Q: I'm looking for an alternative to PayPal for sending money over the Internet. Is there a way to avoid the outrageous fees that often accompany transactions?

DwollaLogo.jpgA: Dwolla is a new service that is trying to make sending money over the Internet as simple as possible by tying the process to social networks.

Using Dwolla, you can send money to people via Twitter, Facebook or a handful of other social media sites. Currently, Dwolla operates as a web-based service -- so anybody with an Internet connection can sign up through the site -- with applications available for iPhones and all Android-based phones.

When you make a transaction through the service, the sender of the money pays a $0.25 transfer fee (this can be paid by the receiver if they agree to it). If the fee is recurring (such as a monthly utility payment that you make to your roommate using the service), then the fee is waived.

After raising more than a million dollars from venture capital groups, Dwolla is considered a serious player in online transactions. The low fees could help it to become more popular among young, Internet savvy types than old stalwarts like PayPal. I can't see a downside to using the service as it exists: Should it fail, all money held in Dwolla accounts is insured by the FDIC and the National Credit Union Administration.

In a profile of Dwolla by the Associated Press, a couple of different individuals raved about how much they are able to save by using it. Nick Kremer, the president of a website design and hosting company sells $5,000 computer servers to new customers using Dwolla. Instead of paying a $150 credit card fee, he pays $0.25. Brad Bacheir pays his hair stylist through a Facebook account using Dwolla to avoid the processing fees charged by credit card swiping machines.

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