Save on International Transfers by Understanding How Remittance Fees Work
13 November 2024
In this article, we will explore the different types of remittance fees, take a not-so-deep-dive look at how providers like OTT Remit structure their services, and provide tips for finding the best options for your money transfers.
We are all familiar with “padala,” the Filipino term for remittances, which plays a crucial role in supporting both the global economy and families and communities around the world.
But when we ask, “magkano magpadala?” or “how much does it cost to send money?”, many of us either throw out rough estimates or avoid answering because we are unsure of the actual cost.
Remittance fees, or service fees, are an essential part of sending money. In this guide, we will explore the different types of remittance fees, take a not-so-deep-dive look at how providers like OTT Remit structure their services, and provide tips for finding the best options for your money transfers.
So the next time you will be sending funds to support your family, understanding these fees can help you make more cost-effective and informed decisions.
Why Do Remittance Fees Exist?
Sending money internationally sometimes comes with fees, but knowing the reasons behind them, and why these service fees exist can help you assess and evaluate remittance providers more effectively.
1. Intermediary and Processing Costs
When sending a remittance or a money transfer, your padala passes through formal channels like banks or other financial institutions. These institutions, known as intermediary banks, act as middleman banks to help transfer money between two banks that may not have a direct link. For example, when you remit money internationally, your bank might not have a direct connection to the recipient’s bank in another country, so it relies on an intermediary bank to send the funds through the banking system until they reach the destination – your loved ones. Each intermediary bank involved in a cross-border remittance transfer usually charges a service fee, which can increase the overall cost of sending money.
2. Currency Exchange Conversion
Converting one currency to another, for example from the Canadian Dollar to the Philippine Peso, generally incurs exchange rate markups. Some money remittance providers keep these markups low, while other money transfer services use them as a source of revenue. The size of these foreign exchange markups can affect or even dictate the remittance fees they charge, waive, or discount. Understanding how different money transfer services handle exchange rate markups can help you identify the most cost-effective provider for your cross-border remittance needs.
3. Security and Regulatory Compliance
The remittance industry is highly regulated and must adhere to strict compliance standards to prevent fraud and money laundering. Given this, money remittance providers usually pass these operational costs on to customers through remittance fees. Ensuring regulatory compliance is important for maintaining the safety and integrity of money transfer services, which helps protect both senders and recipients in cross-border remittance transactions.
How to Remit Money with Different Remittance Fees
Money remittance providers use various fee structures, and understanding these can help you find the best ways to send money or the cheapest way to send money internationally. Here are some common types of remittance fees to consider when choosing a provider:
1. Fixed or Flat Remittance
Some remittance service providers charge a fixed fee, regardless of the amount sent. This predictable approach is often cost-effective for larger transfers but may feel expensive for smaller remit transfer amounts. For example, a $3.99 flat fee means you pay the same rate whether sending $50 or $500. This remit money transfer model is popular among users who value transparent and straightforward fees.
2. Percentage-Based Remittance Fees
Other providers use a percentage-based fee, calculated based on the amount sent. This structure benefits smaller remit transfers but can become costly for larger sums. For instance, a 2% fee on a $100 money remittance costs $2, but the fee increases to $20 on a $1,000 transfer. Some providers cap these percentage fees, so it’s worth comparing options if you’re sending larger amounts.
3. Remittance Fees Based on Payment Method
Different remittance payment methods can affect the fees you pay. Many money remittance providers offer a variety of payment options:
- Bank Transfers: Linking directly to a bank account can reduce fees since this method carries lower risk.
- Interac E-Transfers: Sending money via Interac is a low-cost and secure way to send remittance, as offered by remittance service providers like OTT Remit.
- Debit Card: Using a debit card may incur moderate fees but usually allows for faster money remittance transfers.
- Credit Card: Fees are generally highest for credit card payments due to higher fraud risk and card processing costs.
- E-Wallets: Some money remittance service providers support e-wallets with fees similar to bank transfers or debit cards, offering convenience and accessibility.
4. Remittance Fees Based on Delivery Speed
Some remittance service providers, like OTT Remit, structure their remittance fees based on delivery speed:
- In-Minutes Remit Transfer: Higher fees apply for remit transfers processed within minutes, providing quick access for urgent needs.
- Same-Day Money Transfers: Delivered within 24 hours with moderate fees, this option balances speed and cost.
