Jenny Martin of Yonkers, N.Y., an employee at Consumer Reports, is like many people who use transfer services. She uses the same walk-in retail store near her home whenever she sends money to loved ones in the Dominican Republic. But when we compared the deal she got for a recent $200 transfer to other available options, we found that she would have sent 3 percent more pesos for every dollar with the online service Xoom. And had she used another walk-in service a few doors away and sent the money in dollars (to be converted to pesos in the Dominican Republic), her mother would have received 6 percent more pesos per dollar.
Martin's experience demonstrates why it's important to compare services. Here's a rundown of the various ways to transfer funds:
Cash to cash. Walk-in money-transfer centers, such as those operated by Western Union, MoneyGram, and Ria, handle most transfers from the U.S., typically on a cash-to-cash basis. You hand over cash, which is converted to the currency of the destination country and picked up by the recipient, or in some countries delivered to him or her.
Bank accounts. Some services let you take money from your bank account and deliver it to your recipient's bank. You often can arrange these transfers online or by phone by providing the account and routing numbers for both the sending and receiving banks. If only one of you has an account, you can use it for part of the transaction, whether it's to fund the transfer or receive the money. However, if a third-party sender needs to access your account to send money, it could slow down the process.
You also can use a bank wire transfer to move money from one account to another, but this method often has high fees. Bank of America charges $45, and there can be additional fees from the receiving bank. So wire transfers are best used to send large amounts that exceed the daily or monthly limits imposed by other types of money-transfer services; such limits are typically around $1,000 to $5,000, depending on the service and where the money is going.
Some banks have special remittance programs for transferring smaller amounts. For example, Bank of America's SafeSend program, available only for transfers to Mexico, lets you send money from a BOA account to more than 5,700 partner locations in as little as two hours with no fees to the sender or recipient. We did, however, find BOA's exchange rate to be not as favorable as some other services. Another service is the Wells Fargo ExpressSend program, which has a range of sending options, including account-to-cash, cash-to-cash, and cash-to-account.
Credit and debit cards. For some services, such as Western Union and MoneyGram, using a debit or credit card can speed up the time it takes to send the money, compared with using a bank. But using either may cost you more than paying with cash or a bank account, and you may face an extra credit-card fee from your issuer, depending on whether the transaction is processed as a purchase or cash advance. Some services, including MoneyGram, let you send money to a recipient's credit card.
Prepaid debit cards. Some services send funds via a prepaid debit card that your recipient can use for cash withdrawals and, in some cases, purchases. The benefit is that you can replenish the card in the U.S., using cash, a checking account, debit or credit card, or direct deposit—and the money can be available within minutes. But fees can make this an expensive option.
The amount and types of fees can vary widely from one prepaid card to the next. The Mi Promesa card, for example, charges a $19.95 card activation fee, a $4 monthly fee, and a $10 a month fee if the card is inactive after six months. Some prepaid debit cards charge fees to add money, check the balance, make a withdrawal or purchase, and take a cash advance. There might even be a fee if the card is declined at an ATM or by a retailer. And you might have to pay a delivery fee: the ATMCash prepaid card charges a one-time fee ($9.99 for cards sent to Mexico) to express mail the card, which can take three to seven business days.
Cell phones. You can use your smart phone's browser to access a money-transfer service's website, in the same way you would use an Internet-enabled computer. Beyond that, there are several new technologies. One is a free PayPal downloadable app for the iPhone, Android, and Blackberry. It lets you text money from your PayPal account using a recipient's phone number or e-mail address. Recipients need a free PayPal account to access the money.
Another is Western Union's mobile money-transfer program that lets you transfer money directly to the mobile-phone wallets of cell-phone users in Bangladesh, Kenya, Madagascar, and the Philippines. The mobile wallets can be used to make purchases, pay bills, and get cash, turning the mobile phone into an electronic debit card. Check the PayPal and Western Union websites for more information.