Remittances: How to Send Money Abroad

Map of world made of various currency
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A remittance is a payment from one place to another, whether it’s a personal transfer or a payment to a business. The most common form of remittance happens when people send money to their home country while working abroad. Over $100 billion moves from the U.S. alone, and migrants send hundreds of billions of dollars among all other nations annually. While in a foreign land, you might send funds to another country for several reasons:

  • To support family and loved ones in your home country
  • To make local currency available to yourself while overseas
  • To repay loans
  • To buy things

It’s critical to use remittance payments wisely. As an expatriate, you typically don’t have the experience and resources available to avoid paying steep fees. At times, those costs can reach 20 percent of the amount you send (or more).

How to Send Remittances

Electronic payments are the easiest and fastest option, and you can make those payments from several different sources.

Banks and credit unions might be a good option for infrequent transfers. Depending on your bank’s services, you may be able to send funds to a partner bank, retail store, or other location in select countries. To do so, ask a teller or customer service representative about making international transfers, ACH payments, and wire transfers.

Money transfer services specialize in helping migrants and others make more frequent payments to foreign countries. You have numerous options in this space, including established brands and frequent newcomers.

  • To transfer online, open an account, provide information about the recipient, and fund your transfer. You can typically use a linked bank account, a debit card, or credit card to make payments. Be aware that your funding method affects how fast the money moves and how much you pay in fees. Credit cards are typically the most expensive option because you pay cash advance fees and high interest rates on those balances.
  • To transfer in person, visit a physical location and bring cash or use any of the funding methods listed above. Money transfer services often have agents in grocery stores or convenience stores. Some provide self-service options through ATMs or other specialized machines.

    New competitors enter the remittance space regularly, including blockchain and app-based remittance providers. Before you send money through a service you’re not familiar with, read reviews carefully and learn what consumer protections (if any) are available. If you want maximum protection, stick to your bank or credit union, a well-known brand, or a federally-regulated remittance provider.

    Western Union and other household names are conveniently located in most cities, making it easy for beginners to send remittances. But that easy access can make them more expensive than other services.

    Checks and money orders are also useful—remittances aren’t just electronic. However, paper payments are much slower than online options, and they may require a recipient with a bank account in the country you’re sending to. Discuss local conditions with your recipient, and keep in mind that it may be risky to send large amounts if there’s no bank account available for safekeeping.

    Prepaid cards may be an option. The solution is easy: You load funds onto the card, and the beneficiary can spend that money at merchants and online. But prepaid cards are notorious for fees, and getting the card to another country can be difficult—unless somebody brings it with them. Also, in some areas, using a card is not convenient.

    Fees for Sending and Receiving

    You pay for remittances to foreign countries in two ways:

    1. Service fees to the remittance provider
    2. A spread, or an extra cost built into the exchange rate (also known as a margin)

    Example: The U.S. dollar might be worth 50 pesos in the country you’re sending to. If you send $100, the recipient gets 5,000 pesos (ignoring any fees). But if your money transfer provider takes a spread of one peso, making the dollar worth only 49 pesos, the recipient only receives 4,900 pesos.

    Which Is Best? Some remittance providers use both forms to charge you, while others only use one. Depending on how much you’re sending, it may make sense to choose a provider that uses one method or the other. For example, a spread doesn’t matter as much for small transfers—as long as other fees are low. But if you’re sending significant sums, the spread is important, and it might be worth paying a higher flat fee for a better exchange rate.

    In the U.S. a “remittance transfer provider” is required to provide full disclosure of fees and explain exactly how much the recipient will receive. However, some money transfer services do not fall under those rules, so you won’t always get disclosures.

    Recipient Fees: In addition to the fees you pay, the recipient may have to pay to claim funds. A receiving bank may charge fees, and foreign governments may charge taxes for incoming transfers. When you send money, your service provider won’t necessarily know about all of those costs, but they should provide any information available.

    If There’s a Problem

    Federally-regulated remittance transfer providers offer well-defined consumer protections and are the best option if you’re concerned about safety. In addition to disclosure requirements, they’re required to resolve problems.

    If something goes wrong, you may be entitled to a refund. You have 180 days to complain to a federally-regulated provider, and they have 90 days to investigate problems after you complain. Other remittance providers (that are not federally-regulated) should also resolve issues, but they don’t fall under the same rules. Still, you probably have rights under state law, and organizations that processed the payment may offer additional protection.