I've only used bank-by-mail in the situation described above, so far. I wasn't too paranoid about giving out my checking account number to our renters, given that I'd already elected to trust them with a house worth over 100 times what I have in that account, but I don't want to share my account numbers with just anyone.

Time will tell whether I find other uses for the system, but I love what it is doing for me so far!

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