What is cashback and how does it work? A 2026 Guide

Cashback is a rewards system that gives you back a percentage of the money you spend on eligible purchases. In simple terms, when you buy something using certain credit cards, debit cards, apps, or rewards programs, you may get a percentage of your money back on purchases, though it is usually credited to your account rather than handed over as physical cash.

If you recently moved to the United States or are learning how the financial system works, you may have heard the term 'cashback' while shopping at places like Walmart, Target, gas stations, supermarkets, or online stores.

For many people, cashback can become a practical tool to manage everyday expenses such as groceries, transportation, gas, and household purchases. While the amounts may seem small at first, they can add up over time when used consistently and responsibly.

What is cashback?

Cashback is a type of financial reward that returns a percentage of your purchase after you spend money with a participating payment method or rewards platform.

For example:

• If you spend $100 at the supermarket using a card that offers 2% cashback, you may receive $2 back
• If a cashback app offers 5% cashback at a participating gas station and you spend $60 on fuel, you may receive $3 back

Unlike traditional discounts, cashback usually happens after the purchase is completed. The Consumer Financial Protection Bureau (CFPB) explains that cashback rewards are commonly offered through credit cards and loyalty programs as an incentive for spending.

How does cashback work?

Cashback programs generally follow a simple process:

• You make an eligible cashback purchase using the participating card, app, or rewards account
• The transaction is recorded by the provider
• A percentage of that purchase is returned to you as cashback

The reward may appear as:

• Statement credit
• Bank deposit
• Gift card
• Rewards balance
• Redeemable points
• Store credit

Some cashback rewards appear within a few days, while others may take an entire billing cycle or longer to process. There are often minimum redemption thresholds before you can claim your cashback. Certain programs may include expiration dates. It is also important to understand that not every purchase qualifies for cashback.

Cashback vs. traditional discounts

While cashback and traditional discounts can both help consumers save money, they work in different ways. A traditional discount lowers the price immediately at checkout, while cashback returns part of the money after the purchase has already been completed.

Types of cashback in 2026

Not all cashback programs work the same way. Before signing up for a cashback program, it is important to review details such as annual fees, interest rates, minimum redemption, expiration policies, and spending categories.

Fixed-rate cashback

This type gives the same cashback percentage on all purchases. Example: 1.5% cashback on everything you buy. This structure is simple because you do not need to track categories or rotating offers.

Category-based cashback

Some cards or apps offer higher cashback percentages in specific categories such as supermarkets, restaurants, gas stations, or streaming subscriptions. For example: 3% on groceries, 2% on gas, 1% on all other purchases.

Rotating cashback categories

Some providers change cashback categories every few months. One quarter may focus on gas stations and grocery stores; another may include online shopping and travel purchases. These programs sometimes require manual activation each quarter.

Welcome bonuses

Certain credit cards offer introductory cashback bonuses if you spend a minimum amount during the first months after opening the account. For example: spend $500 in the first 3 months and receive $150 cashback bonus. The Federal Trade Commission recommends reviewing terms carefully before applying for financial products with promotional offers.

Where can you get cashback in the United States?

Credit cards:

Many credit cards in the U.S. include cashback rewards. Some examples include products from Discover, Chase, Capital One, and American Express. Some cards focus on categories like dining or travel, while others offer flat-rate cashback.

Debit cards:

Some financial institutions offer cashback debit cards, although rewards are usually smaller than those offered by credit cards. This may appeal to people who prefer avoiding debt or credit card interest.

Cashback apps:

Several mobile apps partner with retailers and offer cashback rewards for purchases. Examples include Rakuten, Ibotta, Upside, and Honey. These apps may provide cashback for grocery shopping, online purchases, gas stations, and restaurants.

Store loyalty programs:

Retailers sometimes offer cashback or store rewards through membership programs. For example, supermarkets, pharmacies, and warehouse stores may return store credit or savings points after purchases.

Cashback vs. points vs. miles: Which is better?

Although they are often grouped together under the category of 'rewards,' each one works differently and can be useful depending on a person's spending habits, financial goals, and lifestyle.

Cashback programs generally return a percentage of the money spent on eligible purchases. Points systems usually assign a numerical value to purchases that can later be redeemed for products, gift cards, discounts, or services. Travel miles are typically associated with airlines, hotels, or travel-focused credit cards.

For many people, especially those focused on getting some value on their everyday expenses such as groceries, transportation, gas, or household purchases, cashback can feel more useful as the reward is directly connected to money rather than conversion systems or travel programs.

3 practical tips for using cashback responsibly

1. Use cashback for purchases you already planned

Focus on recurring expenses such as groceries, gas, transportation, and utility bills. This helps you avoid overspending simply to earn rewards.

2. Don't buy things you don't need

A cashback offer does not automatically make a purchase worthwhile. For example, spending $200 to earn $4 cashback may not help your finances if the purchase was unnecessary.

3. Track your cashback earnings

Many apps and financial platforms allow you to monitor spending categories, cashback totals, and monthly rewards. Tracking your rewards can help you understand your spending patterns and maintain financial goals.

Does Común offer cashback?

No. Común does not currently offer cashback programs.

However, Común provides tools and resources that offer guidance for Latin American immigrants navigating the U.S. financial system.

While cashback might be useful for some people, it is important to pay attention to commissions, as savings when commissions are included might not be as strong as initially perceived. When comparing financial tools in the United States, cashback is only one factor to consider. Fees, commissions, account accessibility, and transparency can also affect your financial experience over time.

Común's cost for opening a debit account is $0, same as the $0 minimum balance and $0 monthly commission for the debit account.

FAQ

What is cashback and how does it work?

Cashback is a rewards system that returns a percentage of your purchases after you spend money using eligible cards, apps, or loyalty programs.

How is cashback calculated?

Cashback is usually calculated as a percentage of the purchase amount. For example, if you spend $100 and your cashback rate is 2%, you receive $2 back.

Where can I get cashback in the United States?

Cashback is commonly available through credit cards, debit cards, shopping apps, and retailer loyalty programs.

What is the difference between cashback and points?

Cashback returns money directly, while points are part of rewards systems that may only be redeemed for specific products, gift cards, or services.

