Find out what remittance means and how to use it
If you’ve moved abroad for work and are looking for an easy way to financially support loved ones back home, a remittance may provide the answer.
A remittance is simply the transfer of money between two groups, whether people, companies or billpayers. It’s a term usually associated with workers who send money back to their family from abroad.
As of 2019, around 800 million people around the world were said to be receiving remittances.
Options for remittance include money transfers, cheques, bank transfers and prepaid cards. There are also several ways of sending money without a bank account.
Read on to discover how a remittance works, the people who traditionally use them, and how to complete one.
In this article
- Remittance definition: what it means
- Who uses remittance transfers?
- How to send a remittance transfer
- How can you receive a remittance?
- What’s the difference between a remittance and a bank transfer?
- FAQs and guides
If you’ve not heard the term before, a remittance might sound complicated or even challenging. But it’s really nothing to worry about.
A remittance is simply a money transfer, sent between two parties. Though a remittance can refer to any kind of monetary transfer, it usually describes someone sending money to another country. For example, you might be sending funds to your family abroad, whether as a wedding gift, or contributing towards bills back home.
‘Remittance’ comes from the word ‘remit’, which means ‘to send back’. It’s a very common transfer option and can be made using a money transfer company, such as Western Union. The money is sent by electronic transfer to offer peace of mind.
Remittances are a common way for migrant workers to get vital funds back home to their friends and relatives.
A percentage of your wages can be sent to family members and loved ones regularly, or a remittance can be used as a one-off gift, for a graduation or christening.
India is the most common destination for remittance transfers, with $83 billion wired to locations in the nation in 2020. The destination with the most transfers sent out of the country was the US, where $68 billion was transferred out in 2020.
However, despite their popularity among migrant workers, anyone can choose to make a remittance transfer.
There are several different ways to send a remittance transfer. The one that suits you will depend on your personal circumstances. Here are some of the main options to choose from.
Money transfer services
Money transfer services like Western Union offer a convenient way of sending funds to over 200 countries. You’ll usually need a bank account, debit card or credit card to fund your transfer. You can often send money online, through an app or in person.
Banks or credit unions
It’s possible to transfer money between bank accounts at home and abroad. However, both you and your receiver will need access to an account.
Cheques and money orders
It’s possible to send money back to another country without the assistance of an agent. Cheques and money orders can be written and sent yourself. However, these methods rely on the receiver having access to a bank account to cash the cheque.
Though a cheaper alternative to using a remittance agent, posting cheques may not always be the most secure option.
You can use prepaid debit cards to send money home. With these, you’ll load the amount you wish to send on to the card and then post it to your family. They can then use the card much like a debit card, spending it where they want until the funds are gone.
There are several ways you can receive a remittance sent by a loved one abroad – from cash pickup to a bank account transfer.
If you receive a money transfer from abroad, you might be able to pick it up as cash from participating agent locations. All you need to do is head to a convenient agent location and hand in your details.
You can receive a cheque in the post sent to you by a family member or friend abroad. You’ll need to deposit it into a bank account to withdraw the money.
You may also receive a prepaid card. This works like a regular debit card and can be used at participating retailers until the balance on the card is spent.
If you have a bank account, you can receive a remittance via an electronic bank transfer. The money should become available to withdraw shortly after the transfer has been made.
Though they’re both methods of transferring money between people, remittances and bank transfers differ in several ways. Which one is suitable for you will depend on your circumstances.
A bank transfer requires two bank accounts to take place. Money is sent digitally from one account to the other. For you to be able to transfer funds abroad, both you and your receiver will need access to separate bank accounts.
A remittance, meanwhile, covers money transferred from a variety of sources. Though you can still transfer from a bank account, you’re also able to send money via other means. These can include money transfers, prepaid cards and physical cheques. Depending on how you choose to remit your money, your receiver will not always need regular access to a bank account.