Immigrants Send Money Home in Record Numbers
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Many immigrants send remittances to their family left behind in their native countries. For some individuals, it is necessary to send money to relatives remaining in their home countries, in order to either help supplement their income, or to provide their only source of income. Immigrants who have recently arrived in the United States tend to send money home often, despite earning relatively low wages. However, the longer an
immigrant resides in the United States, the more money they tend to send to family back home. For example, recent immigrants tend to send $200 or $300 home on a monthly basis. Individuals who have been in the United States longer and are better off financially tend to send money less often but in larger amounts. It is estimated that worldwide remittances amount to more than $126 billion. Remittances have become a considerable force in the economy of many countries. Among the countries that receive the most in remittances are Mexico, the Philippines and India. Last year Mexico received more than $17 billion in remittances. The amount of remittances in Mexico exceeds the amount of foreign direct investment in the country. This is not surprising given that a significant portion of Hispanics in the United States are of Mexican descent. Other Latin American countries like El Salvador are popular destinations for remittances. In 2005 approximately $2.5 billion was sent to El Salvador. The amount represented more than 13% of El Salvador’s GDP, or gross domestic product. It is estimated that Latin Americans residing in the United States send $30 billion dollars to their native countries.
There are many different ways to send a remittance to one's home country. Immigrants may send money home via a family member or friend who is visiting their homeland. Others may choose to do an international transfer, and wire money home, but this turns out to be expensive since transfers incur a charge of anywhere from 10 to 20 percent of the total money being wired. In addition, those sending money may also incur higher costs due to the exchange rates offered by the companies. Some companies that transfer money internationally include Western Union and Money Gram. There are other companies that charge a flat fee for up to a certain amount of money like Mexico Express, which sends remittances to Mexico. Mexico Express customers can send remittances along with documents and letters at no extra charge. The remittance is then personally delivered to the recipients within 24 hours. Once the money is in the hands of the recipient, the majority of the remittance ends up going toward food, services and goods. Whatever is left over tends to be used to improve housing or buy property. It is estimated that only a small portion of remittances ends up being invested in the country. Conversely, mutual aid societies in the United States that are formed by former immigrants who are now permanent residents and U.S. citizens, help to foster foreign investment. Members of these aid societies have generally prospered economically and raise funds to send back home. The money has been used to improve infrastructure, purchase computers for schools, and install water and sewage lines, among other investments.
The majority of the remittances are sent using money transfer companies, but now commercial banks are introducing similar programs which are gaining popularity. Banks like Citibank have started forming partnerships with foreign banks. They have also made it easier for immigrants to open bank accounts by presenting a consulate identification card. At Citibank a remittance of up to $3,000 can be sent for $5 which is significantly lower than what money transfer companies are charging. Bank of America has also introduced a similar program called SafeSend. With this program, remittances can be sent to Mexico at no cost. Customers can transfer money from their checking account and within a few hours the funds are available for pick up in Mexico. Another option is to transfer money to an account of one of Bank of America’s partner banks in Mexico and the funds are available the following day. The customer can simply make a phone call to the bank and request the remittance to be sent. In the process of introducing such programs many banks are hoping to gain new immigrant customers who currently have no bank accounts in the United States. The banks are offering perks like giving out international phone cards or financial education classes to attract immigrants. Other financial institutions like the Federal Reserve also would like to see a greater number of immigrants opening bank accounts so that they can take advantage of services offered by banks and start establishing accounts. However, one barrier that immigrants often face is that some banks require a Social Security number in order to open a banking account.