Does Común offer cashback?

No. Común currently does not offer cashback.

Is cashback taxable?

In many cases, cashback earned through purchases is generally treated as a rebate rather than taxable income. However, tax treatment may vary depending on how rewards are earned. The IRS recommends consulting a tax professional for specific situations.

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ITIN vs SSN: What's the difference and why does it matter?

If you are authorized to work in the United States, you need a Social Security Number (SSN). If you are not eligible for an SSN but still need to file taxes or access certain financial services, you may need an Individual Taxpayer Identification Number (ITIN).

If you recently moved to the United States, you have probably heard the terms 'ITIN' and 'SSN' many times already. They often come up when opening a bank account, filing taxes, applying for work, or trying to build credit.

Understanding the ITIN vs SSN difference matters because each number serves a different purpose in the US financial and tax system.

What is an SSN?

A Social Security Number (SSN) is a nine-digit identification number issued by the Social Security Administration. It is primarily used to track earnings, taxes, and eligibility for certain federal benefits.

SSNs are generally issued to:

• US citizens
• Permanent residents
• Certain noncitizens authorized to work in the US (for example: people with work visas, some asylum applicants or refugees)

An SSN is required for legal employment, payroll reporting, and access to some government programs.

What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service, known as the IRS. ITINs are designed for people who are not eligible for an SSN but still have US tax filing obligations or need access to certain financial services.

An ITIN can be used by:

• Immigrants without SSN eligibility
• Dependents or spouses of US residents or visa holders
• International students or temporary visa holders in certain situations
• Individuals required to file US taxes

It is important to note that an ITIN does not authorize someone to work in the United States.

ITIN vs SSN Comparison Table

Which one do I need?

You need an SSN if:

• You are a US citizen
• You are a permanent resident
• You are legally authorized to work in the United States
• Your employer requires it for payroll and tax reporting

You may need an ITIN if:

• You are not eligible for an SSN
• You still need to file taxes in the United States
• You want to access and open financial accounts
• You want to begin building a financial history

Many recent immigrants apply first for an ITIN while they are still navigating the US financial system or while they're waiting for changes in their work authorization status.

Can I have both an ITIN and an SSN?

Yes, in some situations a person may have both at different stages of their life. For example, someone may initially receive an ITIN because they are not eligible for an SSN at the time. Later, if they become eligible for work authorization or permanent residency, they may receive an SSN. When this happens, the SSN becomes the primary identification number used for taxes and financial reporting.

What can I do with each?

An SSN can be used to:

• Work legally in the United States
• Receive wages through payroll systems
• File taxes
• Access certain federal benefits if eligible
• Open debit card and checking accounts
• Apply for loans and credit products
• Build credit history

An ITIN can be used to:

• File taxes with the IRS
• Open debit card and checking accounts at institutions that accept ITINs
• Build credit with lenders that report ITIN activity
• Establish financial history in the US

Can you work with an ITIN?

An ITIN itself does not authorize employment in the United States. It is primarily a tax identification number used for IRS reporting purposes.

Does an ITIN build credit?

An ITIN may help some people begin building credit history in the United States. Certain banks, lenders, and financial platforms report account activity linked to ITINs to credit bureaus. Policies vary by institution.

How can I apply for an ITIN?

Applying for an ITIN generally involves submitting:

• A completed IRS Form W-7
• A valid federal tax return (unless you qualify for an exception)
• Proof of identity and foreign status

The IRS may request original documents or certified copies depending on the situation. Processing times may vary.

How can I apply for my ITIN with Común?

If you need or want help with the application process, Común offers ITIN application support for $199 with a money-back guarantee if the application is not approved. Visit comun.app/itin to learn more.

Requirements to apply for an ITIN with Común:

• You must live in the U.S.
• You must have a valid passport with an expiration date more than 6 months from the date of your application
• You will need to file your taxes to apply for an ITIN

The process:

• We recommend you open a debit account with Común from your mobile phone
• Complete the application form at comun.app/itin and submit your payment
• Upload a scan of your passport
• If you choose to file your taxes along with your ITIN application, upload documentation of your income from the previous tax year
• Común's agents will contact you via email if they have any questions
• Print, sign, and submit your completed official ITIN application (Form W-7)
• Común's agents will submit your application to the IRS

The application process does not consider your immigration status, and your status will not be reported to any government immigration authority.

Open your Común Account

A debit account can be a great first step to building your financial future in the United States. Común allows customers to open a debit account using ITIN, passport, country-of-origin ID, or more than 100 accepted Latin American valid IDs. You can open your Común account from your phone. The app is available in Spanish. Visit comun.app to learn more.

FAQ

What is the difference between ITIN and SSN?

An SSN is issued by the Social Security Administration primarily for employment, taxes, and federal benefits eligibility. An ITIN is issued by the IRS for people who are not eligible for an SSN but still need to file taxes or access certain financial services.

Can I have both ITIN and SSN at the same time?

In some situations, yes. A person may first receive an ITIN and later become eligible for an SSN. Once an SSN is assigned, it generally becomes the primary number used for taxes and financial reporting purposes.

Can I work legally in the US with an ITIN?

An ITIN alone does not authorize employment in the United States. It is primarily used for tax identification and reporting purposes through the IRS.

Do I need an SSN to open an account?

Not always. Some financial institutions, including Común, allow customers to open debit accounts using an ITIN, passport, or other forms of identification.

How do I apply for an ITIN?

Applying for an ITIN generally requires completed IRS Form W-7, identity documentation, and a filed federal tax return. The IRS may also request certified supporting documents.

How long does the ITIN application take?

Processing times can vary depending on the time of year and the completeness of the application. In many cases, ITIN applications may take several weeks to process after submission to the IRS.

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Unrecognized charge on my debit card: What to do in the United States?

If you notice an unrecognized debit card charge, one of the first steps is to lock your card, verify whether the transaction was actually unauthorized, and contact your financial service provider immediately. If you are a Común debit card holder, you can report suspicious activity directly through the app, email, or WhatsApp support.

