Western Union money transfer

[pennsylvania]

My guess is this trade won't become a smashing success. On paper, it sounds tempting - 78 pesos to the dollar when the cueva is at 64. That's an extra 14 pesos per dollar. But consider the costs. I gotta transfer money to a friend or family member. They have to get cash from their bank (who goes to the bank branch anymore?). Then they run to a WU branch to pay the transfer. In the meantime, I have to set up the trade through my computer or mobile phone.

So the transfer goes through. Now I have to pick up the pesos at a WU. My guess is you have to visit one of those big WU outlets - cuz if you transfer say $500US, the smaller ones won't have $39.000 pesos laying around. So I go to the WU branch, stand in line for at least 20 minutes, maybe 30. Then it takes 5-10 minutes for them to figure out the keystrokes and count out 39.000 pesos. Finally, I gotta immediately jump in a cab so I don't get robbed on the way out.

What are the economic savings? The difference between the WU rate and the cueva is 14 to the dollar - that's an extra $7.000 pesos. Divide that by 64 and you get $109US. Subtract the $8US in fees. Now you are down to roughly $100US.But if my family member put the trade on their Amazon credit card, that's 5% of transaction amount. So the opportunity cost for them, or the potential foregone based on a cash trade is 5% of $500, or $25US. So now we are down to economic savings of $75US. Now I consider my family member's time, my time, the chance of getting robbed walking out of a WU with one month's Argentine equivalent income?

It all sounds less appealing as I write this.

I suppose you could do a $2K trade. But that's $156.000 pesos. That's not a safe amount of money for a foreigner to walk around with in BA. And unless you are a huge spender, that much peso surplus means you are long pesos; you are betting on the peso staying stable or increasing in value vs. the dollar. Who wants that bet?

It all sounds tempting. But given my alternative - which is call the cueva and have him deliver any amount I want (total transaction time - 2 minutes) - I'll pass on Western Union.

The usage of a credit card wouldn't decrease your economic savings, because apart from the fact that they wouldn't get 5%, Western Union would likely be categorized as a cash advance. Not to mention, the WU fee for using a credit card is $14.50 higher than the debit card option to begin with.

While I agree with you about going long on pesos, 1k USD/month is a reasonable spend (much of it front loaded with monthly bills) and that would give you an approximate economic savings of 200 USD for this hastle. For most people it would be worth it.

 

[Holgs]

Not sure if this is relevant to many, but for EUR transfers using WU from Germany the rate to cash is 76, vs 80 if paid into an account (fee is only 0.90 euro cents if paid into an account vs 4.90 for cash). I did a transfer last week (to cash) that worked out without any problems. Needed to call them to confirm the account. There doesn't seem to be any option to pay WU with cash in that case.

 

[TheDonald]

The usage of a credit card wouldn't decrease your economic savings, because apart from the fact that they wouldn't get 5%, Western Union would likely be categorized as a cash advance. Not to mention, the WU fee for using a credit card is $14.50 higher than the debit card option to begin with.

While I agree with you about going long on pesos, 1k USD/month is a reasonable spend (much of it front loaded with monthly bills) and that would give you an approximate economic savings of 200 USD for this hastle. For most people it would be worth it.

Rational economic/financial decisions must include all costs, that includes opportunity costs. Any economic/financial choice that ignores or overlooks opportunity costs, is incompletely analyzed. Opportunity costs are incurred when revenue/profit is foregone in exchange for an alternative. If I can charge a $500 WU transfer on my credit card and earn 5% cash back, the net cost is $475. If I pay cash for the exact same transaction, then the opportunity cost is $25. You mention WU charges higher fees for a credit card transaction, so those would have to be included in a rational calculation also.

Your last observation is apt and applies in many situations. Given the variables you describe, the decision would be right for many people. We all value our time differently. For me, it doesn't make sense. But that's just me.

