Seems like everywhere you look these days there are little fees nipping at you for any monetary transaction. From ATM fees climbing to up to $4 per transaction, to wire transfer fees of $25 and higher. The banks try to take a little bit out of you any way they can.
The internet also gets you. Depending on the type of transaction, collecting money through PayPal can cost you 2.9% of the transaction, plus $0.30, but may vary. I bet vary doesn’t mean vary downward.
Credit card transactions on the internet can also come with hefty fees. Like any time you want to pay your property taxes, car registration or other forms of government payments. Most credit card charges are a percentage of the transaction.
Banks don’t offer much relief. They can give you the ability to do ACH (Automated Clearing House) transactions, but those don’t always come free. Plus many of us have tenants who are not happy to have money automatically swept out of their bank accounts.
Would $0.00 Per Transaction Be Okay with You?
Whenever there is a pain point for people, you can count on an entrepreneur stepping in eventually to fix it. In this case, that entrepreneur is Ben Milne. Ben sold stereo speakers online, and he was pretty ticked off at the amount of fees a bank charged every time he sold one.
So he started a company called Dwolla.
Dwolla will allow you to pay anyone or receive payment from anyone for free.
Yup, that’s right… Free. No matter the size of the transactions. Although, they do have a per transaction limit of $5,000 for individuals and $10,000 for businesses and non-profits. But, there is no limit to the number of transactions you can do each day. They used to charge $0.25 per transaction. Not any more.
Here’s how it works: You simply go to Dwolla and sign up for free. You can specify either a personal or business account. If you want a business account, you will need to provide some documentation. They want to know that the business is in good standing and operates from the address you say it does.
For personal accounts all you have to provide initially is the last four digits of your social security number.
After the account is set up, Dwolla will ask you to link your Dwolla account to your bank account. Just like most payment services, Dwolla will require the account number and routing number of your account to be able to pull money out of the account.
Once you’ve linked your account to Dwolla, you are ready to send and receive payments.
Payments can only be sent and received to other people with Dwolla accounts. But setting them up is pretty quick and easy. If you send a payment, the person or business you’re paying receives an email with a link to sign up.
When you pay someone, you also have to withdraw money from your bank account and then deposit it in your Dwolla account. Once that is done, you can just send the payment out of the balance on your Dwolla account.
Receiving money is just as simple. The payment will just go right into your Dwolla account. From there, it is just a simple matter to transfer the money into your bank account. You can also pull up reports showing who has paid and the amounts.
You can even set up your payments through your company website. Dwolla has an API that can be embedded right on your website. Or just receive the payments directly.
Dwolla is really catching on with landlords, because there are no per-transaction fees for people paying their rents. Many renters may pay their rents in several transactions. Or there may be 2, 3 or 4 roommates who all want to pay their share of the rent separately. Check out this helpful video about Dwolla.
How Does Dwolla Make Money?
PayPal was built on top of the big credit card companies’ infrastructure. That’s why they charge a percentage of the transaction as a fee.
Dwolla set up its own transaction infrastructure. They do not work with credit card companies. They only deal directly with bank accounts. That’s why they can transfer money for practically nothing.
The folks at Dwolla thought the money would be much more lucrative with the big merchants, banks and governments… In fact, even the U.S. Treasury has selected Dwolla as one of their first ‘Digital Wallet’ providers. So they decided to make them pay, instead of consumers.
It’s much better to offer the smaller guy/gal transactions for free to make them more widely recognized.
For businesses, Dwolla does have a monthly fee structure for enhanced services. These are mostly for businesses to set up a payment-processing site. The extra services include:
-
White Labeling – Making your website payment processing look like it is customized for your business, rather than going through an outsourced provider.
-
Multiple Funding Sources – If your business has different bank accounts for different properties you own, perhaps?
-
Next Day Transfers – Transferring cash into your Dwolla account from your checking account can take a couple of days, due to the 1920’s technology still in the banking system. Dwolla can circumvent that… for a fee.
-
Higher Transaction Limits – The higher the better when you’re collecting rents!
-
Priority Support – Hopefully you don’t need this too often.
Banking is an industry that is way past due for a technological disruption. Dwolla is leading the charge in causing trouble for the traditional banks. Anything that can make it easier for your customers to pay you is a good thing, right?
Share Your Thoughts
Have you used Dwolla? Tell us about it below.
Cut Costs – It’s easy to let costs get away from you in the real estate business. Whether flipping a house or being a landlord, it’s easy to pay a lot of money for things. Staying profitable requires an eye on minimizing costs just as much as finding great deals that increase revenues.
Make it Easy for Your Tenants to Pay – The easier it is for people to pay you, the more like it is they will pay.
Keep Everything Secure – Make sure whatever payment processor you are using keeps your data secure. Dwolla does. In these days of identity theft, it definitely pays to be careful.
JP Moses
is a real estate investor in Memphis, TN, with experience ranging from land lording to note buying, rehabbing, and wholesaling. However, wholesaling is the area that he enjoys most and where he bring the most experience and expertise to his students.