What is a 'Transfer Payment'

A transfer payment, in the United States, is a one-way payment to a person for which no money, good, or service is given or exchanged. Transfer payments are made to individuals by the federal government through various social benefit programs. These types of payments are executed by the United States to individuals through programs such as Social Security.

BREAKING DOWN 'Transfer Payment'

A transfer payment is a process used by governments as a way to redistribute money through programs such as old age or disability pensions, student grants and unemployment compensation. Transfer payments, however, do not include subsidies that are paid to domestic farmers, manufacturers and exporters, even though they are technically a one-way payment to a person on behalf of the government.

Government transfer payments, although no services are performed, are considered to be a component of personal income. These payments can be made at the federal, state and local level of governments.

What Are Transfer Payments?

Government transfer payments span a wide range of uses and organizations. The funds for these payments also come from many different sources. However, the most common form of transfer payment is retirement and disability insurance benefits. These payments are made to those who qualify for OASDI benefits, railroad retirement and disability benefits, workers compensation programs and others.

Medical benefits are the second most common form of transfer payments. These types of benefits are government payments made through intermediaries to beneficiaries of medical care. Specifically, medical benefits come from either public assistance medical care or military medical insurance benefits. Public assistance is received by low-income individuals and payments come through the federally assisted, state-run Medicaid program and the Children's Health Insurance Program (CHIP). Military insurance is provided to military personnel through the TriCare Management Program.

Unemployment insurance is perhaps the third most common type of government transfer payments. This insurance includes state unemployment, federal unemployment and other organizations of unemployment compensation. Veterans' benefits are also a fairly common form of transfer payment. Transfer payments that surround these types of benefits are made up of veterans' pension and disability benefits, veterans' life insurance benefits and other types of veteran assistance.

Finally, education and training assistance is considered a type of government transfer payment. This government assistance consists of higher education student assistance, interest payments on student loans and state educational assistance. The combination of these benefits help individuals at all levels of education afford school. They also help people from all types of backgrounds. From Individuals who may only need a loan to people who need more assistance, all people can be helped with these transfer payments.

RELATED TERMS
  1. Current Transfers

    Current transfers are current account transaction in which a ...
  2. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  3. Payment

    Payment is the transfer of one form of good, service or financial ...
  4. Payment Shock

    A payment shock is the risk that the payments due on a loan will ...
  5. Silent Second Mortgage

    A silent second mortgage is a second mortgage placed on an asset ...
  6. Wire Transfer

    A wire transfer is an electronic transfer of funds across a network ...
Related Articles
  1. Investing

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  2. Investing

    Getting Help With Your Down Payment

    It's not as easy as it once was to save for a down payment, but these tips can help give you a head start.
  3. Tech

    How Digital Payments Will Change Commerce in 2016

    The way we transfer and spend money is constantly evolving, and 2016 is poised to expand digital payments like we've never seen before.
  4. Tech

    Is the Payment Processing Industry Evolving? (PYPL, TGT)

    Learn about the many changes in commerce and payment systems that are happening in the rapidly evolving payment processing industry.
  5. Personal Finance

    Is Making Biweekly Mortgage Payments A Good Idea?

    Do you think making two payments a month for your mortgage is a good idea? Think twice about that. We tell you why.
  6. Managing Wealth

    17 Types of Income the IRS Can’t Touch

    Uncle Sam can't get his hands on your money if it's in one of several specific income categories.
  7. IPF - Mortgage

    How Much Money Do I Need to Put Down on a Mortgage?

    When you buy a home, one of the biggest up-front expenses is the down payment.
  8. Insurance

    Free Car Payment Insurance: What's The Catch?

    Many dealers are offering payment protection plans on new cars. Are they right for you?
  9. Personal Finance

    The Pros and Cons of VA Loan Down Payments

    Are making VA loan down payments when buying a home a good idea? Why put money down when you don’t have to? Let’s take a look at the pros and cons.
RELATED FAQS
  1. Paying off debt with a balance transfer

    Learn the best situation in which to do a balance transfer, enabling you to pay off your credit card debt more quickly while ... Read Answer >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center