BofA to Drop Fees for Transfers to Mexico

Escalating the battle for Latino market share, Bank of America Corp. plans to eliminate all fees to transfer money to Mexico, starting today in Chicago and in the rest of the U.S. by the end of this year.

Not surprisingly, there’s a catch: Bank of America said it would require new customers of its transfer program to open a checking account.

For many customers, it will be their first.

“Checking is the entry product,” said Marcos Rosenberg, the bank’s senior vice president for multicultural marketing. “From there they graduate and become more financially literate and move on to credit cards, savings and mortgages.”

The bank’s transfer program allows funds deposited in special U.S. accounts to be withdrawn using debit cards from automated teller machines in Mexico.

Bank executives said Chicago, with the fourth-largest Latino population in the nation, was a key market that was selected for the rollout in part because more Mexican national identity cards had been issued by the consulate there than in any other U.S. city. The cards are required to set up bank accounts.

Until now users weren’t required to set up checking accounts at Bank of America, although more than half of its customers did, said Eduardo Vergara, a senior vice president for the Charlotte, N.C.-based bank.

The bank, the largest retail operator in California, previously had charged users a $10 “load fee” for each transfer, plus a 3% foreign exchange fee on the transmitted funds. Under this formula, sending $200 south of the border would cost $16.

Starting today, no load or foreign exchange fees will be levied in the Chicago metropolitan area, and the cost in California and elsewhere will be cut to $8 a transfer, without the 3% exchange surcharge. The timetable for eliminating the $8 charge in additional markets, including California’s heavily Latino cities, hasn’t yet been set.

U.S. banks and credit card companies eyeing the growing Latino population have tried with mixed results to lure money transfers, also known as remittances, from Western Union and smaller specialists. Consumer-to-consumer remittances to Latin America and the Caribbean totaled about $30 billion last year, according to the Pew Hispanic Center.

Bank of America’s archrival in California, Wells Fargo & Co., cut its money-transfer fee in July to $8 from $10. Wells offered an additional $2 discount per transfer to customers who purchased a bundled package of services, including a checking account and ATM card.

Wells Fargo representatives declined to comment on the escalation of the remittance price wars.

Many immigrants have continued to use traditional money-transfer services because they are often more convenient. Bank of America said its new program should make the cost of sending $300 to Mexico $10 to $20 less than at money-transfer businesses.