Should You Use PayPal to Send Money Overseas?

PayPal is a fast and convenient way to transfer money, but in many cases the fees can be very high. Find out if PayPal is the best choice for transferring money between different currencies.

In a nutshell:

PayPal is a good choice if:

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

PayPal is not a good choice if:

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

Alternatives to PayPal

    • 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

How Paypal Works

1. 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.

2. 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.

3. 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.)

4. 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 to send money overseas

PayPal International Money Transfer 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 seller transactions

Transaction Australian International
Receiving money – Purchase payments (eBay, Gumtree, etc.) 2.6% plus $0.30 AUD of the amount you receive 3.6% plus fixed fee of the amount you receive
Online Invoices 2.6% plus $0.30 AUD of the amount you receive 3.6% plus fixed fee of the amount you receive

PayPal fees for sending or receiving money outside of Australia

Payment Method Transaction Fee Funding Fee
Funded by PayPal or linked bank balance 5% of total transfer. $0.99 minimum, $5.99 maximum n/a
Funded by credit card or debit card 5% of total transfer. $0.99 minimum, $5.99 maximum 2.6% of the total transfer plus a fixed fee based on currency

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

10 Free Transfers

The Currency Shop has partnered with CurrencyFair to offer 10 fee free money transfers. Click on this offer, register your details and avoid paying a fee to transfer money overseas.

  • Easy to use online platform
  • Excellent exchange rates for sending money to and from Australia
  • Rated Excellent 4.7 out of 5 by over 4000 customers on independent review site Trustpilot.

Terms and conditions do apply but you can learn more about them here

Learn More About CurrencyFair

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

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

How are PayPal fees calculated?

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

  • A transaction fee of 5% of funds transferred with a minimum of $0.99 and maximum of $5.99 for the transaction fee from a PayPal account or a bank account linked to PayPal
  • An funding fee of 2.6% of the funds transferred + fixed fee + currency conversion if you pay with credit or debit card. This funding fee has no cap so can get very expensive.
  • A currency conversion fee from 3%

 

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

    • $100 payment/transfer with PayPal account or bank account = $5 + currency conversion.
    • $100 payment/transfer with credit card or debit card = $5 + $2.60 + $0.30 or £0.20 + currency conversion.
    • $1,000 payment/transfer with PayPal account or bank account = $5.99 + currency conversion.
    • $1,000 payment/transfer with credit card or debit card = $5.99 + $26 + $0.30 or £0.20 + currency conversion.
    • $10,000 payment/transfer with PayPal account or bank account = $5.99 + currency conversion.
    • $10,000 payment/transfer with credit card or debit card = $5.99 + $260 + $0.30 or £0.20 + currency conversion.

Are there any hidden PayPal fees?

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.

 

What other options are there to transfer money internationally?

1. A Bank

Banks in Australia have higher fees and uncompetitive 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. Peer to Peer (P2P)

Instead of wiring money overseas through a bank, P2P companies that make these types of transfers match people buying currency in one country with people who are selling it in another.  TransferWise and CurrencyFair are two of the biggest companies that offer P2P transfers and send your money this way. They are cheaper and faster than using banks.

 

3. A Money Transfer Company

Money Transfer Companies like XE and WorldRemit are often the cheapest option when you are sending between $1,000 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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By Arlene Mc Donnell Updated October 19th, 2020