Remittances are a crucial link between immigrants and those they leave behind. If you're an immigrant, you know that sending money to family and friends in your country of origin helps improve their well-being. Here’s everything you need to know about sending money abroad, including how the remittance process works and how much it costs.
Remittances are a crucial link between immigrants and those they leave behind. If you're an immigrant, you know that sending money to family and friends in your country of origin helps improve their well-being.
How do remittances work?
Remittances are transfers of money between individuals living in different countries. Remittance transfer providers make these transfers. Federal protections apply if you send money abroad. Read this page on the Consumer Financial Protection Bureau website to learn your rights.
You may pay remittances by check, credit card, debit card. You may also send instructions by email, phone or internet. Many people send remittances by money order.
A word about money orders
You can get a money order, for a small fee, at various locations. They include post offices, banks and credit unions, and some retail businesses. Money orders for U.S. transactions are issued for up to $1,000. International money orders are limited to $700 for most countries and $500 for El Salvador and Guyana.
The cost of money orders varies according to the amount and where you order one. For example, as of early 2018, the U.S. Postal Service fee for an international money order was $8.55.
When buying a money order, you should fill in the date and name of the intended recipient. 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.
Cost of sending remittances
The cost of sending a remittance from the United States depends on four factors:
- How much money you send.
- When you send the money.
- Which country you send the money to.
- Which transfer provider you use.
Most transfer providers charge a flat fee, as well as a percentage, of the amount you want to transfer. The flat fee and percentage changes from quarter to quarter and country to country. Let's use Mexico as an example. According to the World Bank, the total average percentage for sending a remittance of $200 from the United States to Mexico was 4.45 percent. The total average cost was $8.91.
By comparison, sending the same amount to Colombia had a total average cost of $10.03 in the fourth quarter 2017.
View the World Bank worldwide remittance price finder online for more information about costs. World Bank data is available in multiple languages. Make your language choice in the upper right corner of the World Bank home page. For more information about remittance costs for Central America, visit Envía Centro America.
(available in English and Spanish).
Process of sending remittances
According to the International Monetary Fund, a typical remittance transfer takes place in three steps:
- The sender in the United States pays the remittance to a transfer provider.
- The transfer provider instructs a paying agent in the recipient's country to deliver the remittance.
- The paying agent makes the payment to the recipient.
Consumers use different types of transfer providers to send remittances to other countries. Some commercial banks and credit unions serve as transfer providers to select customers. Other providers include money transfer services such as Western Union and MoneyGram.
Some retail outlets also operate as remittance transfer providers. Finally, online services are another option, available by using a smartphone or computer.
Some people may use other methods to send money abroad, such as hiring an international courier company or mailing cash. These methods are not advised. Other people ask a relative or close friend to carry cash to another country.
There is no limit on the amount of money you can take out or bring into the United States, according to U.S. Customs and Border Protection (CPB). But you must report more than $10,000 to CBP. Also check the rules for bringing cash to the country you’re traveling to.
Once sent, remittances can be picked up at certain banks, telegraph offices, and retail outlets. These include supermarkets, convenience stores, and other authorized places in the destination country. 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. Studies confirm that remittances benefit both families living abroad and the countries involved. Benefits to families include poverty relief, access to education and health care, and housing stability.
Remittances also have direct and positive implications for individual recipients’ well-being. Finally, remittances contribute to the social, economic, and political stability of countries worldwide. They especially benefit developing countries.
Sources Consumer Financial Protection Bureau (2016). Ask CFPB: What is a remittance transfer? Envia CentroAmerica. (2016). All You Need to Know to Send Money to Central America. Evans, A. C. & Klaehn, J. (2004). A technical guide to remittances: The credit union experience. International Monetary Fund. (2017). Remittances: Funds for the folks back home. Samuels, G. (2003). Banking unbanked immigrants through remittances. U.S. Customs and Border Protection. (2017). Currency and monetary instruments — amount that can be brought into or leave the U.S. U.S. Postal Service. (2018). International money orders. World Bank. (2017). Remittance prices worldwide: Sending money from United States to Colombia. World Bank. (2017). Remittance prices worldwide: Sending money from United States to Mexico.