Seeing an unrecognized charge on your debit card can be stressful, especially if you rely on your account for rent, groceries, transportation, or sending money to family. Unauthorized transactions can happen for many reasons, and debit card users in the United States have certain protections under the Electronic Fund Transfer Act (EFTA) and Regulation E.

It is also important to understand that not every unfamiliar transaction is considered fraud. Some charges may come from subscriptions, merchants using different billing names, or purchases made by someone who had permission to use the card.

What is an 'unrecognized' vs 'unauthorized' charge?

An unrecognized debit card transaction

is a transaction you do not immediately recognize. This does not necessarily mean fraud occurred. Examples: a merchant billing under a different legal name, a forgotten subscription renewal, a delayed hotel or gas station authorization, a trial membership converting into a paid subscription, or a family member using the card.

An unauthorized charge

generally means someone used your debit card or account information without your permission. Examples: purchases made after your card was lost or stolen, online purchases you did not authorize, potentially fraudulent recurring charges, or transactions occurring after your credentials were compromised.

It is important to understand that if you voluntarily gave your card, PIN, password, or account access to a family member, partner, or friend, those transactions may not qualify as unauthorized under Regulation E.

How can I identify a suspicious charge?

Checklist for an unrecognized debit card charge:

• Review the merchant name carefully — many businesses process payments under a parent company or billing processor that looks unfamiliar
• Check the transaction date — some charges appear several days after the original purchase
• Look for recurring subscriptions — streaming platforms, delivery apps, gyms, and trial memberships commonly renew automatically
• Verify the location — some online merchants process payments from another state or country even when the transaction was legitimate
• Ask family members — a spouse, child, roommate, or trusted person could have used the card
• Watch for small 'test' charges — fraudsters sometimes attempt small transactions before attempting larger purchases

What to do right away if you notice an unauthorized charge?

1. Lock your card immediately

If your financial service provider offers a card lock feature, you can temporarily freeze your card to help prevent additional transactions while you review the activity further.

2. Report the transaction to your financial service provider

Reporting a potentially unauthorized transaction promptly helps preserve certain protections available under applicable law. If you use Común, you can contact support through:

• In-app chat
• Email: ayuda@comun.app
• WhatsApp: +1 646 600 5660

When reporting the transaction, try to include: the transaction amount, merchant name, transaction date, and why you believe the charge is unauthorized.

3. Document everything

Take screenshots and save records of suspicious transactions, text alerts or emails, merchant communications, and subscription cancellation confirmations.

4. Change passwords and security settings

If you suspect your account information was compromised: change your password, update your email password, enable Face ID or Touch ID, review connected devices, remove suspicious app access, and if your PIN may have been exposed, change it immediately.

5. File a police report if appropriate

If your wallet was stolen, your identity may have been compromised, or the situation involves significant financial loss, contacting law enforcement and filing a police report may help support your case.

Your rights as a US Debit Cardholder

Debit card protections in the United States are primarily governed by the Electronic Fund Transfer Act (EFTA) and Regulation E.

What is the 'Visa Zero Liability' policy?

Visa's Zero Liability policy generally provides protection for eligible unauthorized transactions made with covered Visa debit cards, subject to applicable terms, conditions, and limitations.

Key aspects:

• Protection scope: may apply to certain unauthorized transactions involving lost, stolen, or fraudulently used cards
• No enrollment necessary: the policy applies automatically to eligible Visa cards without requiring special sign-up
• Prompt reporting: to qualify, you must promptly report potentially unauthorized transactions to your financial institution
• Limitations and exclusions: certain transactions, including commercial card or anonymous prepaid card transactions, may not be covered

How does the Común dispute process work?

Once you report an unrecognized or potentially unauthorized debit card transaction to Común, the investigation process may include several stages. Typical timelines may include:

• Initial review beginning within approximately 2 business days
• Potential provisional credit within applicable regulatory timeframes for qualifying disputes
• Extended investigations in certain situations
• Visa dispute or arbitration processes that may take up to approximately 90 days in some cases

What is not covered?

Some situations may not qualify as unauthorized transactions under Regulation E or Visa Zero Liability protections:

• Charges made by family or friends who had access to your card or account
• Transactions you approved but later disputed due to dissatisfaction
• Wallet-only customers without a Común debit card
• ComúnPay P2P transactions funded through external debit cards
• Cases involving negligence or false claims

How can I help prevent unauthorized charges?

Use card lock and unlock features:

Locking your card when not in use may help reduce unauthorized transactions.

Enable real-time transaction alerts:

Instant transaction notifications through the app can help you identify suspicious activity more quickly.

Use Face ID or Touch ID:

Biometric authentication features can help reduce unauthorized account access.

Protect your PIN:

Avoid sharing your PIN, even with people you trust. Never store it in unsecured notes apps or write it directly on your card.

Watch for phishing scams:

Fraudsters may impersonate banks through text messages, fake login pages, phone calls, or social media messages. Banks and service providers will not ask for your password or verification code through text message.

FAQ

What is an unrecognized charge on my debit card?

An unrecognized charge is a transaction you do not immediately recognize on your account. It does not always mean fraud occurred.

How long do I have to report an unrecognized charge?

Under Regulation E in the United States, reporting suspicious transactions promptly is important. Certain consumer protections may decrease after 2 business days and again after 60 days from the date the statement was sent.

Will I get my money back if I report an unauthorized charge?

It depends on the investigation results and whether the transaction qualifies as unauthorized. In some qualifying cases, consumers may receive reimbursement or provisional credit.

What happens if I let a family member use my card?

If you voluntarily shared your card, PIN, password, or account access, the resulting transactions may not qualify as unauthorized under Regulation E or applicable Visa Zero Liability policies.

How long does Común take to resolve a dispute?

Investigations may begin within approximately 2 business days. Some cases may be resolved more quickly, while more complex disputes or Visa dispute processes may take longer, including up to approximately 90 days in certain situations.

Final thoughts

An unrecognized charge on your debit card does not always mean fraud, but it is important to review unfamiliar transactions promptly. In the United States, Regulation E or the Visa Zero Liability protections can help limit your liability for qualifying unauthorized transactions, particularly when reported promptly.

