Are you Mexican-Chicano sending money from USA to Mexico? Want to get the most pesos for your dollars? Not sure how to send money online and which provider is the best, cheapest or fastest? YOU came to the right place! We will cover all most important topics:
Sending money to Mexico: key trends
Pesos to dollar exchange rates and timing
Top providers for sending money to Mexico
The best way to send money to Mexico for you
Please note this post is specific to Mexico. If you are looking for general knowledge of how to best send money, please review this other SaveOnSend blog post first. And if you only have 30 seconds, just find the best provider with SaveOnSend app.
Before we get started… Great news if you are a consumer sending money from USA to Mexico: it is currently one of the most competitive corridors from USA, attracting more providers and larger investments than many other destinations. You could make a relatively safe assumption that when transferring money to Mexico with any top provider you will get a reasonable price and service. Overall, cost of sending money has been decreasing globally, dropping 20-30% in the last 7 years alone:
We are recommending trying providers with the cheapest price – this way, you are helping your family while also supporting Mexico’ growth. Each 1% of savings generates additional 250 million dollars annually for your families and Mexico’s economy.
1. Sending money to Mexico: key trends
USA-to-Mexico is by far the world’s largest corridor for sending money. No other two countries in a world has such mix of its nationalities and a close connection with its birth and/or ancestry home. 35 million people living USA claim a full or partial Mexican ancestry, and another 7 million are unauthorized immigrants from Mexico:
USA dwarfs all other countries combined when it comes to sending money to Mexico:
The volume of remittances from USA to Mexico had been rapidly increasing till the 2008 financial crisis in USA, then dropped off and is now again approaching peak levels:
Around 35% of Mexicans-Chicanos live in California and around 25% in Texas. New immigrants from Mexico, who typically send more money, are also arriving in large numbers to Chicago, Phoenix, and NYC metropolitan areas. However, the number of new arrivals have been rapidly declining due to a slowdown in a construction industry and increase in deportations by the US government. In 2013, Chinese migrants became the largest source of new arrivals to USA.
Mexicans-Chicanos send money from USA using both an online channel (a provider’s website or mobile app) and via a cash agent. A great majority of senders continue using only cash agents despite a much higher cost of this transfer method:
This could be explained by multiple factors. On a surface, migrants sending money to Mexico seem satisfied with a current offering:
While rapidly declining, a significant portion of senders still don’t have a bank account:
Finally, in comparison with other major migrant groups, Mexicans have the lowest levels of education and income:
It is also important to remember about a significant presence of so-called “undocumented” migrants who get paid in cash and don’t pay taxes. They are worried that by placing money into a bank account they could be reported to IRS (USA’s tax service). Out of all remittances between US and Mexico, about 50% are from such “undocumented” customers. Even among legal USA residents, a large portion of Mexicans works in fields where it is customary to get paid in cash (restaurants, cleaning, constructions, nurses, etc.). For them, uploading money into a bank account is an extra step with, again, a potential tax liability.
So while millions of Mexicans-Chicanos in USA already have a bank account and a smart phone and despite that the smartphone usage is also growing rapidly in Mexico, cash transfers will likely continue dominating remittances to Mexico. As a result, sending money from USA to Mexico remains less price competitive than for some smaller corridors (more on this later).
If you are reading this blog and haven’t yet tried sending money to Mexico online, via a website or a smart phone, you should definitely give it a shot. Most of well-known providers have an easy-to-use mobile app, and the setup shall only take few minutes. Once you link your bank account or debit card, you might be surprised how easy it is to send money online and how much you could save. By using online method for money transfers, all your past transactions are available for your review any time, plus your future repeat transfers shall take less than a minute to complete since you don’t have to enter the same information again. There are also significant cost advantages (more on this later).
2. Pesos to dollar exchange rates and timing
Are you wondering if you shall wait for pesos to increase in value or for a dollar to fall? Trying to time the best exchange rate is unbelievably difficult if not impossible. If anybody gives you an advise on this topic while not making millions trading on same information, it might be a sign that you shouldn’t follow such recommendation. Still not convinced? Look at the graph below for changes in the exchange rate of pesos to dollar during the last 5 years – do you see any logic in the exchange rate’s short- or long-term movements? While the overall trend is upward, you can notice long periods when exchange rate decreased or was stagnant:
However, there is a more practical approach to timing money transfers. Based on the analysis of FX markup (the difference between a peso-dollar exchange rate that providers get on the market vs. an exchange rate that you get from a provider). Not only each money transmitter applies a very different FX markup, each provider makes daily changes to its FX markup to maximize profits. Some providers are even applying different FX markups for different sending-receiving methods. For example, for sending money from USA to Mexico, MoneyGram has different peso-dollar exchange rates for sending a) cash, b) online, receiving cash, c) online, receiving to a linked bank account. So how do we use this knowledge against money transmitters? Look at this chart showing fluctuations in FX markups across remittance providers for USA-to-Mexico:
As you could see, except TransferWise, all providers keep significantly changing FX markups every couple weeks. One of the worst offenders is Xoom with massive fluctuations on a daily basis. Sending money with this provider is a bit like playing in casino, a customer could pay 2-3x more or less in fees depending on the day: