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The term “online funds transfer” describes any one of many monetary exchanges or payments made through the Internet. Whenever one elects to pay a bill online, moves money from one online banking account to another, or pays for goods or services with electronic funds, an online funds transfer has occurred. Transferring funds online comes with a variety of benefits and risks.
An online funds transfer is sometimes also referred to as an electronic funds transfer, or an EFT. The distinguishing characteristic of the online or electronic funds transfer is that money is reallocated through a series of computer commands. The money at the core of any online funds transfer transaction is physically located in one place, but the benefit of an online transfer is that the money can be moved and manipulated through a computerized account from virtually anywhere. A bank patron need not visit a bank branch to make a deposit, or write and mail a check to pay for a bill, if the institutions participate in online funds transfer programs.
Most financial institutions around the world offer the option of Internet banking, which allows bank customers to log in to their accounts online. One of the benefits of using the Internet to manage banking accounts and other financial portfolios is the ability to transfer and move funds with little more than the click of a mouse. Most online banking programs not only allow customers to see their money, but also to interact with their money.
Online funds transfers are commonly used to transfer money from one bank account to another, for instance from savings to checking, or from a parent’s account to a child’s. They can be used to make online purchases, or to reinvest funds from one stock or bond portfolio into another. Once executed, fund transfers take immediate effect, although it can take several days for money to physically process from one account to another.
Internet-based transfers can also be used to transfer or receive money from a bank account to a third-party agency. Many governments have set up online fund transfer protocols for the payment and collection of taxes. Similarly, many utility providers and telecommunications companies allow — and often encourage — customers to pay their bills through electronic funds transfers.
Using an online funds transfer to pay bills has both benefits and risks. Payments made online can usually be set up as recurring, which means that customers do not usually have to remember to pay their bills. Online transfers also eliminate the need to mail paper bills, which many argue is a benefit for the environment. Once a creditor has been authorized to electronically remove funds from an account it can be difficult to dispute bills or amounts owed, however, and some online funds transfer users have reported problems getting the transfers to stop once services have been terminated, or once a customer has moved.
Security is also a concern for many people when considering whether to participate in online funds transfer activities. Banking regulations in most countries set strict safety regulations on all activities involving the electronic transfer of money to prevent unauthorized access and fraudulent transfers. Most programs are highly secure, and the banking industry has generally enjoyed great success with online funds transfer programs. As with any financial transaction, however, there is risk of loss or error. Even though using the Internet to manage various accounts is often simple, that simplicity does not remove the need to be vigilant and proactive about where money is and whether accounts are balancing properly.