With so many different methods of making remittance payments, and so many services available, it’s easy to get overwhelmed and end up overpaying.
If you need to send, or receive money from overseas, for any reason, it pays to understand them – for example, Wise is 6x cheaper than traditional banks.
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Read on to learn about remittance payments, and how they work.
What is a remittance?
Let’s start at the beginning. What does remittance mean? The Merriam-Webster dictionary defines it as:
To remit – to send (money) to a person or place especially in payment of a demand, account, or draft¹.
In other words, a remittance is the sum of money being sent, generally to someplace abroad, although it can also be made domestically. In common usage, the word can refer to moving money by any method, such as a wire transfer, or by mail, to move the money. The payment could be to:
- Pay an employee
- Send money to a foreign aid organization abroad
- Settle an invoice from a supplier
- Support family members back home
How do remittances work?
Although the name sounds quite complicated, remittances are pretty simple. You send money from your home country, and the money is then automatically converted to the currency of the recipient’s home country, based on the exchange rate at the time.
If you’re the sender, the first step will be to choose a method that works for you, depending on when you want the money to arrive, and the fees you’re willing to pay.
In order to make a remittance payment, you’ll need information such as the recipient’s name, remittance address (the address that an individual or business uses to receive payments), and possibly the name and address of their bank, depending on the method of payment you’re using.
You’ll also need to consider any foreign remittance taxes that apply before you make your payment.
What companies offer remittances?
If you need to pay a remittance, you have a few options.
In most cases, you can choose to make your payment with your bank by wire transfer, although not all banks offer this service if you’re moving money internationally.
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Services such as Western Union and Moneygram allow you to move money online, or by visiting one of their outlets across the globe.
The recipient can then either have the remittance paid into their account, or collect it in cash at a location close to them.
Depending on the currencies and countries involved, you may also have the option of using PayPal or OFX. If both the sender and recipient are based in the US, newer app services like Cash App and Venmo are also worth considering.
💡 Alternatively, you could use a specialist service provider, like Wise, which offers fair exchange rates and low, fair transfer fees for sending money overseas. You can save up to 6x compared to traditional banks and other providers.
How can I make a cheap remittance payment?
If you make regular remittance payments, you might get a better deal – and make life a lot easier – if you open a Wise account.
With a Wise account, you can hold your money in several different currencies, and for some currencies you can even get your own virtual account details, so you can receive international payments from third parties as well.
Because Wise uses the real exchange rate, you’ll find that switching between currencies when you need to is simple and cheap, with no hidden fees to worry about.
Get a free Wise account today
More remittance examples
There are loads of remittance services to choose from, depending on factors like whether getting your money moved quickly – or minimizing fees – is more important to you.
Depending on where you live, who you bank with, and the exact details of the transaction, you might find that not all options are available, so it pays to do your research in advance.
1. Wire transfer
A common way to pay a remittance is by sending an international transfer through your bank.
You can call into your local bank branch and sort it out in person, or use your bank’s online banking system or app. If you’re sending money abroad from the US, our article on how to make an international wire transfer might help.
2. Checks
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If you would rather pay your remittance using a check, you can simply send it via snail mail, and wait.
However, this process is quite slow, and there’s also the possibility that the check could be lost, damaged or stolen on the way.
Add to that the fact that cheques are far less frequently accepted, and they’re seldom the best choice. Germany, Austria, the Netherlands, Belgium, and Scandinavian countries have already phased checks out altogether, with other countries like the UK in the process of doing so.
3. ACH
ACH, which stands for Automated Clearing House, is a good option if you’re making a remittance within the US, between US bank accounts, ACH payments are the most common method of making bill payments and direct deposits in the US.
Although they’re almost completely free for individuals to make and receive, the biggest drawback is that they can take several business days to process.
4. Credit cards
If you opt to make a remittance payment by credit card, you may find that you’re charged some extra fees.
For example, PayPal charges an additional 2.9% + a fixed fee based on currency for online transfers using a credit card.
Western Union also charges higher fees if you choose to pay with a card. If you want to use your bank account to send money, you can avoid these fees by doing bank transfers instead.
Bottom line
Whether you need to pay a one off remittance, or you’re an overseas worker regularly sending cash home to your loved ones, it’s worth understanding how remittances work, and what fees might be involved.
With a bit of research, you might find that there’s a way to move your money safely and quickly, and with lower fees. That way, more of your hard earned cash gets to where you want it, and less is eaten up by bank or transfer service fees.
Sources:
- https://www.merriam-webster.com/dictionary/remit
All sources checked on 3 May 2022
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