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Cheapest Cities to Live in the United States (2026)

Living in large metropolitan areas such as New York City, Los Angeles, or Miami can be expensive, especially when it comes to housing, transportation, and everyday expenses. For many people, including recent immigrants, young professionals, and families trying to build financial stability, the affordability of a place may play an important role when deciding where to live in the United States.

There are cities across the country where the overall cost of living can be lower while still offering access to jobs, public services, universities, and established communities. Cities such as Cleveland, Detroit, Toledo, Wichita, and Memphis are often recognized among the more affordable cities to live in the United States due to their relatively lower housing costs and cost-of-living indexes.

This guide explores some of the more affordable cities to live in the U.S., the factors that influence affordability, and considerations that may help when choosing a city that fits your budget, lifestyle, and long-term goals.

Factors that influence the cost of living in cities in the U.S.

Housing and rent

Housing is usually one of the largest expenses for households in the U.S. The national median home price ranges from approximately $408,800 to $437,000. In major metropolitan areas, average rents can exceed $2,000/month. In the most affordable cities, median home prices can be as low as $75,000–$150,000, and one-bedroom apartments often rent for $600–$900/month.

Utilities and groceries

Utility costs such as electricity, water, internet, and heating can vary depending on the region and climate. Grocery prices can also differ between cities depending on transportation costs, local agriculture, and overall demand.

Transportation and mobility

In some larger cities, public transportation may reduce the need for a car. In smaller or more spread-out cities, owning a vehicle may be more needed, which can add costs such as gas, insurance, parking, and maintenance.

Job Opportunities and Salaries

A lower cost of living may not always translate into greater affordability if local salaries are significantly lower. According to the U.S. Census Bureau, the national median household income was approximately $83,730 in 2024.

The 10 most affordable cities to live in the United States

1. Cleveland, OH

Cleveland consistently ranks among the most affordable large cities in the United States. Its overall cost of living runs approximately 7–17% below the national average, with housing costs particularly low. Median home prices range from roughly $105,000 to $150,000, a fraction of the national median. The city's economy is anchored in healthcare and advanced manufacturing, with the Cleveland Clinic and University Hospitals serving as two of the region's largest employers. Cleveland is also home to approximately 49,500 Hispanic residents, making it the second-largest Latino community of any city in Ohio, with established Puerto Rican, Mexican, and Central American communities.

2. Detroit, MI

Detroit stands out for its exceptionally low housing purchase prices. Houzeo reports a median sale price of $82,000, while Redfin records a higher median of $104,000 as of March 2026. Significant investment in downtown revitalization, automotive industry jobs, and a growing startup scene have improved its economic outlook.

3. Toledo, OH

Toledo is one of the lower-cost cities in the Midwest. Redfin puts Toledo's median sale price at $111,000 as of February 2026, noting that Toledo's median is 68% lower than the national average. Manufacturing, healthcare, and logistics remain important parts of the local economy, and the city has an established Latino community with access to Spanish-speaking services.

4. Wichita, KS

Wichita's cost of living is 12% lower than the national average, with housing 35% cheaper than the U.S. average. The median household income is $63,072. Redfin reports a median sale price of $235,000 in March 2026. The aerospace and manufacturing industries are major employers.

5. Memphis, TN

Memphis's overall cost of living is 11% lower than the national average. Redfin reports a median sale price of $170,000 in February 2026, noting Memphis's median is 51% lower than the national average. Average rents for a one-bedroom are typically in the $800–$950 range. Memphis is a logistics and distribution hub — FedEx is headquartered there.

6. Tulsa, OK

Tulsa is often viewed as one of the more affordable cities in the South-Central United States, with housing costs remaining below those in many larger U.S. metros. The city gained national attention through the Tulsa Remote program. Energy, healthcare, and finance continue to be important industries in the local economy.

7. Knoxville, TN

Knoxville's cost of living is 14% lower than the national average. The city combines lower overall costs with access to universities, healthcare systems, and outdoor recreation in the Appalachian region. Redfin reports a median sale price of $307,000 in March 2026.

8. Birmingham, AL

Birmingham is frequently recognized as one of the more affordable cities in the Southeast. Healthcare remains one of the city's largest industries, particularly because of the University of Alabama at Birmingham and its medical network. Housing prices and rental costs may remain lower than those found in many larger Southern metropolitan areas.

9. Indianapolis, IN

Indianapolis is often categorized as a lower-cost mid-sized city. The city has continued expanding in sectors such as logistics, healthcare, and technology, while maintaining housing prices that are often lower than those in coastal metropolitan areas. Indianapolis also has a growing Latino community and multiple immigrant support organizations.

10. Brownsville, TX

Brownsville is often highlighted for its affordability and strong connection to Latin American culture. Located within the U.S.-Mexico border, the city has one of the largest Spanish-speaking populations in the country (94% Hispanic), which may make everyday life more accessible for recent immigrants and bilingual families.

Comparison Table: Cost of Living by City (2026)

How to choose the ideal city?

An affordable city may look attractive on paper, but the best option can still vary depending on your personal situation, work opportunities, and long-term goals.

Family budget:

For most households, housing remains the largest monthly expense. Neighborhood-level costs may vary significantly within the same city.

Community and support networks:

For many immigrants, having access to a strong community network can make the transition to a new city easier. Cities with established Latino communities may offer more Spanish-speaking services, cultural organizations, churches, restaurants, and local businesses.

Job availability:

A lower cost of living may not always translate into greater financial stability if local salaries and job opportunities are limited. For remote workers, choosing a lower-cost city may also provide more flexibility.

Access to services and education:

Before moving, it may help to consider commute times, fuel costs, access to public transit, and proximity to schools, grocery stores, and healthcare services.

Manage your finances in the US with Común

Choosing an affordable city is only one part of building a stable life in the United States. Común offers a debit account that can be opened with more than 100 valid Latin American IDs. The app and services are available in Spanish and users can conveniently send money from their phone to 10+ countries in Latin America. Visit comun.app to learn more.

FAQs

What is the cheapest city to live in the US?

Based on 2026 cost-of-living data, Cleveland, OH and Detroit, MI rank among the cheapest large cities in the United States, with cost-of-living indexes well below the national average.

Where can you find the most affordable housing in the US?