 

[pennsylvania]

Rational economic/financial decisions must include all costs, that includes opportunity costs. Any economic/financial choice that ignores or overlooks opportunity costs, is incompletely analyzed. Opportunity costs are incurred when revenue/profit is foregone in exchange for an alternative. If I can charge a $500 WU transfer on my credit card and earn 5% cash back, the net cost is $475. If I pay cash for the exact same transaction, then the opportunity cost is $25. You mention WU charges higher fees for a credit card transaction, so those would have to be included in a rational calculation also.

What I'm saying is that the opportunity cost for not using the credit card doesn't exist. The 5% cash back on the Amazon Prime card only applies to Amazon & Whole Foods purchases, but you wouldn't even get the 1% that they offer on other purchases because it would be categorized as cash advance (no cash back, higher interest rate, interest accrues from date of charge, minimum fees [greater of $10 or 5%]). Using a credit card would be by far the most expensive of the digital transaction options.

 

[jlynch]

Not sure if this is relevant to many, but for EUR transfers using WU from Germany the rate to cash is 76, vs 80 if paid into an account (fee is only 0.90 euro cents if paid into an account vs 4.90 for cash). I did a transfer last week (to cash) that worked out without any problems. Needed to call them to confirm the account. There doesn't seem to be any option to pay WU with cash in that case.

From me from WU online, I only had option to pay receiver in cash (same 4.90 fee) when sending by card. the rate dropped from 78 yesterday to 75.7 today per euro.

 

[Pierre Smith]

What I'm saying is that the opportunity cost for not using the credit card doesn't exist. The 5% cash back on the Amazon Prime card only applies to Amazon & Whole Foods purchases, but you wouldn't even get the 1% that they offer on other purchases because it would be categorized as cash advance (no cash back, higher interest rate, interest accrues from date of charge, minimum fees [greater of $10 or 5%]). Using a credit card would be by far the most expensive of the digital transaction options.

Also, the other guy is not correctly using the term 'opportunity cost,' which describes attaching a value to the loss of opportunity that inheres in a transaction (eg. tying up money in an investment means you can't use it for something else). What we're talking about here, if it is available, is simply a lower cost transaction.

Anyway, I'm really curious about why WU has - by far - the best exchange rates on the market.

 

[TheDonald]

What I'm saying is that the opportunity cost for not using the credit card doesn't exist. The 5% cash back on the Amazon Prime card only applies to Amazon & Whole Foods purchases, but you wouldn't even get the 1% that they offer on other purchases because it would be categorized as cash advance (no cash back, higher interest rate, interest accrues from date of charge, minimum fees [greater of $10 or 5%]). Using a credit card would be by far the most expensive of the digital transaction options.

It appears as though the specs of the transaction that you provide are correct. I was wrong. I apologize for misinforming any readers.

 

[TheDonald]

Also, the other guy is not correctly using the term 'opportunity cost,' which describes attaching a value to the loss of opportunity that inheres in a transaction (eg. tying up money in an investment means you can't use it for something else). What we're talking about here, if it is available, is simply a lower cost transaction.

Anyway, I'm really curious about why WU has - by far - the best exchange rates on the market.

Please read the exchange between pennsylvania and I carefully. Please review the formal definition of "opportunity cost." You will see that what we are talking about comports 100% with the definition of opportunity cost. Thank you.

 

[Ceviche]

I requested a high school friend to gift me 1000 usd from US. He got a rate of 78. I picked the money today at Av Santa fe 4700. It was very close to where I live. But I must say it was intense. There was a queue which moved fast but there was zero privacy. I got almost all my money in 100 peso bills ( not like my favourite cueva). so my pockets were stuffed and bulging with money as I walked out ( reminded me of my days in Venezuela). I got to admit, it was dangerous. I walked back home as I lived so close that taking taxi seemed crazy. I am not sure, I want a repeat experience.

 

[deadOA]

... hate those 100 pesos bills .....