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Spending and Saving

remittance request form

Sending Money Abroad

Antonio Alba Meraz, Extension Educator — Family Resiliency

December 2016

Remittances or money transfers are a crucial link between immigrants and those they leave behind. Money from abroad contributes to satisfying the basic human needs of the individuals and families in the country of origin, which helps them improve their well-being.

What Is a Remittance?

Remittances are transfers of money between individuals living in different countries. Remittances are also known as “international wires” or “international money transfers” (Consumer Financial Protection Bureau, 2016 a).

The business that operates the transfer of money, a remittance transfer provider or operator, is defined under federal law as “a business that transfers money electronically for consumers to people and businesses in foreign countries” (Consumer Financial Protection Bureau, 2016 b).

Money Orders

You can obtain a money order, for a small fee, at various locations, including post offices, banks and credit unions, and some retail businesses, such as gas stations and drug stores. Money orders for U.S. transactions are issued for up to $1,000, while international money orders are limited to $700 for most countries, and $500 for El Salvador and Guyana. The cost of money orders sent to destinations within the United States varies according to where you order one (bank fees are higher than other sources) and the amount of the money order. For example, U.S. Postal Service fees are currently $1.25 for money orders up to $500 and $1.65 for money orders from $500.01 to $1,000.

When buying a money order you should fill in the date and name of the intended recipient, and sign the order immediately so no one else can cash it in case of loss or theft. Keep a copy of a money order as proof of payment.

How Much Does It Cost to Send Remittances from the U.S.?

The cost of sending a remittance from the United States depends on four factors:

Most transfer providers charge a flat fee as well as a fraction, or percentage, of the amount you want to transfer. The flat fee and fraction or percentage charged changes from quarter to quarter. The average flat fee charged in the third quarter of 2016 for sending a remittance of $200 from the U.S. to Mexico was $6.04. The total average percentage charged was 6.35 percent of the amount sent. That means that the total average cost to send $200 to Mexico was $12.39. Sending the same amount to Colombia had a total average cost of $13.13 in the third quarter of 2016.

To find the total cost in U.S. dollars of a remittance, view The World Bank worldwide remittance price finder online: Remittance Prices Worldwide (available in multiple languages).

To compare prices of remittances to Central America using different operators, visit Envía Centro America (available in English and Spanish).

How Are Remittances Sent?

Consumers may use a number of different remittance transfer providers, operators, or “vehicles” to send remittances to other countries. Some of those vehicles include commercial banks and credit unions. Consumers can send money from their checking or savings accounts directly. However, not all financial institutions require that the consumer open a bank account in order to send funds (Samuels, 2003). Authorized retail outlets such as ethnic grocery stores or conventional grocery stores may operate as remittance transfer providers. Online services are another option, available by using a smartphone or computer.

Some people may use other methods to send money, such as using an international courier company or mailing cash (Evans & Klaehn, 2004), or by asking a relative or close friend to carry cash to the family in other country. Be sure to check the rules for bringing cash to the country you’re traveling to.

Once they are sent, remittances can be picked up at certain banks, telegraph offices, retail outlets, such as supermarkets, convenience stores, and other authorized points of payments in the country of destination. You need to coordinate with family or friends in other countries on when and where to pick up remittances.

Socio-Economic Implications of Remittances

Remittances play a vital role in the lives of individuals and families from many countries. Many studies confirm that remittances or money transfers are a part of the global financial interactions that bring direct benefits to the families living abroad and between the involved countries. Some of the benefits for families and individuals receiving remittances include poverty relief, access to education and health care, housing stability, and help for entrepreneurial activities, among other benefits. In addition, remittances have direct and positive implications for individual recipients’ well-being. On a broader level, they contribute to the social, economic, and political stability of countries worldwide, especially of developing countries.

Sources

Consumer Financial Protection Bureau (2016, a). Ask CFPB: What is a remittance transfer?

Consumer Financial Protection Bureau (2016, b). Ask CFPB: What is a remittance transfer provider?

Envia CentroAmerica. (2016). All You Need to Know to Send Money to Central America. World Bank, Center for Latin America Monetary Studies (CEMLA) and the Multilateral Investments Fund of the Inter-American Development Bank (MIF-IDB).

Evans, A. C. & Klaehn, J. (2004). A Technical Guide to Remittances: The Credit Union Experience. World Council of Credit Unions, Inc.

Samuels, G. (2003). Banking Unbanked Immigrants through Remittances. Federal Reserve Bank of Boston. Fall: 3-8

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