The most affordable housing markets in 2026 tend to be in the Midwest and South, particularly in Ohio, Michigan, Tennessee, Alabama, and Oklahoma.

Which cities offer a balance between employment and affordability?

Indianapolis, IN and Knoxville, TN are frequently cited for combining affordability with strong job markets.

How do I calculate the cost of living before moving to a new city?

Start with the three largest expenses: housing, transportation, and food. Use tools like the C2ER Cost of Living Index or Numbeo's city comparison tool to compare cities side by side.

Which cities have the largest Latino communities and affordable cost of living?

Brownsville, TX has a 94% Hispanic population and a cost of living approximately 12–16% below the national average. Toledo, OH, Cleveland, and Indianapolis also have established Latino communities and Spanish-language services.

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Sending Money to Latin America? What You Need to Know About the New 1% Tax

If you send money home to Mexico, Guatemala, Colombia, El Salvador, Honduras, or anywhere else in Latin America, a new federal law may affect the fees you pay per money transfer, depending on how you send it.

On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (OBBBA), Public Law 119-21, which introduced a new federal excise tax on certain international money transfers. The tax, set at 1% of the transfer amount, applies to remittances made on or after January 1, 2026. However, not all transfers are taxable.

If you send money from a US bank account or using a US-issued debit or credit card, your transfer is exempt from the tax by statute. The tax applies only when you pay with cash, a money order, a cashier's check, or a similar physical instrument.

Understanding whether this tax applies to you and how it may affect your transfers can help you send money home with fewer surprises.

What Is the New 1% Remittance Tax?

It imposes a 1% federal excise tax on certain outbound remittance transfers, meaning money sent from a sender in the United States to a recipient in a foreign country, through a remittance service provider.

The tax is codified under IRC Section 4475, added to the Internal Revenue Code by Section 70604 of the OBBBA. It applies to all senders, regardless of citizenship or immigration status.

The tax was effective for transfers made after December 31, 2025, with collection beginning January 1, 2026.

Who Pays the Tax? Who Doesn't?

The key factor is how you fund the transfer, not how much you send, not where it goes, and not your immigration or citizenship status.

This means that if you often send money back home with a remittance service provider with physical locations (for example Western Union or MoneyGram) and pay with cash, a 1% tax will be added to your total transfer amount.

However, if you send money through a digital app or bank account linked to your US checking or savings account, or pay with a US-issued debit or credit card, the transfer is exempt from the tax under Section 4475.

How Is the Tax Collected?

The tax is collected at the point of transfer. When a taxable transaction occurs, the remittance transfer provider is responsible for collecting the 1% from the sender at the time the transfer is made.

Providers must then deposit the collected taxes with the IRS on a semimonthly schedule and file quarterly returns.

The Remittance Landscape in 2026

For millions of families across Latin America, the money that arrives from a relative in the United States can pay the rent, cover school fees, or put food on the table. In 2024, Latin America and the Caribbean received an estimated $161 billion in remittances, the vast majority sent from the US. Mexico alone received over $63.3 billion. In countries like El Salvador, Guatemala, Nicaragua, and Honduras, remittances represent between 19% and 26% of GDP.

For people already stretching every dollar between their own expenses in the US and the needs of family back home, an additional cost on each transfer can have an impact. How much it affects you depends largely on the tools available to you.

Cash agent networks (Western Union, MoneyGram, Intermex):

These are the traditional in-person options, often used by senders who mostly manage cash. Transfers funded with cash at these locations are subject to the 1% tax.

Digital apps (Remitly, Wise, Xoom, Común, and others):

These platforms typically process transfers from a linked US bank account or US-issued debit or credit card. These payment methods are exempt from the tax under Section 4475. However, fees and exchange rate margins may vary by provider.

Bank wire transfers:

Transfers sent directly from a US bank account at a Bank Secrecy Act–compliant institution are exempt from the tax by statute. Bank wire fees can be higher than digital app fees.

What This Means for You

If you send money home regularly, you already know that there are costs involved: transfer fees, exchange rate margins, sometimes a fee on the receiving end. Now, depending on how you send money, there may also be a new 1% federal tax. That may not sound like much in isolation, but if you're someone already careful about managing what to keep and what to send, it can add up.

There is no single right answer for everyone. Some people that have a US bank account can shift to a digital transfer method. Others who don't have that option yet, or may have reasons for continuing to send through an agent location. Whatever your situation is, a few things may help:

Know what you're being charged:

Before confirming any transfer, you should be able to see the fee, the exchange rate, any applicable taxes, and the exact amount your family will receive. Review everything before you hit send. Some service providers, like Común, offer in-app tools to help you calculate the costs before sending anything.

Compare the total cost:

A provider that charges no transfer fee but offers a weaker exchange rate can potentially cost more than one with a modest flat fee and a fair rate. The number that matters is what arrives on the other end.

If you have a US bank account or debit card, ask your provider about your options:

Transfers funded from a US bank account or US-issued debit or credit card are exempt from the tax under the current statute.

Ask your provider directly how they handle the tax:

Some providers may have updated their apps, websites, or agent instructions. If you're sending via a digital channel linked to your US bank account or debit or credit card, ask whether that payment method qualifies for the statutory exemption.

Manage your remittances confidently with Común

Having an account to receive electronic payments, track your spending, and send money directly may help make managing your financial life in the U.S. more convenient. Común accepts more than 100 valid Latin American IDs to open a debit account. With Común you get:

• A $2.99 flat fee per remittance transfer, with no hidden charges
• A checking account held at Community Federal Savings Bank, Member FDIC. Deposits are FDIC insured up to the applicable limits
• Transparent, in-app pricing where you can see exactly what each transfer will cost, including fees and the exchange rate, before you confirm
• 24/7 customer support in Spanish
• Cash pickup options for your recipient
• The ability to send transfers from the comfort of your phone

To learn more about Común's remittance services, visit comun.app/remittances.

FAQ

What is the new 1% Remittance Tax?

It is a federal excise tax introduced by the One Big Beautiful Bill Act (OBBBA), Public Law 119-21, codified as IRC Section 4475. It imposes a 1% tax on certain outbound money transfers from the United States to recipients in foreign countries. It applies only to transfers funded with cash, money orders, cashier's checks, or similar physical instruments.

