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Maine Credit Unions recently drafted an article for Amjambo Africa about the pros and cons of remittance methods. The below article will appear in the newspaper’s July edition:
When people working abroad need to send money to their friends or family back home, they are faced with many different options. Between wire transfers, money orders, checks, peer-to-peer payment systems, and more, determining the best remittance method can be confusing—especially with so many available. To help those sending money internationally, here are the pros and cons of different remittance methods:
Credit Union and Bank Transfers
Many U.S. credit unions and banks offer money wiring services. Much like all remittance providers, there are pros and cons to using your existing financial institution as a means to send money abroad.
Pros: Sending money through a credit union or bank is secure and reliable, and is often more convenient than other services—as people don’t need to create entirely new accounts elsewhere. Many credit unions and banks use the SWIFT (Society for Worldwide Interbank Financial Telecommunications) system, which is a trusted global network that accurately and securely sends and receives information, such as money transfers. Because of this, credit unions and banks are capable of sending money to many different countries in a safe manner.
Cons: Credit unions and banks traditionally charge a base fee to send money internationally. Additionally, the recipient’s credit union or bank may also charge the sender a transfer fee. If the money being sent is being converted into another currency, the sender may be subject to paying for exchange rates. While many credit unions and banks allow you to send money abroad through their website or mobile app, the sender may need to visit the branch in order to make any transfers—meaning it must be done on a business day.
Traditional Wiring Services
Western Union and MoneyGram have long been the go-to options for sending money internationally, with their offerings continuing to evolve over time to accommodate both senders and receivers.
Pros: Western Union has over 500,000 locations in more than 200 countries and MoneyGram has over 350,000 locations in more than 200 countries. With both offerings, people can send money from their websites, apps, or physical locations. While people can send money from their financial institution account, senders have the option of visiting a physical location and sending money via credit or debit card, or even cash. Recipients can collect the money through direct deposit into their financial institution account, on a prepaid debit card, or in cash. This means these options are great for underbanked senders and recipients alike. These options are ideal for emergency situations because the recipient can get the money within minutes if necessary.
Cons: The fees to send money through Western Union or MoneyGram do not follow a universal standard, as it differs depending on how the money is sent, how quickly it needs to be sent, and where the recipient is located. Cash pick-up is only an option during the branch’s work hours. In addition to fees, those using Western Union or MoneyGram to send remittance are subject to paying currency exchange rates.
Online Transfer Providers
Online options like Xoom, Wise, and OFX are growing in popularity. Not only are they convenient options in this increasingly digital age, but they often have lower fees as well.
Pros: Because online transfer providers act as a third-party in a transaction, the sender is often charged no or very low transfer fees and exchange rates. The sender transfers money to the company’s account in the U.S. The company then transfers an equal amount to the recipient from its account in the recipient’s country. With no money leaving the country directly, the platforms are able to keep their fees low. The transfers are fast, cost-effective, and can be easily accessed on easy-to-use online and mobile apps.
Cons: Xoom is only available in 120 countries, OFX is only available in 80 countries, and Wise is only available in 70 countries. While the low fees and ease of use make them an attractive option, they are able to send money to far less countries than credit unions, banks, Western Union, or MoneyGram. Recipients of Wise and OFX payments must also have a bank account to receive money, which does not benefit the underbanked. Additionally, many online transfer providers have minimum transfer limits that may be difficult for some to afford.