Remittances: How to Send Money Abroad

A remittance is a payment from one place to another, whether it is a personal transfer or a payment to a business. A common form of remittances is when people send money back to their home country while working abroad.

More than $ 600 billion was transferred from the US during 2016, and migrants send hundreds of billions of dollars between all other nations annually. While you are in a foreign country, you can send funds to another country for several reasons:

To support your family and loved ones in your home country.
Get local currency abroad
To pay loans
To buy things

It is essential to use remittance payments wisely. As an expat, you typically don't have the experience and resources available to avoid paying exorbitant fees. On average, shipments cost 6.5% of the amount you send (but you can pay more or less).

How to send shipments

Electronic payments are the easiest and fastest option, and you can make these payments from a variety of sources.

Banks and credit unions

Traditional institutions can be a decent option for infrequent transfers. Depending on the services of your bank, you may be able to send funds to a partner bank, retail store, or other location in some countries.

To do this, ask a teller or customer service representative about how to make international transfers, ACH payments, and wire transfers.

Money transfer services

Some services specialize in helping migrants and others with frequent payments to foreign countries. You have myriad options in this space, including established brands and frequent newcomers.

To transfer online, open an account, provide recipient information, and finance your transfer. Typically, you can use a linked bank account, debit card, or credit card to make payments.

Keep in mind that your financing method affects how fast money moves and how much you pay in fees. Credit cards are often the most expensive option because you pay cash advance fees and high interest rates on these balances.

To make a transfer in person, visit a physical location and bring cash or use any of the financing methods listed above. Money transfer services usually have agents in supermarkets or convenience stores. Some offer self-service options through ATMs or other specialized machines.

New competitors enter the international payment space regularly, including blockchain and app-based remittance providers.

Before sending money through a service that you are unfamiliar with, read the reviews carefully and learn what consumer protections (if any) are available. For maximum protection, choose your bank or credit union, a well-known brand, or a federally regulated remittance provider.

Western Union and other household names have multiple locations in most US cities, making it easy for beginners to send remittances. But this easy access can make them more expensive than other services.

Checks and money orders

Paper payments can also be useful: remittances are not just electronic. However, paper payments are much slower than online options and may require a recipient with a bank account in the country you are sending to. Discuss local conditions with your recipient.

Prepaid cards

Prepaid debit cards can also be an option. The solution is relatively easy: you load funds onto the card, and the recipient can spend that money in stores and online.

But prepaid cards are notorious for their fees, and taking the card abroad can be difficult, unless someone physically charges it during the trip. Also, using a card is not feasible in some areas, such as those where cash is preferred.

Shipping and receiving rates

Pay remittances to foreign countries in two ways:

Service fees for the shipping provider
A margin or additional cost embedded in the exchange rate (also known as a margin)

Example: the US dollar can be worth 50 pesos in the country you are sending to. If you send $ 100, the recipient will receive 5,000 pesos (ignoring any fees). But if the money transfer provider takes a margin of one peso, making the dollar worth only 49 pesos, the recipient will only receive 4,900 pesos.

Which is better?

Some shipping providers use the above two forms to bill you, while others use only one. Depending on how much you send, it may make sense to choose a provider that uses one method or another.

For example, a margin does not matter much for small transfers as long as other fees are low. But if you send large amounts, the margin becomes more important and it may be worth paying a high flat fee to get a better exchange rate.

In the US, a “remittance transfer provider” must provide full disclosure of fees and explain exactly how much the recipient will receive.1 However, some money transfer services are not governed by these rules, so you will not always get the disclosures.

Recipient fees

In addition to the fees you pay when sending money, the recipient may have to pay fees to claim the funds. A receiving bank can charge fees and foreign governments can collect taxes on received transfers.

When you send money, your service provider does not necessarily know all of these costs, but they must provide all available information.

If there is a problem

Federally regulated remittance transfer providers in the US offer clear consumer protections and are the best option if you are concerned about security. In addition to disclosure requirements, they are required to resolve issues.

If something goes wrong, you will be entitled to a refund. You have 180 days to file a complaint with a federally regulated provider, and they have 90 days to investigate problems after you file the complaint.

Other remittance providers (which are not regulated by the federal government) are also expected to solve the problems, but they are not subject to the same rules. You may still have rights under state law, and the organizations that process your payments may offer additional protection.

We hope you enjoy watching this video about Remittances

Source: Marginal Revolution University

 

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