The coronavirus pandemic has hit the US economy hard, with many companies transitioning to remote work mode, which hasn’t really changed the way paychecks and freelancer fees are dispensed. In cases where work relationships were legally formalized, even before the lockdown measures were introduced, cashless transfer was used 99% of the time. What financial tools do American employers and employees use most often?
If we’re talking about paychecks, freelancer fees and other kinds of remuneration for services, the first on the list is the ACH (automated clearing house), governed by its respective association. With its help people can, among other things, place direct deposits, pay taxes and get tax returns as well as pay for goods and services. The distinctive feature of this system is that it collects transactions during the day, forming batches, and then sends them out in bulk to banks for processing. This approach allows reducing the price of each transaction to a minimum (just a few cents per a few thousand dollars), but the speed of transfer leaves much to be desired.
The world of electronic payments in the US is hard to imagine without PayPal — the largest debit electronic payment system in the world that operates in over 200 countries (however, not all of these countries get to enjoy 100% of its features) and supports 25 currencies. In the US, PayPal is not a bank from a legal standpoint, the system is merely licensed to provide money transfer services as a financial organization. If domestic financial transactions within the US is what you’re after, PayPal is arguably the best possible tool for the job when it comes to speed (instant within the system, up to 5 days for bank card transfers), fee schedule (free transfers within the system and from 2.5 to 3.5% using a bank card).
Another low-fee service is Transferwise. It has open bank accounts all over the world, and its working principle is fairly simple: when a transfer is made, the system doesn’t make a transaction in the true sense of the word, but an order to pay the recipient from the system’s bank account in their state or country. Such a system enables much faster transactions than simple banking tools. Transaction speed in this case can take from 2 minutes to 3-4 days. However, it’s only fair to mention that Transferwise is much more often used for international transfers (owing to its competitive fee schedule and transaction speed) rather than domestic ones.
Another notable service, this time MasterCard’s ePayService, provides debit cards that stand out from the rest of the banking product market with their ample withdrawal limits ($10,000 a day and $300,000 a month) and low fees (about $1 per withdrawal). Naturally, it gained widespread popularity among freelancers from the US and the rest of the world alike, thanks to the option of withdrawing your hard-earned money from any ATM. Domestic transfer fees vary from 0 to 3%. However, the system has a minimum withdrawal fee that can reach up to $50. With that said, an ePayService card can be integrated with PayPal, a feature that is much higher on the priority list than low fees for millions of people both in America and the rest of the world.
Speaking of money transfers in the US, it’s important to mention Western Union as one of the pioneers of the industry that was among the first to break into the realm of international money transfers. Its business strategy is based on reaching out to the client as close as possible. Currently the company operates in over 200 countries and has over 550,000 offices, most of which is located within the US. The company offers more than just their offline service, with a Western Union online platform that lets you send money to a bank account, wallet or a mobile app instantly. The only significant downside to Western Union compared to its competition is fee structure, however, considering the quality of their service, the price is well-justified.
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