Transfer payments can be monetary payments in which individuals receive money directly from the business or government. An example of such monetary transfer payments made by businesses is that of charitable donations to nonprofit organizations. Government transfer payments that fall into the monetary category include such payments as Social Security, Supplementary Security Income, or workers compensation. The stimulus checks received by individuals from the federal government also fall into this category of transfer payments.
Nonmonetary transfer payments are programs established to assist individuals, such as housing assistance programs, food stamps, or Medicaid. Typically with government-run programs, the money is not given directly to the individuals, but is instead used to fund assistance programs.
Transfer payments allow for those who fall under a minimum income level to receive assistance for such things as food, housing, medical care, and other necessities that allow for an adequate standard of living. The argument has also been made that transfer payments can be used to stimulate economic growth by putting money into the hands of consumers who will, in return, increase their buying and spending.
Critics of transfer payments argue that individuals in need of assistance for such items as food, housing, and medical care could receive help through local organizations, such as churches and charitable groups or other individuals, which would free up government funds. Critics also argue that having safety nets such as Social Security discourages individuals from saving.