When does the new remittance tax take effect?

The tax applies to remittance transfers made on or after January 1, 2026. It was signed into law on July 4, 2025, as part of the OBBBA. The IRS granted penalty relief to providers for the first three quarters of 2026, with full enforcement expected beginning Q4 2026.

Who has to pay the 1% tax?

The tax is owed by the sender, but it is collected and remitted to the IRS by the remittance transfer provider at the time of the transfer. It applies to all senders, regardless of citizenship or immigration status.

Are all money transfers from the US subject to the new tax?

No. The tax applies only to transfers funded with cash or physical instruments. Transfers funded from a US bank account at a Bank Secrecy Act–compliant institution, or paid with a US-issued debit or credit card, are exempt from the tax by statute.

How is the tax collected?

The remittance transfer provider collects the 1% tax from the sender at the time of transfer. Providers must deposit collected taxes with the IRS on a semimonthly schedule and file quarterly returns using Form 720.

How can I tell if my transfer is taxable?

It depends on how you're funding the transfer. If you are paying with cash, a money order, or a cashier's check at a remittance agent, the 1% tax likely applies. If you are sending money through a digital app or bank account using your US checking account or a US-issued debit or credit card, the transfer may be exempt under the current statute. Ask your provider directly to confirm how your specific payment method is classified.

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How to apply for a credit card as an immigrant in the U.S. in 2026

Applying for a credit card in the United States as an immigrant is possible, even if you don't have a Social Security number (SSN) or established credit history. This guide provides general information about the process and shares helpful tips.

What do you need to apply for a credit card in the U.S.?

Applying for a credit card in the U.S. is generally a straightforward process. Issuers typically request documentation for identity verification and risk assessment purposes. Requirements may vary by issuer, but you can generally expect the following:

Identification

• Full legal name
• Date of birth (must be 18+)
• U.S. address (some institutions may accept applicants with a U.S. mailing address)
• Government-issued ID (for example, passport or driver's license)

Tax ID number

You'll typically need one of the following: SSN or ITIN (Individual Taxpayer Identification Number) issued by the IRS. It's important to note that not all credit card issuers accept ITINs. However, some financial institutions and fintech providers may offer alternatives.

Income information

• Annual income (employment, self-employment, or other sources)
• Employer name (may be requested)

Credit history

• Credit score (for example, FICO) may be reviewed
• Existing loans, credit cards, and payment history

Contact information

• Phone number and email address

Can I apply for a credit card without a Social Security number?

Yes. Some credit card issuers accept an ITIN instead of a Social Security Number. You can apply for an ITIN by submitting Form W-7 to the IRS.

It is recommended to look for service providers whose requirements match your current needs and documentation. For example, you may be able to open an account with Común using more than 100 valid Latin American IDs, which can be a helpful first step before applying for a credit card.

Step by step: How to apply for your first credit card

Step 1: Open a bank account in the U.S.

Before applying for credit, while not always required, it is generally recommended to open a debit account in the U.S. Having one may improve your chances of approval and help simplify the process. It can also help demonstrate income activity and provide a way to make payments on your credit account.

Look for service providers whose requirements align with your current documentation status. For example, some traditional banks may accept an ITIN to open a debit account. Others, such as Común, offer the ability to open a debit account online with more than 100 valid Latin American IDs. Visit comun.app to learn more.

Step 2: Build a basic financial history

To begin establishing a financial footprint in the U.S., it is often suggested to use a debit account consistently. This may include receiving direct deposits and maintaining regular account activity. While this does not create a credit history on its own, it may help establish a relationship with financial institutions and may support access to credit-building products.

Step 3: Choose the correct card type

Secured credit cards:

These cards typically require a refundable deposit, for example, $200. The deposit usually becomes your credit limit. This structure helps reduce risk for the issuer and may make approval more accessible.

Credit cards for individuals with limited or no credit history:

These credit cards are designed for individuals without an established credit history. They may not require a deposit but can have stricter approval criteria. Some issuers may offer products that accept an ITIN.

Step 4: Submit your application

To submit your application, depending on the issuer you may apply online or at a bank branch. You will typically be required to provide personal details, such as your name, address, date of birth, an SSN or ITIN and your income information.

It is generally recommended to avoid submitting multiple applications in a short period of time, as each application may result in a 'hard inquiry' which can temporarily impact your credit score.

Differences between a credit card and a debit card

Debit card:

• Uses your own money (that you deposit or transfer)
• Does not involve borrowing money
• Can help manage daily spending and receive deposits
• Does not typically build credit history on its own
• May serve as a practical and accessible first step into the U.S. financial system

Credit card:

• Uses borrowed money from a bank
• Requires repayment (ideally in full each month)
• Activity may be reported to credit bureaus
• Can help build your credit history and score over time

Tips to help reduce the likelihood of application rejection

• If possible, avoid applying for multiple credit cards at the same time
• You could consider starting with a secured card if you don't have a credit history
• It is recommended to have an active debit account before applying
• Verify that your information matches across all documents
• Try to keep your expectations realistic about your first credit limit — approval matters more than the amount

Frequently asked questions about applying for a credit card as an immigrant

How long does it take to build credit?

You may generate your first credit score within approximately 3 to 6 months after opening a credit account.

Can I apply for a credit card without documentation?

In most cases, to apply for a credit card you'll need some form of identification, such as a passport, and an ITIN. Some institutions offer options for individuals without an SSN, but applications without any documentation are generally not accepted.

What is a credit score?

A credit score is a number that reflects how you manage credit, based on your payment history and use of borrowed money.

Can I be denied a credit card because I'm an immigrant?

No. Lenders generally don't deny applications based on immigration status alone. However, an application may not be approved if you don't have a credit history, sufficient income, or the required identification requested by the issuer.

Does my credit history from another country count in the U.S.?

In most cases, no. Most U.S. lenders don't have access to international credit data, so you'll need to start building credit history in the U.S.

In summary

Starting somewhere can make the process feel more manageable. For many people, building credit in the U.S. begins with something simple such as opening a debit account. Común offers a debit account that can be opened with more than 100 valid Latin American IDs, with an app available in Spanish. Visit comun.app to learn more.

