Converting and Sending Currency via PayPal - How does it compare?

Find out if PayPal is the best choice for transferring money between different currencies

PayPal is a fast and convenient way to transfer money, but in many cases the fees can be very high.

PayPal is a good choice if:

pros of paypal

You are sending money in the same country (not across international borders).

pros of paypal

Both you and the recipient have a PayPal account.

pros of paypal

You can fund your account via direct debit from your bank account.

PayPal is not a good choice if:

cons of paypal

You need to fund your account via a debit or credit card.

cons of paypal

You are transferring money internationally.

In these cases, the costs can add up very quickly and will often be between 3% and 7% of the amount you transfer.

pros and cons of paypal

The Currency Shop Says

  • If you want speed, convenience, are transferring a small amount and do not mind paying the fees, PayPal is a reasonable choice.
  • In any other circumstances, you might be better off using the TransferWise Borderless Account

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What we will cover

Paypal is one of the world’s most popular ways to buy good and services and send money to friends and organisations. Many people also use PayPal to transfer money to other countries, but it may not always be the best option.

We’ll explore how to use PayPal to send money overseas,recommend when it’s best used and share other options to save you money. We’ll also look into some of the details and fine print you’ll want to be aware of.


How Paypal Works

one

Open an account

You’ll need to open a free account with PayPal before you can use it. You’ll need to add your name, address and some other personal and payment information. As PayPal is one of the most popular and widely-used payment services in the world, it’s highly secure.

cons of paypal

Get the PayPal address of the person you want to send money to

If you want to transfer money, you'll need the PayPal account of the person or organization where you're transferring money. This is normally the email address they have associated with the account. If they don't have an account, they can set one up as well.

cons of paypal

Fund your account

Before you can send money, you'll need to credit funds to your account. You can do this from your bank (fee free) or by using a debit or credit card (which PayPal does charge fees for.)

cons of paypal

Send the money

You can then arrange to send money. You can pay in your local currency and they'll receive money in their currency, after PayPal have exchanged the funds and deducted their fees.


PayPal Fees

PayPal makes money in two main ways; through providing an exchange rate slightly below the interbank rate, and by charging you (and possibly the receiver) fees on a transfer.

Paypal fees for transactions within Australia

Transaction Using Paypal balance or linked bank account Using credit or debit card
Receiving money - Purchase payments (eBay, Gumtree, etc.) 2.6% plus $0.30 AUD of the amount you receive 2.6% plus $0.30 AUD of the amount you receive
Receiving money - Personal payments (friends, family) Free Free
Sending money Free 2.6% plus $0.30 AUD of the amount you send
For example, if you send $100.00 AUD by credit card, the fee would be $2.90 AUD ($2.60 + $0.30).

Paypal fees for sending or receiving money outside of Australia

Currency Conversion Using your PayPal balance or linked bank account Using credit or debit card
US or Canadian dollars 3.5% above the wholesale exchange rate 3.5% above the wholesale exchange rate plus a fixed fee
All other currencies From 3.9% - 7.4% plus a fixed fee, depending on the country From 3.9% - 7.4% plus a fixed fee, depending on the country
Within your PayPal account (not as part of a purchase) to any currency 2.5% above the exchange rate 2.5% above the exchange rate plus a fixed fee

The Currency Shop Says

  • Warning: The fees for sending money internationally (across country borders), especially via a debit or credit card can add up quickly. If you do want to use PayPal, use a direct debit from your bank account to pay whenever possible.
  • In any other circumstances, you might be better off using the TransferWise Borderless Account

Paypal Exchange Rates

PayPal uses what’s called a “retail exchange rate.” This rate is seldom as good as the rate you can get from dedicated currency exchange providers.

PayPal themselves say the rate should be compared to an airport currency exchange rate. Unfortunately, airport exchange rates are always higher than you can get elsewhere.

The Currency Shop Says


Exchange Rate Comparison Tool


Who should use PayPal and why?

It’s best to use PayPal when:

  1. You’re sending money in the same country (not across international borders).
  2. Both you and the recipient have a PayPal account.
  3. You can fund your account via direct debit from your bank account.

The Currency Shop Says

  • In almost all other circumstances you will be better off using a dedicated currency provider. They will give you better exchange rates and charge lower fees.
  • PayPal is great for transferring money between friends in Australia, or paying for ebay purchases. But not for large amounts.
  • It is fast and convenient, but their fee structure can be complicated
  • Avoid using a debit or credit card to fund your account or to send money internationally, the fees add up very quickly

Frequently Asked Questions

Here are the fees typically charged by PayPal for international transfers.

  • 0.5% to 3.3% (cross-border transaction fee) for direct debit from a PayPal account or a bank account linked to Paypal
  • 3.9% to 7.4% (cross-border transaction fee) for debit or credit card, PLUS fixed fee (estimated at $0.30 equivalent), PLUS currency conversion.


Example: Sending money from Australia to the US, UK or China

  • 3.9% (cross-border transaction fee) + $0.30 (fixed fee) + currency conversion.
  • $100 payment/transfer = $3.90 + $0.30 + currency conversion.
  • $1,000 payment/transfer = $39.00 + $0.30 + currency conversion.
  • $10,000 payment/transfer = $390.00 + $0.30 + currency conversion.


If sending Australian dollars overseas, you will not be subject to the currency conversion.If your payment is funded by direct debit, the currency conversion fee is significantly reduced, though you will still face the conversion if sending a foreign currency.

To say PayPal’s Australian fee structure is complicated would be a big understatement. With 23 major headings, over 20 tables and over 8,000 words, it’s not for the faint-hearted.

The essential takeaways are that you and / or the person receiving the money can expect to pay anything between 0.5% and 7.5% in fees to transfer money internationally (before taking exchange rates into account).



Because PayPal tends to charge percentages, rather than fixed fees, the more money you transfer, the more you will end up paying in fees.



Tip: Fees vary depending on where the payment is being sent from, the method of payment (bank account/Paypal balance, debit card or credit card) and the payment destination. It’s worth doing some research and comparison to check you’re getting a fair deal.

1. A Bank

Banks in Australia have higher fees and uncompetitve exchange rates but this doesn't mean you should never use them. Using a bank is also the quickest way to transfer money internationally.



2. Paypal

This is a great option for anyone sending smaller amounts under $1000. The exchange rate you'll get are comparable to a bank but the fees are significantly lower. It is particularly handy when the person you are paying has a Paypal account.



3. A Money Transfer Company

Money Transfer Companies like OFX and HiFX are often the cheapest option when you are sending between $1000 and $1,000,000 at a time. This is because they offer better exchange rates and lower (and sometimes no) fees. The downside to using a transfer company outside of a bank is that you'll have to set up an account with them first. This can take between 10 minutes and 2 days depending on how much information they need from you. Also, the transfer itself will usually take 1 day longer than using a bank.


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