Paul's Comments

We have a problem with moving money that isn't stored electronically. As the saying goes, "fast, easy and cheap, pick any two."

It's very expensive to move money from one party to another quickly unless it is electronic, then it's just expensive. Moving it slowly is cheap, but if you need it now that may not be an option.

For cheap transfers, either I need to know your bank and account number, ship cash to you, which means a potential loss, or mail you a check. If you have a checking account where I can deposit the money then if I can get to your bank then it won't cost anything, but you have to let someone know your number.

For fast transfers - or purchases by phone or Internet - I have to put money into an electronic form. The faster you need it the more expensive it gets. If I have to give you immediate cash it's going to cost as much as 10% if I have to wire it to you. If I use a bank wire it's going to cost $10 plus you may have to pay an incoming wire fee. If you can accept Paypal, that's a pretty good option if you can move the amount due fast into an account in case they stiff you or you have a problem but someone has to pay a 3% fee plus moving money from Paypal to a checking account tied to the Paypal account can take several days.

Loading a prepaid card will cost about $5 for up to $500. An ACH transfer to someone else's checking account, which is the equivalent to Direct Deposit, is essentially the same as a wire transfer and costs about $10. These are very high for a transaction, that if you have a commercial account, can be as little as about 10c. If you have a reloadable debit card that can be loaded by ACH transfer, it's the equivalent of a checking account except they won't accept check deposits; all money has to be electronic.

Another issue is the potential for account freezes and chargebacks. This was where Wikileaks had a problem; they should have had, not one, but one hundred accounts (or several hundred), so that if you donated money to them only 1% know any specific account number and thus not the entire funding stream gets cut off if someone tells Paypal or tries to convince Visa or Mastercard to stop allowing payments, since not all account numbers are known or directly discoverable.

This is where the ridiculousness of high charge-back fees for accounts that get a lot of people claiming they didn't make the transaction make no sense. Supposedly the chargeback fine, which is in addition to the transaction fee, can be thousands of dollars if you get a lot of denials. This is, of course, ridiculous.

If you're selling porn or something potentially objectionable you should be using a lot of accounts so you don't get to being hit by huge chargebacks because if you get a lot of chargebacks you stop using the account that gets them and switch to a new one. In fact, it might be best that anyone who might have a potential for chargebacks should only use a specific account a month at a time (or maybe even less) so the risk for being hit for a large chargeback fine goes way down.

Say you use 12 accounts, one each month, plus a transfer account so there's never money in an account more than a day or two, if you get people who otherwise complain, well, as it turns out, once the money is gone, it's gone and the sender might file a complaint, either the receiving bank eats the chargeback or the sending bank does, but the merchant has basically immunized themselves against chargebacks.

Even better, use multiple entities so that the bank can't use set-off to take money from one account if there is a question about a transaction causing a chargeback. Or drop the account once one occurs so you never have but one. It's basically companies who sit around fat, dumb and stupid that end up paying for chargebacks. Smart companies can structure themselves for defense against attack and avoid charges, crooks will do the same thing.

A lot of people do not want to bother with the effort to protect themselves. They don't want to take the time to structure their affairs properly such as having multiple bank accounts, setting up a corporation or LLCs for their business (or multiple corporations/LLCs in some cases), and so they basically paint a big target on themselves, saying "please sue me, please tax me at the highest possible rates, I'm stupid and love being an easy mark for anything you want to take from me."