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I'm renting an apartment from an individual. The landlord and I discussed the possibility of paying rent electronically. My bank (BofA) has some kind of electronic payment option where I'd enter the payee's account number and use that instead of mailing the checks.

Are there any downsides to paying rent this way? Is that different, legally, from "wire transfers"? What if the payee (or the payer) makes a mistake in the account number, or the payee's account runs into problems?

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What country is this in? USA? That'll make a big difference to the rules and protections –  Gagravarr Aug 15 at 12:43
    
@Gagravarr "BofA" is a large US bank. –  200_success Aug 15 at 19:16
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I'm surprised anyone still makes large payments un-electronically. I'm from Melbourne, Australia and I've always paid rent electronically. I don't know anyone under 40 who owns a cheque book. Approx. 5% of my business clients still pay via cheque, but they're a dying breed. –  Simon Aug 16 at 13:07
    
@200_success "Bank of America operates [in the U.S.] and more than 40 other countries." -Wikipedia The US is probably the best guess, but hardly conclusive. –  Tim S. Aug 16 at 23:28

3 Answers 3

With BofA, you can just enter their address and it will mail them a check instead of needing to wire it to them. You don't need your landlords permission to do this (just let him know to expect the check in the mail). I did this for years, and other than the fact that the arrival date may vary by a day or two (presumably due to mail or processing delays), had no issues with it. It is a great way to make sure your rent is paid on time (if you've got till the 5th, just set it up for the 1st and you should be fine).

The same is true of most other banks who have online bill payment, with the main difference being the time variability of delivery. I've not come across any that charge for this. It even saves you the cost of a stamp, envelope, and check.

Update: There are also some marginal difference between banks about how records are kept and when the amount is deducted from your account. The records keeping probably works to your advantage if they ever claim you missed a payment (you have record it was sent, even if they never cash it). The variation in deduction from your account (i.e. when it is sent vs when it is cashed) could play out different ways and isn't anything that big to worry about.

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My bank also shows me a record of payments made, which is pretty handy if a landlord every loses a check or disputes payment. –  MrChrister Aug 15 at 14:09
    
@McChrister - You also get that when checks are cashed, but I see your point that you'd have the record even if they didn't deposit it. –  Jared Aug 15 at 14:19
    
Note that while BofA will tell you when they sent a check, they are still mailing it (unless your landlord has a relationship with them such that it is electronically transferred, which is unlikely but possible) and so you are still subject to the whims of the USPS. I've used online bill pay for years, and only had one go missing - but I did have the one. That said, your landlord is encouraging this, so perhaps he will waive late fees if this occurs if you show him the check was sent. –  Joe Aug 15 at 15:39
    
Along with your last comment, some banks remove the money from the account (or at least put a hard hold "pending" transaction on it) the day you have it schedule for, while others wait until the check they sent out gets presented back to them for payment. One just needs to see how it is handled and plan accordingly, less one end up with a sudden eruption of fees and returned checks. –  BrianDHall Aug 15 at 16:02

To answer:

What if the payee (or the payer) makes a mistake in the account number

Direct payment (via online banking) is pretty common in my country (UK). There is a real chance that if you make a mistake the money will not be recoverable, since the bank only undertakes to do what you tell them to do, not what you intended to do.

While not necessarily legally binding, the usual procedure to make sure the payer doesn't make a mistake over account numbers is either to copy-paste them into online banking, or to visually compare them several times side by side and call a friend in to make sure they think they match too.

You want to get something signed by your landlord, or emailed to you by them, with what they say their account number is. So if they do make an error you have proof it's their mistake, and that you paid to the account they requested you to. They can play the same check-it-thrice game their end before sending you the details.

If you want to be really sure, first make a payment of $1. Confirm that it ends up in the right place, then you can safely use the same details again for future payments. Assuming your bank remembers them for you, there's no further danger of mistyping the numbers.

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If it's truly an electronic payment, definitely try the $1 payment for the first payment. This is commonly used by banks and even employers using direct deposit, and is an excellent way to verify it works properly with little cost if it doesn't. –  Joe Aug 15 at 15:41

Are there any downsides to paying rent this way?

No. Where I live there can be upsides. Some banks charge for paper transactions involving checks (cheques).

Is that different, legally, from "wire transfers"?

Yes, wire transfers are effectively anonymous and can be picked up as cash without a bank account, which is why they are popular with crooks. Electronic payments go into a known bank account and are traceable. The bank should be able to provide proof of payment in any dispute.

Note: the use of these terms vary from country to country. "Wire transfer" may mean something different in your locale.

What if the payee (or the payer) makes a mistake in the account number,

You'd have to ask your bank if the erroneous payment can be withdrawn.

My bank's online banking service allows you to set up account details for people you expect to make future payments to. This reduces the chances of making a mistake as you pick the recipient from a short list rather than typing in a number.

or the payee's account runs into problems?

If the payer's account has insufficient funds, either the bank will refuse payment or your account will be overdrawn (and you will be charged heavily for if no overdraft facility has been arranged in advance). I think this depends on the bank. I've seen both situations.

I don't know what happens if the payee's account is locked or somehow unable to accept the payment. I'd be astonished if the money disappeared from my account, didn't arrive in the payee's account and the bank could give no satisfactory explanation. I'd expect the money to remain in the payer's account.


Example Western Union money transfer option

enter image description here

See also "Wire transfer scams" "Crooks like their victims to use wire transfers because the money moves fast and they can take the money and run before the victim discovers the truth,"

So yes "wire transfers" are different from bank-account to bank-account online transfers.

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I'm not sure what location you are speaking of about wire transfers, but the anonymity is completely untrue certainly in the US. By federal law proof of identity must be available from both the sender and receiver, and no anonymity is provided at all to the bank itself, and the sender often is provided the name of the person who sent it (though this could vary by bank). Hollywood movies may depict them this way, but it's a complete falsehood - at least in the US, money and banks don't work that way. –  BrianDHall Aug 15 at 16:06
    
@BrianDHall: See example in edited answer: The US Western Union site (much beloved of scammers) allows you to electronically send money that the recipient picks up as cash. –  RedGrittyBrick Aug 15 at 16:15
    
It seems that Western Union does indeed allow people to accept money without ID, in accordance with law, if under $1000. In that way, it is true that you can receive it effectively anonymously. Note that this is only true when using such a cash service, not when you wire to or from a regular bank account. –  BrianDHall Aug 15 at 16:24

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