By Catherine Blinder
For many decades, immigrant families have come to America with aspirations and hope.
That aspirational drive, along with a strong work ethic, often results in a commitment to improving the lives of family members left behind. For some families, remittances, money sent to the home country, are a major source of income; they may help pay for education, for the purchase of livestock or land, for tools or to help meet basic living expenses.
Among foreign-born Hispanics, 54 percent say they send money home and among U.S.-born Hispanics, 17 percent say they send money to their home country. As a result, remittances now constitute a larger source of money to Latin America than official international foreign aid.
Due to a lack of bank access, especially in rural areas, a lack of confidence in formal channels, bribery and graft in the country of origin or costly financial services, many people revert to informal channels for sending money home. The administrative cost of non-regulated transfers presents a significant loss to immigrants and their families, up to 20 percent of the total being transferred. Moreover, there are no protections for unregulated money transfers, leaving the sender at greater risk of falling victim to a fraud or scam.
By contrast, if you use a regulated transfer service, as of February of 2013, there are expanded federal protections available to you.
For instance, you have the right to:
- Have the money delivered to the correct person or business
- Before you pay, and after the transfer is sent, receive information about:
Amount to be received
- Cancel a transfer, generally within 30 minutes after it is sent, at no cost.
- Report a problem to the company within 180 days and have it investigated.
- Contact the CFPB (Consumer Financial Protection Bureau) if you have a problem when sending money.
The most common methods of regulated transfers are:
- Walk-in money transfer services – RIA, MoneyGram and Western Union.
- Direct bank account transfers – usable only if both parties have bank accounts.
- Bank wire transfers – They tend to have high fees, and are best used when sending large amounts of money that exceed the daily or monthly limits imposed by other types of money transfers.
- Credit or debit cards –You will pay more and some cards will charge you extra fees to use this service
- Prepaid debit cards to another’s card, which means money is available in minutes, but high fees make this a very expensive option.
- Cell phones – You can use your smart phone’s browser to access a money transfer service website. Several new technologies allow you to access a free PayPal app, which lets you send money from your PayPal account to another using the recipient’s phone number or email address. PayPal accounts are free.
Importantly, many banks now accept individual taxpayer identification and foreign government identification documents when opening a bank account – making it easier for undocumented immigrants to use these lower-cost services.
When choosing a transfer service, remember to compare fees, exchange rates and total cost. The transfer service Viamericas (www.viamericas.com) offers an online tool that calculates the total cost, making it easy for you to compare services.
More Tips for saving money:
- Don’t pay extra to get the money there in hours if it’s alright that it arrives in a few days.
- Adjust the timing and amount sent to take advantage of the best exchange rates. This is particularly true with automatic transfers – they may be happening when there is an unfavorable exchange rate.
- Send dollars to dollars if possible; it is almost always cheaper to send in dollars and have the recipient convert money to the local currency.
For more information, you can find lists of services and other details online at:
Finally, if you believe the company or person you sent money through is part of a fraud or a scam, contact the CFPB immediately at (855) 411-2372, ext.1.
This article was written by Catherine Blinder, chief education and outreach officer of the Department of Consumer Protection of the State of Connecticut. To learn more about how the Department of Consumer Protection can help, visit us online at www.ct.gov/dcp.