How to transfer money through your mobile phone

The US is fast catching up with the rest of the world when it comes to mobile payments. Many banks and credit unions now include mobile payment options as a standard feature of their banking apps, and more of us are taking advantage of the convenience.

Mobile payments allow you to move money between you and your contacts, other mobile numbers and even retailers with the help of your cell phone. Unlike standard bank transfers, you might not even need the payee’s bank account details for delivery.

Text mobile payments

Today, you can easily send money to bank accounts using only your cell phon. You might see this service referred to as SMS mobile payments. SMS stands for short message service, and it’s a term used more widely outside the US to refer to texting.

Whether sending money to a friend or paying for a purchase, these payments require only your recipient’s phone number. Depending on your bank’s payment system, funds are either transferred from your bank account or charged to your mobile phone bill.

Peer-to-peer SMS mobile payments

For a successful mobile money transfer, both ends of the transfer must sign up for mobile payments by:

• Direct text. You’re given a code and number to text to opt in.
• Phone number. You receive a text message from your bank or transfer specialist, responding as directed to set up the service.

After signup, your financial institution provides instructions on how to transfer money by phone. After completing your payment request, your recipient receives a text explaining how to claim your money.

Making purchases with SMS mobile payments

Some institutions and retailers also allow customers to make purchases by text. In most cases, the retailer texts a payment request to your phone — usually in the form of a link or code. The link or code acts as mobile checkout, allowing you to pay for goods or services on the spot.

Mobile wallets

Mobile wallets are another way to use your cell phone for purchases and transfers. Offered by banks and third parties, these wallets requires only your credit or debit card number and a mobile device to get started.

In most cases, you download a wallet app, enter your credit or debit card information and set up a PIN or fingerprint for security. From there, your wallet takes care of transactions without you having to dig for your card.

Contactless mobile payments

Some cell phones are equipped with near-field communication technology. It’s a tech-heavy way of referring to contactless payments, whereby you pay for purchases by waving or tapping your device on a contactless terminal.

You must sign up for a mobile wallet, and only select US retailers participate in contactless payments. But access is growing, with big-name brands like Costco and Walmart on board for tap-and-go payments.

Read our pros and cons on contactless payments.

Google Pay

Google Pay is a mobile wallet that offers a multiple payment methods supported by most major US banks. You simply sign up for a Google account, add your credit or debit card as a payment and send or receive money in minutes.

Google Pay allows users to transfer money and pay for purchases by:

• Text to mobile numbers
• Contactless payments
• Gmail
• iMessage, Android Messages and other messaging systems
• Amazon, iTunes and other apps
• Online checkout
• Android messages

Apple Pay

If you’ve got an iPhone, Apple Pay helps you get paid and send cash to phones through similar payment methods. You set up and verify your debit, credit or Apple Pay Cash card in the built-in mobile wallet app to transfer money and buy through:

• iMessage
• Siri
• Apple Watch
• Contactless payments
• iTunes and other apps
• Mobile web stores

Mobile payment services

If you aren’t quite ready for mobile payments and mobile wallets, other third-party payment services make it easy to store your sensitive payment details for future mobile transactions.

These services often require only a phone number or email and bank account for on-the-go transfers and payments.

PayPal

The popular PayPal helps you send and receive mobile payments directly to phone numbers and email addresses. You sign up for a free account, linking your credit or debit card to send money. Your recipient doesn’t need a PayPal account for you to initiate the transfer.

Use PayPal to send payments with your cell phone in three ways:

• Through the PayPal mobile app
• By text message
• Through a mobile web browser

After you confirm your payment, your recipient receives an email or text allowing them to create an account and claim the money. Because funds are stored in your PayPal balance, you don’t even need a bank account.

Use your balance to send money to loved ones, withdraw money to your linked bank account or pay for goods and services at millions of retailers who accept PayPal at checkout.

Square

Square is a mobile payment system that allows you to accept sales payments and send invoices. But it’s recently jumped into the mobile payments market with the Square Cash app.

Square Cash enables peer-to-peer payments directly to and from debit cards through:

• iMessage
• Email
• Siri
• A mobile web browser

Zelle

Zelle is both a standalone app and integrated into bank systems for peer-to-peer payments with only an email address or phone number.

Both parties of the transaction need a bank account to use the service. But once your email or phone number is linked to your account through Zelle, you can start sending money. Your recipient receives notification explaining how to claim money, setting up an account, if necessary, to receive the funds.

Venmo

The peer-to-peer Venmo also makes sending and receiving money easy, even allowing for purchases at select retailers. You download the app and link your credit, debit or prepaid card to immediately send money to other Venmo users.

Payments and requests are sent directly to others using their username or email — or by phone, if your recipients don’t have a Venmo account. After you confirm a payment, they get instructions on how to create an account or complete the transaction.