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How many numbers does a Social Security Number have? Format, meaning, and difference from an ITIN

The Social Security number (SSN) has 9 digits and is written in the format of XXX-XX-XXXX (for example 123-45-6789). An SSN is used to track earnings for taxes and benefits, access Social Security benefits, and verify identity for many activities such as applying for jobs, banking, accessing credit, and obtaining government services. It's one of the most sensitive personal identifiers in the U.S. You can find this number on your Social Security card, tax documents, and certain official government records.

What does each part of the Social Security number mean?

Historically, the SSN had meaning in each section. It followed a structure where the first three digits (known as the area number) were originally linked to the location where the SSN was issued. This was followed by the middle two digits (the group number), which had an administrative purpose. The last four digits (the serial number) were unique identifiers.

However, since 2011, these numbers no longer reflect location or order and are assigned using a 'randomization' system. The last four digits are often used for partial identity verification by financial institutions such as banks or credit unions, credit card issuers, government agencies, and healthcare providers.

How do I know if my SSN is valid?

There's no public tool to fully verify an SSN. You can confirm that it follows the 9-digit format, but official verification is performed through the Social Security Administration.

What is the Social Security number used for?

The SSN is a primary tax and financial identification number in the U.S. It is used across employment, financial, and government systems. Key uses include:

• Employment & Taxes: Required by employers for payroll processing and reporting income to the government
• Access to Government Benefits: Used by the Social Security Administration (SSA) to track lifetime earnings and determine eligibility for benefits, including retirement, disability, and Medicare
• Financial Services: Banks and financial institutions may require an SSN to open accounts and report interest income
• Credit & Loans: Credit bureaus use it to track credit history, and lenders use it to access creditworthiness
• Identification: Used by certain government agencies, for example the Department of Motor Vehicles in some states and for background checks

SSN vs. ITIN: What's the difference?

If you are not eligible for a Social Security Number (SSN) but have a U.S. federal tax obligation, you may need to apply for an Individual Taxpayer Identification Number (ITIN). Even though they are both nine digit numbers, they serve different purposes. The SSN is a nine-digit identification number issued to U.S. citizens and certain individuals authorized to work in the U.S. to report wages, access benefits, and establish credit history. An ITIN, on the other hand, is a tax processing number issued by the Internal Revenue Service (IRS) to individuals who are not eligible for an SSN but need to file U.S. tax returns.

Here are some key points to keep in mind:

• The ITIN also has 9 digits and typically starts with the number 9, the format 9XX-XX-XXXX
• The SSN is issued by the Social Security Administration, while the ITIN is issued by the IRS
• An SSN is generally issued to individuals authorized to work in the U.S., while an ITIN is used by individuals who need to meet tax obligations but are not eligible for an SSN
• An ITIN does not, by itself, authorize employment in the U.S. Work eligibility depends on immigration status and applicable laws

Both SSNs and ITINs may be accepted by some financial institutions to open checking or savings accounts, subject to each institution's policies.

Can I open a bank account without a SSN?

Policies vary by financial institution, but it may be possible. It can be challenging for newly arrived immigrants to open a bank account without an SSN; however, some institutions offer alternatives.

For example, certain banks may allow in-person account opening using an ITIN. Some community-focused credit unions may accept either an SSN or an ITIN. Other providers, such as Común, may offer digital account opening with more than 100 Latin American IDs.

Results may vary. For a complete list of eligible IDs and application requirements, follow this link to Común's Help Center.

How can you protect your Social Security number?

Your SSN is highly sensitive information, and protecting it is important to reduce the risk of identity theft. Here are some general tips:

• Whenever possible, avoid carrying the physical card. Try to keep the document in a safe place at home
• Avoid sharing your SSN unless it is necessary and you trust the requesting party
• Monitor your financial accounts and credit reports regularly for unauthorized activity
• Contact the Federal Trade Commission (FTC) if you suspect your SSN has been compromised

As a newly arrived immigrant, dealing with documentation can feel overwhelming. However, the good news is that you don't necessarily need to wait for an SSN to begin addressing your banking needs in the United States. Común's app is available in Spanish. Visit comun.app to learn more about account requirements.

FAQ

Can a Social Security number be changed?

Generally no, except in some exceptional cases, as determined by the Social Security Administration.

Do children born in the U.S. automatically receive a Social Security Number (SSN)?

An SSN is not issued automatically, but can be requested when the birth is registered.

How many digits does an ITIN have?

An ITIN has 9 digits, and typically starts with the number 9.

Is it mandatory to have an SSN to live in the United States?

No, an SSN is not required for residency.

Can I use someone else's Social Security number?

No, it's illegal and can result in serious legal consequences.

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The total cost may depend on three main factors: the transfer fee, the exchange rate used to convert USD to Guatemalan quetzales (GTQ), and any charges applied when the recipient receives the money. The total cost can vary from one transfer to another, depending on the provider and delivery method.

For many Guatemalans living in the United States, sending money back home is important. Some people support their families by covering everyday expenses or helping during emergencies. According to the World Bank, Guatemala is the second-largest recipient of remittances in the Latin America and Caribbean region, after Mexico. Remittances play a vital role in supporting rural communities in Guatemala, which receive over half of total flows.

Today, there are many ways to send money to Guatemala from the United States, including banks, cash pickup services, and apps and digital platforms. Comparing costs, delivery times, and exchange rates before sending can help your family receive more money overall.

How much money can you send to Guatemala?

The amount you can send to Guatemala may depend on the provider you choose, your account verification level, and the payment method used for the transfer.

In general, there is no single universal limit imposed on personal remittances from the United States. However, money transfer companies and financial institutions usually apply their own transfer limits as part of fraud prevention and regulatory compliance requirements.

For example:

• Some providers may limit new accounts to smaller daily or monthly transfers.
• Verified users may qualify for higher transfer limits.
• Cash-based transfers sometimes have different limits than bank transfers.
• Certain services may request additional identification for larger transactions.

Before sending money, it is recommended to review the provider’s limits, accepted identification documents, and delivery methods available in Guatemala.

What determines the real cost of sending money to Guatemala?

