The Finance Buff

For reasons I won’t go into details, I need to send $100 to someone in Mexico. I’m not in a big hurry. The money doesn’t have to be there in minutes or hours, but I don’t want it to take weeks or months either. Obviously I’m interested in reliability and cost, both in fees and the hit on the exchange rate. What are my options?

1. Mail a check. A check in the mail probably takes a week to get there. Then my recipient can take it to their bank and have the bank collect it. I don’t know how long that will take. I’m guessing another week or two. So total 2-3 weeks. In terms of cost, there is only postage (< $1) on my side. The recipient’s bank perhaps will charge a small amount for collecting a check from the U.S. but I imagine it will be minimal too. This is probably the lowest cost option but it will take longer than I’d like.

2. Western Union or MoneyGram. I can also use Western Union or MoneyGram. These services let me transfer money almost instantly. The going rate is about $10-15 for my $100 transfer, more for higher amounts. The cost is too high for me.

3. Wire Transfer. I can also go to a bank and use their wire transfer service. This is even more expensive for transferring a small amount because the fee is usually fixed for any amount. An outgoing international wire transfer can cost me $40. That’s way too expensive for sending $100. Washington Mutual advertises free outgoing wire transfers for their account holders. Then it says "non-refundable foreign currency exchange charges and intermediary and beneficiary bank fees may apply." I don’t have an account with Washington Mutual so I don’t know what those charges will be.

4. Bank Partnership Remittance Service. I don’t know if that’s the proper name for this kind of service. Some banks established service partnerships with some other banks in other countries. They offer remittance service which lets customers send money to those specific countries. The recipient either sets up a bank account with the partner bank or picks up cash from the partner bank. Because it’s a bank-to-bank partnership, the service does not cover all countries. It also requires the recipient to do something with a partner bank on the other side. If they happen to use that bank or that bank has a branch location near them, great. If not, the partner bank may not be convenient for them.

This is the service I ended up using. Fortunately Mexico is a popular country for this kind of service. At the bank I used (Wells Fargo), their ExpressSend service covers Mexico, El Salvador, Guatemala, China, India, Philippines, and Vietnam. For Mexico, the partner banks are HSBC Mexico, Banorte, and BBVA Bancomer. My recipient also happens to use one of these banks. That made things a lot easier. I went to the bank and I gave them the recipient’s name, address and phone number. If I need to send money regularly, I can also give them the recipient’s bank account number and set up an ongoing link. Because it was only a one-time transfer, I selected the "cash pickup" option.

Two days later, my recipient told me he got the money. Problem solved. Because of my other account relationships with Wells Fargo, they didn’t charge me any fee for this service (otherwise $5). The exchange rate was about 2% less than the wholesale rate reported on Yahoo! for that day. So that’s how the banks make money. For a one-off transfer of $100, a cost of $2 is reasonable for me.

If someone needs to send money regularly, there are probably other more convenient and/or less expensive options. Do you know any of them?

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