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<p>Many migrants find themselves responsible for keeping friends and family financially stable in their home countries, so they send hundreds or even thousands of dollars a month out of the country. But did you know remittances can affect the currency exchange rate?<br><br>Learn more about remittances and what they do for the global economy, as well as how to make your money go further when you send it abroad.</p>



<h2 class="wp-block-heading">What Are Remittances?</h2>



<p><br>Remittances are payments from one person to another. People usually use the term when talking about money sent to another country. Migrants, for example, often send remittances back to their home country to help support friends and loved ones.<br><br>Remittances have become so popular that they can be a <a href="https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Remittances#:~:text=Countries%20that%20receive%20re">significant source of income</a> for an entire country. In 2011, for example, remittances made up 12% of Haiti&#8217;s gross domestic product (GDP), the total value of all goods and services produced that year. Other countries rely even more heavily on remittances. In Somalia, for instance, over 70% of the country&#8217;s GDP came from out-of-country transfers in 2006.<br><br>Needless to say, without remittances, some countries would suffer drastic consequences to their economy and the people’s way of life. Remittances continue to be an important way to share wealth with others in the same family, even across thousands of miles.</p>



<h2 class="wp-block-heading">How Remittances Work</h2>



<p><br>Remittances work much like other payments, but they must travel much farther and often across international borders. Senders choose between paper options, such as an <a href="https://www.riamoneytransfer.com/en/blog/how-to-send-an-international-money-order-a-complete-guide/">international money order</a>, or a digital transfer.<br><br>Here’s a more detailed look at what happens when sending money digitally:</p>



<ul class="wp-block-list">
<li>A person from Country A (such as the U.S.) chooses to send $500 to a loved one in Country B (such as Mexico). They initiate the process with an <a href="https://www.riamoneytransfer.com/en-us/international-money-transfer/">international money transfer</a> service that serves both countries.</li>



<li>The sender funds the transfer using money from their own bank account, credit card, debit card, or cash on hand.</li>



<li>The money is converted into the person&#8217;s currency in Country B.</li>



<li>The remittance provider sends the currency to the receiver, who can pick it up as cash or have it deposited into a bank account or digital wallet.</li>
</ul>



<p>How long the entire process takes depends on a few factors, such as how the remittance is funded and received. While some bank transfers can’t take place on holidays or weekends, other funding types can move in as little as 15 minutes.</p>



<h2 class="wp-block-heading">Remittances and Currency Exchange Rate</h2>



<p><br>Remittances bring much-needed income to those who need it, but the currency exchange rates affect just how much of that money makes it to the receiver. As the currency values of both the sending and receiving countries fluctuates, the actual benefit of the remittance varies.</p>



<h3 class="wp-block-heading">What is a currency exchange rate?</h3>



<p>In simple terms, the <a href="https://www.thebalancemoney.com/how-do-exchange-rates-work-3306084">currency exchange rate</a> is how much of a currency in one country can be purchased with the currency of another. In our previous example of money being sent from the U.S. to Mexico, the currency exchange rate between U.S. dollars and Mexican pesos matters. If the rate isn&#8217;t good, it takes more dollars to get the needed amount of pesos to the receiver.</p>



<h3 class="wp-block-heading">How do remittances affect the currency exchange rate?</h3>



<p>The rate of exchange isn’t just important to make sure the sender’s money goes further. The act of remitting large amounts of money into a country can negatively affect exchange rates. This happens more often in those countries where a large part of the GDP comes from remittances.<br><br>So, what happens to make the rate change? Remittances may do the following:</p>



<ul class="wp-block-list">
<li><strong>Affect inflation</strong>: If there’s more money in a country to spend, people will spend it. Unfortunately, as people buy and consume more goods, this causes the merchants to raise the prices. Too much of this price raising leads to inflation and keeps the remittances from going as far in the local economy.</li>



<li><strong>Appreciate the currency</strong>: When a currency, such as the peso, is in high demand, the cost for it goes up. If more and more dollars are converted from U.S. dollars to pesos through remittances, the peso can be appreciated, or the rate can go up. It takes more pesos to buy things than before.</li>



<li><strong>Stabilize the currency</strong>: One positive benefit from remittances is a possible stabilization of the currency. When people want a currency, and its value stays high, it makes this currency strong. A strong currency is more likely to perform well in times of economic uncertainty, and this is a good thing for the people of that country.</li>
</ul>



<p>Of course, these are very high-level effects that may happen with large remittances coming into a country. Whether they occur depends on other factors, such as a country’s monetary policy, existing debts and liabilities, and economic forces outside of the country’s control. The relationship between remittances and exchange rates may be complicated.</p>



<h2 class="wp-block-heading">What You Can Do to Improve Exchange Rates</h2>



<p><br>Ideally, you’ll want to get as much of the receiver’s currency as possible. To maximize the remittance rate, try the following:</p>



<ul class="wp-block-list">
<li><strong>Shop around.&nbsp;</strong>Services like Ria Money Transfer not only show you the exchange rate up front but also offer competitive pricing to help you send money with lower fees.</li>



<li><strong>Send more at once</strong>. Some money transfer services charge a flat fee for the service and then a percentage of the total on top of that. Sending more at once only requires you to pay that flat fee one time.</li>