The real cost of sending money to Guatemala may depend on three main factors:

Transfer fee

The transfer fee is the amount charged to process the remittance.

Some services use a flat fee structure, while others may adjust the pricing depending on the amount sent, payment method, or delivery speed. Some service providers may also offer promotional pricing for first-time transfers.

Although low fees can help reduce costs, they may not always represent the lowest total transfer cost once exchange rates and other charges are considered.

Exchange rate spread (USD to GTQ)

Another important factor is the exchange rate used to convert U.S. dollars into Guatemalan quetzales.

Some providers may apply a margin (also known as a spread) on top of the market exchange rate. Even small differences in the USD to GTQ conversion rate can affect how many quetzales your family receives, especially on larger transfers.

Comparing the final amount received in GTQ may provide a more accurate picture of the total transfer cost.

Recipient charges or withdrawal costs

In some cases, the recipient may face additional costs when receiving the money. These depend on the provider and delivery method.

There could be charges related to ATM withdrawals, cash pickup locations, bank processing, or currency conversion. These costs may vary depending on the institution or pickup network used in Guatemala.

What is the best way to send money to Guatemala from the United States?

The best way depends on your context and priorities. Today, there are many ways to send money to Guatemala from the United States, with different service providers offering features such as faster delivery times, multiple delivery methods, or lower overall transfer costs depending on the type of transaction.

Traditional banks

Some people choose to send money through traditional bank wire transfers. This option is available for people who already use a U.S. bank account.

However, international bank transfers can sometimes involve higher fees, slower processing times, special considerations such as banks in the U.S. generally being closed for federal holidays or additional requirements such as SWIFT codes and recipient banking information.

Cash transfer agencies

Cash pickup services continue to play an important role for many families in Guatemala, especially for recipients who primarily manage their finances in cash or who may not have easy access to traditional banking services.

Companies such as Western Union, MoneyGram, and Ria Money Transfer can offer extensive pickup networks across Guatemala through local banks, convenience stores, supermarkets, and remittance partners.

This option can be convenient for recipients who prefer immediate access to cash, although some traditional cash transfer services may involve higher fees or exchange rates that are less favorable compared to other options.

Digital apps and platforms

Another option is using apps and digital platforms specialized in international transfers.

Services such as Común, Félix Pago, Ria Money Transfer, and MoneyGram offer options to send money directly from your phone, either through an app or even WhatsApp. These services often include multiple delivery options available in Guatemala.

While some of these service providers focus mainly on remittances, others may also include features such as debit cards, mobile banking access, or account management tools. For example, Común (https://www.comun.app) offers a debit card that accepts more than 100 Latin American IDs for account verification, it also offers the option to send money on the app or using WhatsApp, and offers cash pickup options in Guatemala.

Comparing services for sending money to Guatemala

There are services available for sending money to Guatemala, but the fees, exchange rates, transfer speeds, and delivery methods can vary depending on the provider and transfer type. This table was created to provide a visual aid for comparing 5 popular remittance service providers in the United States to Guatemala.

The total amount received in GTQ is subject to change throughout the day due to exchange rate fluctuations, provider fees, and delivery methods.

To compare real-time transfer costs and exchange rates, you can use tools such as Común Compara (https://www.comun.app/compara) designed to help you have more clarity on remittance costs. If applicable, you may see a "Primer envío" toggle that reflects promotional pricing for eligible first transfers.

How does the recipient receive money in Guatemala?

It depends on the provider selected, as recipients in Guatemala can receive money through different delivery methods.

Bank deposit

Some service providers offer direct deposits into Guatemalan bank accounts in quetzales. The delivery speed can vary depending on the receiving bank and transfer verification process.

Cash pickup

Depending on the provider and the recipient's location, they can collect money from local banks, remittance agencies, supermarkets, or retail stores.

To receive the money, recipients often require a valid identification document and the transfer reference number.

Delivery times

Transfer times can vary depending on the provider, payment method, verification requirements, holidays, and delivery option selected.

Some digital transfers can arrive within minutes, while bank transfers or certain cash pickup options could take longer.

How can I send money to Guatemala with Común?

With Común, people can send money to Guatemala directly from the mobile app. To send money, you can follow the steps:

• Open your Común mobile app.
• Select "Send a Remittance."
• Choose or register the recipient.
• Enter the recipient's information, including bank details if needed.
• After registering the recipient, enter the amount you want to send.
• Review the exchange rate, transfer fee, and delivery method.
• Confirm the transaction.
• You can check the transfer status in your Común mobile app by clicking on the transaction.

Transfer fees start at 2.99 USD per transaction, up to applicable limits.

Why choose Común to send money to Guatemala?

Común’s vision is to become the leading financial platform for immigrants in the U.S. Therefore, it can include elements that are helpful for people sending money to Guatemala from the United States.

Some of the services include:

• Acceptance of more than 100 Latin American IDs for verification.
• Spanish-language app experience.
• Ability to send money directly from the app or WhatsApp.
• Multiple delivery methods available in Guatemala.

As with any financial service, transfer costs, delivery speeds, and availability may vary depending on the transaction details. You can learn more about Común on our website (https://www.comun.app/about-us) or in the app (https://www.comun.app/).

FAQ

How much does it cost to send money to Guatemala?

The total cost may depend on the provider, transfer fee, exchange rate, delivery method, and whether the recipient faces additional charges.

How long does it take for money to arrive in Guatemala?

Transfer times can vary depending on the provider and delivery method selected. Some digital transfers may arrive within minutes, while others could take several business days.

What is the best app to send money to Guatemala?

The best app may depend on what matters most to you, whether that's lower fees, exchange rates, delivery speed, or cash pickup availability.

Do I need an SSN to send money to Guatemala?

Some providers may require an SSN, while others may also accept an ITIN or alternative identification documents depending on their verification policies. It is important to check each service provider’s verification requirements.

How much money can you send to Guatemala from the United States?

Transfer limits may vary depending on the provider, payment method, and verification level.

Where can my family receive money in Guatemala?

Depending on the provider, recipients may receive money through bank deposits, cash pickup locations, mobile wallets, or other delivery methods available in Guatemala.

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