Money transmitters are held to a high standard because they are expected to handle their clients’ money responsibly and in accordance with their state laws and guidelines. Every state other than South Carolina and Montana require money transmitters to obtain a Money Transmitter Bond before they can start doing business.
UPDATE: On June 6, 2016 the South Carolina Anti-Money Laundering Act took effect. This act requires South Carolina money transmitters to now get licensed and bonded before they can start doing business.
If you are an online retailer and you accept payments online (such as Paypal and Amazon) you are most likely required to secure a Money Transmitter Bond.
What is a Money Transmitter Bond?
A Money Transmitter Bond (also known as a Money Remitter Bond, Money Services Business Bond, or Check Casher Bond) is a type of surety bond. Like all surety bonds, it is a three party agreement between a principal, an obligee, and a surety.
- Principal: you, the money transmitter; the one who needs the bond
- Obligee: the state agency requiring you to get a bond
- Surety: surety bond company; the one who issues the bond
When you secure a surety bond, you are guaranteeing that you will follow the rules and regulations of your industry. That is the purpose of a Money Transmitter Bond. It helps safeguard your client’s well being. Having a Money Transmitter Bond ensures you will take are of clients' money according to your Money Transmitter License. If you fail to follow the rules and regulations stated in your license, your clients are free to make a claim against your bond. You can learn about the bond claim process here.
Think of your Money Transmitter Bond as insurance paid by you, but for your clients.
Common acts that could result in a claim against your bond:
- Dishonest acts
If you commit any of the above acts (or any acts that go against your license), then a claim might be made against your surety bond.
Money Transmitter Bond Amounts
Every state will have a different bond amount. Some states require only a $25,000 bond while others require up to a $300,000 bond. Check your individual state guidelines to determine your bond amount.
You do not need to pay the full bond amount to get bonded. You can learn more about how much Money Transmitter Bonds cost below.
How Much Does a Money Transmitter Bond Cost?
You will not need to pay your full bond amount to get bonded. For example, if you need a $100,000 bond, you will not need to pay $100,000. Instead, you will just pay a small percentage of this amount.
The rate you’ll pay is based on your personal financial strength as seen in your credit score. Those with good credit will usually pay 1-4% of their total bond amount. Those with less than average credit will have to pay a higher rate, anywhere from 5-15% of the total bond amount. You only need to pay once to get your bond.
At Surety Solutions, we know getting a Money Transmitter Bond can be expensive, which is why we created an online Bond Cost Calculator. This tool will let you view free quotes for your bond so you can compare prices before you commit to buying.
We are licensed in all 50 states and have relationships with over 30 of the top insurance carriers in the nation, which means we not only can get you bonded but at the lowest price on the market.
Once you purchase your Money Transmitter Bond, the surety company will mail it to you. You can then turn this in to get your Money Transmitter License.
Can I Get a Money Transmitter Bond if I Have Bad Credit?
While many surety companies, including us (Surety Solutions) have bad credit options for individuals, getting a Money Transmitter Bond with bad credit might be more difficult compared to other bonds. This is because if you are planning to handle other people's money, the surety company wants to ensure you can do so appropriately.
Money Transmitter Bonds are also seen as higher risk bonds. This is because theft and fraud is more apparent in this industry than others. For this reason, getting a Money Transmitter Bond with bad credit can be more difficult.
If you have bad credit, the best way to find out of if you can get bonded is to get a free quote.