Remittances: exchange rates and hidden costs
Understand how remittance costs go beyond the commission fee, including the applied exchange rate.
Remittances in Costa Rica
Remittances — money sent by people living and working abroad to their families in Costa Rica — represent an important source of income for thousands of households. Most of these transfers come in dollars from the United States.
But many remittance recipients don't realize that the real cost of receiving that money goes beyond the commission charged by the transfer service.
The two costs of a remittance
1. The explicit commission
This is the charge the transfer service applies for sending the money. It can be a fixed amount ($5, $10, $25) or a percentage of the amount sent. This commission is visible and easy to compare.
2. The applied exchange rate
This is the hidden cost that many people overlook. Remittance services don't always use the market exchange rate. Instead, they apply their own rate that includes an additional margin — and that margin can be larger than the commission itself.
Example: sending $500
| Concept | Service A | Service B |
|---|---|---|
| Sending fee | $5.00 | $0.00 |
| Applied exchange rate | ₡472.00 | ₡465.00 |
| Recipient receives | ₡233,500 | ₡232,500 |
| BCCR reference rate | ₡474.00 | ₡474.00 |
| Difference vs. reference | ₡1,000 | ₡4,500 |
| True total cost | ₡3,500 | ₡4,500 |
Service B advertises "no commission," but applies an exchange rate so far from the reference that the true cost is higher. The total cost includes the commission plus the difference between the applied rate and the market reference rate.
Remittance channels
Bank wire transfer (SWIFT)
- Commission: $15-45 per transfer, plus possible charges from the receiving bank
- Exchange rate: The receiving bank's rate at the time of deposit
- Speed: 1-3 business days
- Best for: Large amounts ($1,000+) where the fixed fee gets diluted
Specialized services (Western Union, MoneyGram)
- Commission: $5-15 depending on amount and delivery method
- Exchange rate: The service's own rate, typically with a ₡5-15 margin vs. reference
- Speed: Minutes to hours
- Best for: Urgent transfers, recipients without bank accounts
Digital services (Remitly, Wise, Xoom)
- Commission: $0-5, sometimes absorbing the fee for large amounts
- Exchange rate: Variable, generally closer to market rate than traditional services
- Speed: Hours to 1 business day
- Best for: Regular transfers, tech-comfortable users
How to know if the exchange rate is fair?
The simplest way is to compare the rate offered by the remittance service against the BCCR reference exchange rate for that day. If the difference is greater than ₡5-7, you're probably paying an excessive margin.
Also compare against the buy prices of local entities. Remember that when receiving dollars and converting to colones, you're selling dollars — so the buy price is the relevant one.
Tips for recipients
1. Compare the total cost, not just the commission
Add up the commission plus the exchange rate difference. The service with "zero" commission isn't always the cheapest.
2. Consider receiving in dollars
If your bank allows you to receive remittances directly into a dollar account, you can convert to colones when the exchange rate is favorable, at the entity offering the best buy price.
3. Establish a regular pattern
Digital services often offer better rates for recurring transfers. Scheduling regular transfers can be more economical than sporadic ones.
4. Don't rush
The fastest transfers (in minutes) generally have worse exchange rates than those that take a business day. If it's not urgent, choosing the slower option usually saves money.
Practical tip
Before accepting a remittance service's exchange rate, check the BCCR reference rate and local entity buy rates on ARiSabe. That quick comparison tells you whether the margin being applied is reasonable or excessive.