Costs of sending money (Candace)

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​As discussed in the previous section, there are multiple ways to send money overseas to other people. Different ways of sending money typically have different fees associated with them.

 

Factors to consider are:

- Is the fee a flat fee, or is the fee a percentage of the amount you send?

- Example: $10 per transfer

- Example: 0.01$ of the total transfer amount

- Is there no fee if you send below a certain amount and a fee if you send above a certain amount?

- Example: no fee for transfers below $1000

- Example: fee only for transfers more than $1000

- Is there a fee depending on how quickly the money must be sent? - Example: no fee for 5 day delivery

- Example: $20 fee for next day delivery

- What is the shipping cost of sending money if you physically mail money in the form of a check, money order, or cash?

- Example: it could cost $40 to send a letter with a money order in it to Afghanistan.

- What is the cost that the transfer service charges for exchanging the US Dollar to the currency in your home country?

- Example: $100 US Dollars is equal to about 2000₱ (2000 pesos, the currency in Mexico). The company you’re using to make the transfer might take 1% of the amount the recipient is supposed to receive (1% of 2000₱ is 20₱) to convert dollars to pesos, meaning that the people receiving the money would get 2000₱-20₱=1980₱ instead of 2000₱.

- Are there receiving fees?

- Example: a bank in your home country may change a fee for receiving transfers, this fee would be taken out of the amount you send or paid by the people you’re sending money too.

 

Note: depending on the bank you use and the bank your family uses overseas if they have one, you might be able to transfer money electronically directly to them through your bank, possibly for free or possibly for a fee. You can call your bank or look on their website online to see if this is possible.

 

Sending money through your bank is the safest way, but this isn’t always possible depending on your bank and the banks in your home country. Bank transfers typically have higher fees, ranging from $25-50.

Sending money electronically is the second safest way since sometimes international mail can be unreliable. Let’s look at five real examples of electronic money transferring services that have international transfer services:

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1. Transferwise

- Fees: - Less than 1% of the transfer amount if you transfer from your bank account for 3 transfers under $10,000

- More expensive than OFX for transfers over $10,000

- Time: - Same day if you transfer using a debit or credit card

- A few days from a bank account

- Other:

- The recipient has to have a bank account

- Works with over 70 countries

 

2. OFX - Fees:

- No transfer fee for any amount

- Less than 1% exchange rate fee

- Time:

- 2-4 business days

- Other: - Minimum transfer amount is $1000

- Works with over 80 countries

 

3. Xoom

- Fees: - Usually under $5 per transfer for any amount when you use a bank account

- ~3% exchange rate fee

- Time:

- Ranges from same day to 3 days depending on the country you’re sending to

- Other:

- Cash pickup at stores is an option in some countries, so the people you’re sending money to might not need to have a bank account

- Works with over 120 countries

 

4. Moneygram

- Fees: - Low for transfers from a bank account

- ~3% for transfers from a credit or debit card

- Time:

- 2-5 days depending on bank and the country you’re sending to

- Other:

- Works with over 200 countries with 350,000 physical locations

- $10,000 transfer limit for electronic transfers

- You are able to go to a physical location to pay with cash, and recipient can go to a Moneygram location in their country to pick up cash. This means no bank account is needed, by you or the recipient.

 

5. Western Union

- Fees: - Less than $5 for amounts under $1000

- Exchange rate fee is 1-5% depending on the country you are sending money to

- Time:

- Can be same day if you use cash, credit card, or debit card (will cost additional fee)

- 1 week for transfers from bank account or for the cheapest fee possible

- Other: - Works with over 200 countries with 550,000 physical locations

- Limit for sending depends on country (example: $5000 limit to send to Mexico and $50,000 limit to send to India

- Can send money at a physical location and it can be picked up at a physical location. This means no bank account is needed, by you or the recipient.

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Activity: Read the following scenario and decide which of the above options is best for Flores:

 

Flores wants to send money to her family in Guatemala. They don’t have a bank account, so they need to be able to pick up the money in person at a location. She wants to send $100, wants to avoid fees, and they need to get the money within 5 days. Which of the above electronic money transferring services should she use?

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Avoiding scams (Candace)

Unfortunately, scammers target international transfers because they’re complicated and sometimes will take a few days for anyone to notice that the money hasn’t been received.

 

Here are some ways to avoid scams with money transfers:

- Avoid sending money to anyone you have not met in person

- If you have to send money to someone you haven’t met in person (example: a friend of your family), send the money in smaller amounts instead of all at once (example: send $100 three times instead of $300).

- Consider paying late. Frequently scammers will say that they need you to send the money before a certain time or something bad will happen, try and wait if you suspect a scammer is asking you for money.

- Use a reputable and secure money transfer service, like your bank or the ones listed above.

- If sending a money order, cash, or a check by mail, do not mail it to an address you don’t know.

 

Read the following questions and decide whether it’s “safe” or “scam”:

1. Mr. Abboud’s brother asked him to send $100 to help the family in Egypt. The brother has a bank account that Mr. Abboud has sent money to before in the past.

2. Flores received an email from a family member she has never heard of asking her to send $500 for an emergency. They are asking that she send it within the next two days to a bank account that she doesn’t recognize. 3. Mrs. Garcia wants to send money to her mother in Mexico. Her mother doesn’t have a bank account, but she can pick the money up at a physical location. Mrs. Garcia got a text message from a new phone number asking her to send the cash in the mail to an address that she doesn’t recognize as either her mother’s address or the Moneygram location where her mother usually receives transfers.

 

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Budgeting for remittance costs (Gena)

Most importantly, only send what you can afford within your established budget.

 

Because there are fees with each remittance, it is important to include those fees in your budget.

 

The best ways to reduce fees are to

1. Send larger amounts less frequently

2. Choose the company with lowest fees.

3. Pay attention to exchange rates.