Mobile banking

More widespread is mobile banking, which helps you manage your accounts using only your cell phone and an Internet connection. The majority of today’s banks and credit unions offer mobile banking apps linked to your bank account.

Depending on your bank, you sign in to the app to manage your account and:

• Transfer money among your accounts
• Transfer money to other banks
• Pay bills or schedule payments
• Check your account balance
• Upload and deposit checks
• Create and use mobile wallets
• Find nearby branches and helpful contacts
• Manage investments

Security of mobile payments

With hacking and data breeches in the headlines, you might be concerned about the safety and security of mobile banking and payments. But digital payments are more secure than you might think, employing tools like:

• Fingerprint scanners. Many mobile wallets and contactless payments require you to scan your fingerprint before a purchase, sometimes as a secondary ID. This technology helps secure your sensitive credit or debit card and also protects against card skimming.
• Secure passwords. You’ll want to set up a password that’s difficult to guess. Some payment services also use one-time passwords, PINs or codes for transfers to prevent anyone else from claiming your cash. These passwords expire after the transaction is complete or an allotted time.
• Monitored payments. Depending on the service, you may be able to monitor or cancel your mobile payment if you discover you’ve sent it to the wrong address or it’s not picked up as expected. Canceling a payment returns the funds to your account.
• Encrypted data. The majority of mobile banking and payment services encrypt the personal and financial information you link — meaning that the service, merchant or any other party itself isn’t able to access your banking information.

What to watch out for

When it comes to offline safety, most people know not to share their PIN or card information. Similarly, here’s what to keep in mind when sending money through your cell phone.

• Protect your device against theft. Mobile wallets are secure, often requiring your fingerprint or PIN. But what about if you lose your phone? Most devices and payment systems today allow you to remotely put your device into lost mode. This prevents potential thieves from using your card even if they make it past your PIN or fingerprint. And because your data is encrypted, they can’t access your information to use your card manually.
• Take caution with public Wi-Fi. While unlikely, it’s possible for hackers to intercept information sent on unsecured public Wi-Fi networks. Although payments are encrypted, hackers can “spoof” your mobile wallet when you enter your information, giving them access to your accounts. Avoid this by setting up your mobile wallet at home, where your network is secure.
• Watch for phishing scams. Many fraudulent messages or links appear to come from seemingly legitimate sources. The best way to protect yourself from these scams is to avoid clicking links and ads or visiting websites from unfamiliar sources.
• Monitor for malware. The threat of malware is more common on computers, but that doesn’t mean your mobile phone is completely safe. Malware is like a virus that infects your phone to steal your information, passwords and other data. Just like phishing scams, you can reduce the risk of malware by avoiding links and ads from sketchy or unfamiliar sources.

Bottom line

Your cell phone is for much more than chatting with loved ones. Today, you can not only monitor your bank accounts but also transfer money across them and pay at retailers worldwide. But you’ll want to find a service that best fits your lifestyle, accounts and shopping habits.

Learn more about flexible payment services and making the most of your money in our comprehensive guide to bank accounts.

Real questions from readers

• How do I monitor the status of a mobile payment?

  Banks and financial institution offer different ways of monitoring the progress of your payment, though you can often view the status through an app or your online account.

  If you send money through a service like Venmo, your transfer’s status is available in the app or online.

• What happens if I enter the wrong mobile number?

  With many services, your transaction is “pending” until the payment is claimed, allowing you to cancel it before it’s picked up. If the payment shows as received, call your bank or service to ask how to reverse the transaction.

• Someone sent me a mobile payment. How do I collect the money?

  With most mobile payments, you receive a text or email with details on how to complete the transaction. The process of setting up an account or claiming money varies depending on the service used.

  If you’re unsure, contact the bank or service that’s sent you notification.

• How long do I have to collect a payment?

  It depends on the payment service and financial institution, but you generally have a week to a month to pick up the payment before it expires. With PayPal, funds are returned to the sender after 30 days if the recipient doesn’t claim the money.

• What are the transaction limits of mobile payments?

  Each financial institution and payment service enforce their own transaction limits. For example, Square allows transfers of up to $250 a week without verification and up to $2,500 a week after verifying your name, date of birth and Social Security number. Check with your bank or preferred payment service to find out how much you can send or receive.

• Do I need an account with a bank to collect a payment?

  No. Depending on the financial institution or service, your phone number, reference number and account details should be sufficient to forward payment to your account.

Ryan Brinks

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As the assistant publisher of banking and investing at finder.com, Ryan Brinks melds more than a decade of experience in business news and online content into creating comprehensive and helpful comparisons of the companies you trust your money with. He loves to innovate and put money to work while keeping a careful eye on managing risk. Beyond work, Ryan's also passionate about his family and serving his community.