<li><strong>Watch remittance timing.&nbsp;</strong>It’s not possible to predict the perfect time to send money, but some days will have better exchange rates than others. By knowing the conversion rate each day and sending on the better days, you can get more cash to your loved ones.</li>
</ul>



<p>Some countries will have more drastic currency fluctuations than others. If you send to a country with a relatively stable currency, you shouldn&#8217;t see big swings in price from week to week. Pick a day that&#8217;s convenient for you and send it with a service like Ria Money Transfer, where the exchange rate is always competitive and transparent.</p>



<h2 class="wp-block-heading">Limiting Other Remittance Costs</h2>



<p><br>The exchange rate isn’t the only thing to consider. The total cost to send a remittance includes fees that eat into your hard-earned cash. To get the best price on your transfer, take the following precautions.</p>



<h3 class="wp-block-heading">Use only a reputable service</h3>



<p>Not all companies are created equal, and those located conveniently in airports or other popular destinations may not be the best deal. Ria Money Transfer has several physical locations in over 160 countries to make it convenient and affordable to pick up cash, with the reputation to back it up. The cost of sending remittances can be cheaper than using an <a href="https://www.riamoneytransfer.com/en/blog/how-to-send-an-international-wire-transfer/">international wire transfer</a>.</p>



<h3 class="wp-block-heading">Watch out for promotional offers</h3>



<p>Your first remittance may be free or have a lower cost than later remittances. This can be a good way to get to know a company, but you should know the actual price to send cash. Ria Money Transfer offers a bargain on your first send but clearly shows the costs, so you won&#8217;t be surprised the next time.</p>



<h3 class="wp-block-heading">Know the costs of funding</h3>



<p>While the money transfer service may not charge a different rate for cash vs. credit card funds, your bank may. Credit card funding can be considered a type of cash advance by some banks and may come with additional fees. If you want to save the most money, learn how each funding type works and what it will cost before you initiate a remittance.</p>



<h3 class="wp-block-heading">Collect information in advance</h3>



<p>In addition to fees and charges, you should be careful about the cost of your time. You don’t want to be driving all over looking for a money service or tracking down the right pickup location for your family members. To ensure a speedy transfer, get the recipient’s name as it appears on their government-issued ID, along with their payment preferences.<br><br>Do they want to pick up cash at a retailer? Do they prefer their digital wallet? By asking ahead of time, you can save both of you additional frustration and time.</p>



<h2 class="wp-block-heading">When Sending Remittances, Keep This in Mind</h2>



<p><br>Whether you’re sending $50 or $5,000, remittances play a big role in the global economy. Understanding the cost of remittances and how they work can help you reduce high fees and get more of your money to those you love. Ria Money Transfer is here to help with transparent pricing and competitive exchange rates. Use the app and get full access to all the money funding options and a quick, user-friendly experience designed for everyone from beginners to seasoned travelers.<br><br>To learn how to get started, download the free Ria Money Transfer app to your phone or tablet. </p>



<h2 class="wp-block-heading">FAQs</h2>



<h3 class="wp-block-heading"><br>What are the best ways to send remittances?</h3>



<p>When choosing a remittance method, consider cost, convenience, and speed. Some methods, such as international money orders, may be cheap, but the money may take a long time to arrive (and could even get lost) through international mail. International wire transfers may come with additional fees that make it too expensive to use on a regular basis, but the money arrives very quickly.<br><br>Ria Money Transfer is another option that balances the best of all features. With low fees and secure funding methods, it&#8217;s an excellent choice for those who want money to arrive in as little as 15 minutes.</p>



<h3 class="wp-block-heading">How large of a remittance can I send?</h3>



<p>The money transfer companies and banks in each country set the limits on how much money can be sent at once. To know for sure, contact the money transfer company you want to use and ask. While it may allow you to send very large remittances ($10,000 or more), laws may require you to fill out additional forms or seek special tax treatment for gifts given.<br><br>If it’s your first time using a money transfer service, you can try it with a smaller amount to get the hang of things. When you feel confident it will work for you, you can send larger payments.</p>



<h3 class="wp-block-heading">Where can I send a remittance?</h3>



<p>Each money transfer company has a list of places you can send money. The list may change based on political relations between countries and the laws of each country. Ria Money Transfer lets you send to 165 countries around the world and offers a wide range of funding and cashout methods to help you get money to those you love.<br><br>To see if you can send money to the country of your choosing, use the <a href="https://www.riamoneytransfer.com/">Ria Money Transfer app</a> and select the receiving country. If you see it on the list, it&#8217;s available. You will also see the cost of sending money, including fees and the currency exchange rate. Note that not all funding options are available in all countries. (Some countries don&#8217;t have digital wallet options, for example.)</p>



<h3 class="wp-block-heading">Is a higher or lower exchange rate better?</h3>



<p>Depending on your money goals and where you send money, you may prefer a higher or lower currency exchange rate. A higher exchange rate gets you more of the currency you want to buy, so this is good if you are converting your money to send to someone else. Remittances with a higher exchange rate go further and help the receivers do more with the cash. A lower exchange rate can be good for those selling items out of the country. It’s a good deal for exporters who want to make and sell things cheaply.<br><br>Most people who want to send remittances abroad prefer a higher exchange rate.</p>


How Do Remittances Affect Currency Exchange Rate?

About the author

Gabriela Solis

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