Hispanic Heritage Month: Shaping the future of remittances together
Remittances tell a powerful story of sacrifice and hope. These transfers of money, sent by people living and working in the U.S. to their families in their home
Hidden costs in international payments: The overlooked junk fee that’s burning a hole in Americans’ pockets
“Junk fees” were certainly a buzz word of 2023, as the Biden Administration announced a crackdown across industries to protect American consumers. The White House defines junk fees as “unnecessary, unavoidable, or surprise charges that inflate prices while adding little to no value”, costing Americans billions.
While the fight against junk fees has been crucially expanding to the financial sector from the initial focus on concert, resort and airline fees, there’s one major “junk” fee that is still being overlooked: exchange rate markups in international payments and remittances.
International payments are riddled with hidden fees in the US, which is the largest source of remittances worldwide. Specifically, providers can advertise “$0” or “no fees”, but hide fees via a bloated exchange rate. Recent research found that these hidden fees in international transfers are costing Americans billions: $5.8 billion was lost by Americans in exchange rate markups in 2023 alone. Alarmingly, Californians made up over a billion of these fees. Further, New Yorkers, Floridians, and Texans each lost over $500 million.
At Wise, we have been fighting for transparency in international payments since our founding, because we know how much junk fees hurt. That’s why we launched a new report on the impact of junk fees, including in international payments, to further understand how Americans are impacted by them. It shows that 81 percent of Americans surveyed consider a hidden fee included in a currency exchange transfer (i.e. an FX markup) to be a junk fee. Cracking down on these fees could stand to save Americans billions.
The White House must refocus its efforts on the fees Americans encounter every day. And that includes junk fees in international payments.
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