- Standard Remit Transfers (3-5 Days): The most affordable option, ideal for non-urgent transfers, making it one of the best ways to send money with lower fees for those who can wait.
OTT Remit’s delivery-based model provides flexibility, allowing customers to choose a speed that fits their urgency and budget. For example, if you are making an online remittance from Canada to the Philippines for a non-urgent expense, you can opt for a standard transfer to save on fees. For immediate remit money online needs, in minutes money remittance are available.
By understanding these money remittance fee structures, you can choose the best remittance providers for your needs and avoid unnecessary costs.
How Money Remittance Providers Handle "Zero Fees"
Some money remittance providers advertise “zero fees,” but it’s important to understand how they still generate revenue. In many cases, these providers apply a lower foreign exchange (FX) rate than the mid-market rate, profiting from the difference. Here’s how it typically works:
- FX Markup: If the mid-market rate is 1 CAD = 41 PHP, they might offer 1 CAD = 40 PHP, allowing them to earn a profit on the currency exchange.
To find the best way to send money internationally, it is always advisable to compare exchange rates and fee structures across different money remittance providers like OTT Remit and others. This way, you can ensure you are getting the best value for your remittance.
Remittance Advice on Choosing the Best Remittance Provider: Key Factors
Selecting the best remittance provider involves more than just comparing money remittance fees. Here is some key remittance advice to consider:
- Exchange Rates: Low or zero-fee options may seem appealing, but if the exchange rate is unfavourable, you could end up losing more when you send money internationally. Be sure to review both the remittance fees and the exchange rate offered.
- Transparency: Opt for remittance providers that clearly disclose remittance fees and exchange rates upfront, as hidden charges can quickly increase your remittance costs.
- Security Features: Verify that the remittance provider has strong security measures to protect your data and ensure safe transfers.
- Delivery Speed Options: Remittance providers like OTT Remit allow you to choose between different delivery speeds, giving you the flexibility to balance cost and urgency for the best way to send money abroad.
- Customer Support: Good customer service is essential if you encounter any issues with your money remittance. Choose a provider with responsive support that can offer helpful remittance advice when needed.
By keeping these factors in mind, you can find a remittance service that meets your needs and provides the best value.
Remittance Advice on Minimizing Fees with Providers like OTT Remit
These tips can help you get more value from your remittance transfers:
- Regularly Compare Remittance Providers: Use comparison websites to evaluate fees, exchange rates, and transfer speeds across multiple providers, including OTT Remit.
- Be Cautious of “Zero Fee” Claims: Always review the exchange rates offered by zero-fee remittance providers, as foreign exchange markups can make remittance transfers more expensive.
- Optimize Your Payment Method: To reduce remittance fees, choose payment methods like Interac e-Transfer or bank transfers instead of using credit cards.
- Plan Ahead for Standard Transfers: If your transfer is not urgent, opt for a slower, more cost-effective delivery option (e.g., OTT Remit’s standard transfer) to save on fees.
Check for Recipient Fees: Some remittance services may charge fees to the recipient, though OTT Remit does not impose any recipient or associated remittance fees.
Understanding Remittance Fees: Choosing the Best Provider for Your Money Transfers
As shared, remittance fees play a very important factor when selecting a money transfer provider. OTT Remit offers a unique remittance fee structure based on delivery speed, giving you flexibility and control over your costs. Other remittance service providers may charge in various ways, including flat remittance fees or exchange rate markups, which can add up quickly.
When sending money to support loved ones, understanding these remittance fees can help you save money in the long term. Again, just some pieces of remittance advice: When choosing a remittance provider, consider one like OTT Remit, which offers transparent fees and flexible delivery speeds. Always take the time to compare your options. By using these insights, you can find the best way to send money internationally, ensuring that your hard-earned funds reach their destination with minimal fees. Whether you are looking for the best way to send money abroad, how to remit money from Canada to the Philippines, or how to send money online, choosing the right provider is key.
Disclaimer: The views and opinions expressed by the authors in this publication are their own and do not necessarily reflect the views of OTT Remit, OTT Financial Inc., and the OTT Group of Companies. This publication is provided for general information purposes only and should not be considered as exhaustive or comprehensive in covering all aspects of the discussed topics. It is not intended to replace seeking advice from a specialist or professional.
