New ways to pay back friends and family
When Victoria Scipione has to pay back friends after a weekend getaway, she pulls out her phone and uses the Venmo app. Since it's linked to her bank account, she can quickly reimburse them for anything from dinner to Uber. "I'm extremely guilty of not always carrying around cash, and when I go out to dinner with friends we usually split the bill – that's when Venmo comes in handy," says Scipione, 23, a communications coordinator in New Jersey.
Venmo is one of the many new tools that make it easier than ever to reimburse friends and family. Choosing the right one for you often comes down to personal preference and needs – whether you're moving funds domestically or overseas and your reason for sharing money in the first place.
Scipione says she's drawn to Venmo largely because all her friends have the app, too. "When I think of PayPal, I think of my parents," she says. Her generation, she adds, tends to prefer the social aspect of Venmo, which makes it easy for users to send each other friendly notes about payments, almost like texting. (Venmo is part of PayPal and charges a 3 percent processing fee per credit card and some debit card payments; receiving the funds is free.)
PayPal is also offering a new-and-improved service, called PayPal.Me, which launched in September. Users can create a personalized link they can share with others to collect payments. Sending money to friends and family within the U.S. is free if it's done using a PayPal balance or bank account. If it's done using a debit or credit card, there is a fee of 2.9 percent plus $0.30, paid by either the sender or recipient.
"People were looking for a quick and easy way to collect money for group payments," says Meron Colbeci, senior director for global consumer product management at PayPal. "People find collecting money to be very awkward, and by giving a link right there in the email or text message, it hopefully reduces that awkwardness," he adds. A PayPal Money Habits Study of 4,000 consumers released earlier this year found that, on average, adults owe friends almost $450, but many people said they were afraid to ask for reimbursement because they felt uncomfortable doing so.
Because of the trend toward digital payments and away from cash, the need for easy exchanges between friends is growing, Colbeci says. "Down the line, cash will be a very small portion of the overall wallet," he adds.
In September, Google announced the Google Wallet app, which allows users to send money for free to anyone within the U.S. using an email address. While Google is rolling out different features, the app is currently available on Google Play and the App Store.
Blended families exchanging child support payments often have specific needs when it comes to money, and that's where the payment platform SupportPay can help. Founder Sheri Atwood says that as the child of divorced parents and who is now a single mom, she saw the need for making easier payments. "My parents constantly fought, and it seemed like everything they cared about was about money," she says. She was determined to have a more amicable divorce, but she still found it hard to track the multiple payments and expenses shared between her and her ex-husband. "I was a single mom and now a debt collector," she says – and that latter role is not one she wanted.
SupportPay, which is currently used by 30,000 parents, keeps a record of support agreements as well as payments and receipts. "It's like an expenses management system," she says. It also assures the parent paying child support that the money goes toward the child's expenses and not the other parent's lifestyle. SupportPay, which has a free version as well as a premium version that is $19.99 a month, also handles notifications and billing, so divorcees don't have to make requests of their exes.
For those exchanging money with people overseas, TransferWise aims to reduce costs associated with bank exchange rates. "Twenty percent of people in the U.S. will need to send money abroad at some point in the year, whether they're paying friends or family abroad or booking travel," says Joe Cross, U.S. general manager of TransferWise. "It's incredibly expensive and hard. We're trying to do what Skype did for international calling," he adds, which is to keep it simple and cheap.
TransferWise works by finding a counterpart in Europe, for example, who wants to send money to the U.S, so the dollars go to that recipient and the money stays in the country of origin. That way, paying exchange rates can be avoided. After the launch in the U.S. about a year ago, customers have already used TransferWise to transact around $4 billion. The company charges a small fee, typically 1 percent, to handle the transaction. "We believe it should be as close to free as possible," Cross says.
Banks are also joining the friend repayment party: Chase launched QuickPay in 2009, making it one of the first banks to launch its own "person to person" payment service, according to company spokeswoman Lauren Francis. Customers can access QuickPay through Chase apps or the website, and they made 30 million transactions on mobile devices in 2014, an 80 percent increase from 2013.
After comparing the perks and fees of each tool, you can pick the one that makes the most sense for you – and reimburse your friends for that fun night out.
Copyright 2015 U.S. News & World Report
RELATED: Click through to read the 10 steps to upgrade your financial life