What Is A Remittance? A Few Things To Understand
When looking to understand the different service offerings provided by foreign exchange institutions, it’s important to get a firm grasp of the terminology. By now, you’ve likely come across the term “remittance” more than once while doing research on money transfers.
At the most basic definition, a remittance is the act of sending or receiving an international money payment.
WHAT YOU NEED TO KNOW ABOUT BOOKING REMITTANCES
While the term may appear confusing or unknown, it’s really quite the opposite. Remittance, and all the phrases associated with it, is common business lingo in the foreign exchange industry.
We’ll shed some light on a few things to hopefully give you more clarity on the subject. By understanding remittance/remittance phrases you can better navigate the FX market with some expert knowledge.
What is a Remittance?
At its core, a remittance (sometimes called a remit for short) is just a fancy way of saying “international money transfer” or sending currency payments across national borders.
Generally speaking, remits are sent out in the form of wire transfers, digital transactions, debit/credit payments, or bank drafts. Individuals and businesses would ordinarily book a remittance with a financial institution to make overseas payments, investments, or to send money to family.
What are the affects of Global Remittance?
As globalization continues to expand, the overall value that international remittance provides increases. Transferring funds across borders can be viewed as a substantial economic booster, especially when considering developing countries.
Remittances are becoming more popular due to the combined impact of accessible internet, work visa popularity, and the tendency for migrant workers to seek more prosperous job opportunities overseas.
Global Remittance: A positive outlook
International money transfers are undoubtedly a useful service – billions of dollars are transacted every year to low-income nations to spur local development and future growth.
For instance, a wealthy migrant businessman in the United States may choose to distribute their wealth with relatives back home in India.
What is a Remittance Float?
A remit float is essentially the turnaround time of your transaction. The “float period” begins when you’ve initialized the transfer of funds, and ends when your recipient gets access to the money.
Depending on the method of money transfer, your remittance float can range between 24 hours to a few days; sometimes it could even take a few weeks. It consists of establishing the transaction amount, paying for it somehow (credit/debit, digital wallet, etc.), and waiting for intermediary processing while the money is in-transit.
When considering remit floats, it’s important to find a reputable money transfer service that promises timely delivery of funds.
What is Remit Advice?
To clarify off the start, remittance advice is not synonymous with the traditional meaning of “advice.” Speaking plainly, remit advice is a formality for businesses that need a transaction confirmation written on paper.
The “advice” on remittance is basically an official notification given out to the parties involved stating that a payment has been initialized. Although it may help in the case of personal audits (at the individual level), remittance advice is generally more helpful for businesses that operate on tight financial records.
What is a Remit Address?
The remit address involved in an international money transfer is simply where the funds will end up once transit is finalized. Usually, the remit address is the deposit/banking details of your recipient.
In a broader sense, the term “address” inquires about your recipient’s geographical location as well – since different countries have varying foreign exchange costs.
HOW CAN I PLACE A REMITTANCE?
Professional foreign exchange companies who specialize in currency conversions and international money transfers will place remits/money transfers for you.
Historically, sending money abroad involved high transaction fees and unfavourable exchange rate mark-ups (to convert the sent funds into local native currency).
How We Can Help
KnightsbridgeFX offers completely free wire transfers – with ZERO transaction fees and hidden charges – on remit amounts over $2000 CAD. With KFX, you’re guaranteed a competitive exchange rate that you can lock in.
Call their phone line at: 1-877-355-5239 to speak to a representative and receive a no- obligation complimentary quote.
4 Different Ways to Send a Remittance
Before you place money transfer orders internationally, it’s a good idea to understand your options first. There’s no one-size-fits-all transfer method; the best transaction pathway depends on your individual needs.
Here are a few variables you should consider prior to booking a remittance: your location/recipient location, transaction costs, speed of the transfer, security of funds, and overall quality of the service.
Remittance Payment – Wire Transfer
Before the invention of digital foreign currency wallets and online-only direct deposits, the most common method of placing remits was by wire transfer. Although some consider this practice out dated by technological advancements in sending money, in truth a wire transfer is still very reliable and secure.
Typically, international wire transfers are placed either in person at your local bank or through an online banking portal. The process involves bouncing your funds through an intermediary bank network (called the SWIFT network) until it ends up in your recipient’s account.
While traditional wire transfers with major banks can be very costly, KnightsbridgeFX offers free wire transfers on eligible orders.
Remittance Payment – Physical Cheque
Placing an international money transfer/remittance with cash or a cheque is truly old-fashioned and not recommended in most circumstances. Conducting money transfers through written cheques often result in substantial remittance float periods.
Cheques themselves – as a financial product – are slowly rotating out of daily use, and for good reason. In a world where timely access of delivered funds is vital, mailing a cheque through the postal service is just too slow.
Remittance Payment – Debit & Credit Balance
Oftentimes you can make payments on remittances with your debit or credit card information. While it can prove to be extremely convenient, especially if you’re on the go and need to place a quick transaction, it’s usually subject to higher fees.
In many instances convenience and cost in the foreign exchange industry are positively correlated, and this example shows it perfectly. If you’re willing to book a transaction using an FX service’s proprietary account balance system you could save a ton of money.
Remittance Payment – Digital Wallet
This method is steadily becoming the most popular way to perform foreign exchange transactions in the modern day, primarily due to its ease of use and speedy delivery.
One commonly known example of digital wallet payments is PayPal. Millions of users today use PayPal for currency conversion remits because of the application’s simplicity.
However, it’s worth noting that this simplicity comes at a cost – as a general note PayPal is not the best FX service provider in terms of dollar cost savings. With PayPal, you’ll be paying higher fees for convenience, even though you can quickly place a transfer from their native cell phone app.
FINAL THOUGHTS: LEARNING ABOUT REMITTANCES
Whether you need to book a remittance on behalf of a business or for personal reasons, you’ll find better deals at third party foreign exchange specialists than simply booking one at a local bank.
The big banking system has traditionally profited off unfavourable FX margins (good for them, bad for the consumer) and many frequent FX users seek cheaper alternatives.
KnightsbridgeFX offers a great balance between conveniences, reliability, speed, and overall cost efficiency – as long as you’re transacting over $2000 CAD you won’t be subject to any hidden fees or fixed transfer charges.
Looking to place a remittance towards Canada? Check out our article on the best way to send money to Canada to learn more.