Dwolla Instant Takes a Swing at Credit Cards (and ATMs)

Kira M. Newman Dec 16, 2011 Tweet

Yesterday, online and mobile payment network Dwolla launched Instant so you can keep using the service when your balance gets low.

For $3 per month, you get a $500 line of credit to transfer into your Dwolla account – which you can then use immediately at places like cafes, food trucks, or gas stations, or for paying friends online. If you don’t pay that money off by the end of the billing month, late fees are only $5.

Before Instant, users with a low balance would have had to wait 2-3 days to load money into their Dwolla account from their bank account.

As we previously explained, Dwolla lets you send money to your Twitter or Facebook friends, or to people and merchants nearby using a feature called Proxi. Transactions cost the merchant 25 cents, but those under $10 became free earlier this month to benefit small businesses.

In a blog post that criticizes credit card companies for their high fees and outdated architecture, founder Ben Milne explains that Dwolla will send you plenty of notifications to avoid late fees:

We honestly don’t want to ding you $5, it’s not part of Dwolla’s culture. We just want the quarter.

The Des Moines-based startup also has a variety of security systems in place to prevent fraud, but the bigger issue (at least for users) may be friction. If they use Instant, consumers have to take the time to pay off Dwolla every month, just like they do with credit cards. And merchants still have to wait several days for money to transfer to their bank account. But with frequent updates coming out of Dwolla, we can be sure this version isn’t their last.

Users can activate Instant now by logging on to their Dwolla account.