Home News What is Zelle? How it works and an example

What is Zelle? How it works and an example

by SuperiorInvest

Zelle is a peer-to-peer money transfer app that allows users to move funds from one bank account to another. They are among a growing number mobile payment application which allows you to pay another person at the click of a button, even if they have an account with a different bank.

Unlike its competitors such as Venmo, PayPal and Cash App, Zelle does not charge an extra fee for an instant transfer. Learn more about how Zelle works and its pros and cons.

Key things

  • Zelle is a money transfer app that lets you quickly send money to family or friends.
  • More than 1,700 banks include Zelle in their banking application.
  • Unlike many money transfer apps, Zelle doesn’t charge fees for instant transfers.
  • Zelle transfers are generally safe, but the app carries risks, including the risk of bank glitches that can affect money transfers.

How Zelle works

Zelle is a money transfer app that helps you quickly send money to family or friends through your mobile device. Zelle already offers more than 1,700 banking apps.

You register via the Zelle app or through your banking app if it offers Zelle service. You can then find the person you want to pay by entering their email or phone number. Finally, choose the amount of money you want to send and the recipient will receive instructions on how to receive the payment quickly.

Zelle is owned by Early Warning Services, a fintech owned by seven major banks: Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, US Bank and Wells Fargo. It was launched in 2017 to compete with the likes of PayPal and Venmo, both of which are owned by PayPal Holdings Inc. (PYPL) and Cash App owned by Block Inc. (SQ).

The amount you can transfer will depend on the transfer limit of your bank account. If your bank does not offer Zelle, the weekly transfer limit is $500 and you cannot request an increase.

An example of how Zelle works

Zelle works similar to another mobile payment application. For example, if you went to a restaurant with a group of friends and wanted to split the bill, one friend could pay. You and your other friends can use Zelle to send your account share to the person who paid.

Instead of receiving cash, your paying friend would receive money directly into their bank account. With Zelle, they would receive the money within minutes and not have to wait several days for the payment to be processed.

Pros and cons of Zelle

Zelle’s benefits include providing a convenient way to transfer money within minutes at no charge. Mobile payment services reduce the need to carry cash, which can reduce the risk of your money being stolen.

However, Zelle has some drawbacks to keep in mind. First, even though Zelle is generally safe because it uses verification and monitoring features to protect your funds, users have had issues with transfers, such as from a bank outage. And if a transaction goes wrong, Zelle currently doesn’t offer the payment protection that credit cards typically do.

Is Zelle more secure than Venmo?

Zelle and Venmo both are generally safe money transfer apps because they use authentication, encryption, and monitoring features to keep transfers safe.

What are the disadvantages of using Zelle?

Disadvantages of using Zelle include the possibility of fraud or theft. Users may also face issues such as not receiving funds if the app or banks experience technical issues. Outages may affect money transfers. You also can’t cancel a payment received by another user, and transfers are fast.

Do you need a bank account for Zelle?

You must have a US bank account to use Zelle. The recipient must also have a US bank account, but it does not have to be with the same bank as the sender’s account.

Does Zelle charge a fee?

Zelle does not charge fees for sending or receiving funds. Some banks or credit unions may charge for this service. So confirm with your financial institution whether or not they charge for the Zelle service.

Bottom Line

Zelle can provide a quick and convenient way to send money to another person, regardless of which bank they use. Unlike many of its competitors, Zelle provides instant money transfers with no fees, so you can send and receive funds faster. However, as with any technology, Zelle users can potentially encounter glitches from the app or banks that can affect their payments. Before using any money transfer app, consider the pros and cons, including any associated fees.

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