How the New U.S. Remittance Tax Will Impact Cash-Based Transfers

Starting in 2026, international money transfers funded with cash from the U.S. will face a new 1 percent federal tax.

While the change may seem small, it will affect millions of people who send money to countries where cash pickup is the dominant receiving option.

What Is the New U.S. Remittance Tax?

The U.S. remittance tax is a new federal excise that will apply to certain types of international money transfers from the United States.

The tax is set at 1 percent of the transfer amount and applies only to transfers funded by cash, money orders, and cashier’s checks. The tax does not affect international money transfers made through a bank account, debit or credit card, or using digital apps.

It applies to all senders, regardless of citizenship or immigration status, and remittance providers will be required to collect it at the time of transfer and pass it on to the government.

Countries That Heavily Rely on Cash Transfers

While 1 percent may sound small, the impact could be significant in countries where cash-based remittances are the norm.

More than 650 million adults without accounts (or 53% of all adults without accounts) currently reside in Bangladesh, China, Egypt, India, Indonesia, Mexico and Nigeria and Pakistan according to FXC Intelligence.

Some of these are also the higher receivers of remittances:

*Remittance inflows are based on 2023-24 World Bank data.

In many of these, people often live in rural or low-income areas without regular access to banks, digital wallets, ATMs, smartphones, or mobile data.

Even when digital options exist, many do not use them due to low digital literacy or lack of trust in financial institutions.

As a result, recipients often travel to agents or branch locations to collect cash in person. The new tax adds another layer of expense, making each transaction less affordable for families who rely on regular support.

Cash Transfer Costs

Sending cash abroad is already more expensive than using digital methods. For people who send money home each month, these costs add up over time.

For a $200 transfer from the U.S. using cash pickup methods, here are the average fees from the leading cash transfer companies.

*The fees were manually collected using the forms on respective companies for $200 transfer on the 28th Aug 2025. All fees are non-discounted rates. For latest fee data refer to: Western Union, MoneyGram and Ria Money Transfer.

Over the past 12 months, MoneyTransfers.com tracked a 24% increase (based on the internal data) in comparison searches to the cash-reliant countries (above) from the U.S. alone.

This points to a growing awareness among senders and a clear demand for alternatives. Users are not just comparing fees, they’re looking for safer, more affordable ways to reach people where cash is still the only option.

What to Expect Next

The upcoming tax is likely to reshape how people send money abroad in many ways.

A Shift Toward Digital

As cash-based transfers become more expensive, we expect to see a growing shift toward digital-first remittance adoption

For senders with access to bank transfers, mobile wallets, P2P transfers, and similar services, switching to a digital service will be one of the simplest ways to avoid the new tax.

However, in many rural or low-income areas, digital infrastructure is still weak, and recipients may not have the tools to use mobile money or open a bank account.

Some May Send Less

The added cost, though small in percentage terms, may discourage frequent transfers.

In families where money is sent home monthly, even a $2 increase per transaction adds up, that is $24 increase in fees, 12% of the transfer amount.

Informal Transfers May Rise

Some may turn to informal or underground methods, including cash sent with travelers or through unregulated agents, as well as an increase in unregulated crypto transfers.

These options are harder to track and can carry greater risk for both senders and recipients.

New Interest in Innovation

We’ve already seen increased interest in providers that go beyond traditional models.

Some offer hybrid services that bridge cash and digital payments. Others are testing blockchain-based infrastructure that can serve hard-to-reach corridors.

Luke Eales from MoneyTransfers.com recently spoke with Sling Money, a startup in the crypto-remittance space, which is developing solutions for areas with weak financial access.

At the end of the day, the new tax will have a real impact on cash-based transfers. For senders supporting families where digital access is limited, costs will rise.

As the landscape shifts, both users and providers will need to adapt.