How to Send Money by PayPal and Cut Costs on Overseas Transactions
Question is, was I wasting money in exchange for convenience?
How does PayPal work and are there better options in certain circumstances?
That is exactly what I will uncover here.
For small amounts PayPal can be a super convenient and a surprisingly low total cost option. However for more then a few hundred dollars it is usually expensive compared to almost any other method. But international money transfer services are normally as quick, charge you lower fees, and give you a better exchange rate.Cut to the Chase: Check out our PayPal V Transferwise comparison.
The results of my test may shock you:
Here is how they faired in our $5000 comparison when sending money abroad.
Click image for “My International Money Transfer Service”
So why are the Total Costs so high?
Total Costs – include the difference between exchange rate offered and exchange rate big financial institutions like banks and PayPal get (which is called the wholesale or interbank rate).
A much more common transaction for PayPal is when transferring money less then a few hundred dollars. Less than a hundred dollars and PayPal is hard to beat.
In our example, a transfer of $100 would cost $7.50!
While that is still 7.5% of your money to do the transaction it is a lot cheaper than other options and very quick and easy if your recipient wants to get paid into a PayPal account.
However, there are much cheaper options for international money transfers for amounts of more then a few hundred dollars. If you want to send small amounts though – here are the steps.
How does PayPal work for international transactions?
It really couldn’t be simpler.All you need to open an account is:
- An email address and
- A bank account or a credit card
The individual steps are below in the infographic.
Now you can send or receive money using your PayPal account.
Sending Money
It is possible to send money to anyone in practically any corner of the world. You only need to know the email address that is linked to the PayPal account of the intended receiver of your payment.PayPal operates in 200 markets and has the flexibility to make payments in more than 100 currencies. You can also withdraw funds in 56 currencies and hold balances in their PayPal accounts in 25 currencies.
Step-by-Step How to Send Money Overseas using PayPal
(See below – How to Receive)
Receiving Money
Transfer of money from one PayPal account to another is almost instantaneous regardless of the location of the sender and the receiver. The only caveat – if the person who has received the money wants to transfer it to a bank account, it may take several days.The receiver also has the option of holding the money in a PayPal account. Amounts can be held in any of 26 specified currencies.
Security
PayPal was established in 1998. Since then it has grown into one of the largest and most trusted companies for individuals to send money across the globe.In 2017, PayPal processed 451 billion USD and now has over 250 million account holders.
In the last quarter of 2018 alone, the payment volume totalled $143 billion.
PayPal lays great stress on the security of the data that is generated by the millions of transactions that it handles on a daily basis. A recent report in MIT Technology Review explains how the company is at the forefront of the branch of artificial intelligence technology known as ‘deep learning’ that enables it to minimize frauds.
Fees and charges
As a sender of money through PayPal, you will pay up to four different fees. Although this varies for different countries, it is usually a (1) small fixed amount and (2) another larger sum that is determined by the amount being sent.Additional fees can also be incurred (3) if you use a credit or debit card as opposed to sending money from your PayPal balance or a linked bank account.
In addition to these fees, (4) currency conversion fees will often also be incurred at source or destination.
For example, if you are sending US$100 to Canada or Europe, you will pay a total fee of about US$3.29 if it is from your PayPal balance.
These fees are made up of = (1) 30c small fixed fee + (2) $2.99 variable fee. In this case based on the amount being $100 or more.
Total = $3.29
Assuming this transfer was made from a PayPal balance there would be no (3) additional fees on the method of funding.
If the funds of the receiver could be used in USD there would be no more to pay in fees, however usually the receiver will want the payment in their local currency. In this case an additional (4) currency conversion fee should be considered.
PayPal international fees is quite complex but you can also save a lot of money if you know how it works.
We have included specific information for USA, UK, Canada and Australia as well as way you can save money!
See “Cross-Border Payments” for the USA
See “Sending and Receiving Money” on this document for the UK
See “Fees and Charges” on this document for Australia
See our FAQs below for comprehensive fees and conversion costs:
Convenience
As you can see, the charges add up to a fair amount. Then why is PayPal so popular?It is extremely easy to set up an account.
Transferring money takes almost no time and their systems and procedures are time-tested and fail-safe (as far as reasonably possible).
Practically no other money-transfer service is as efficient as PayPal. It has adapted to a changing market by making its systems capable of handling mobile transactions. PayPal now processes over $500 billion in payments.
The service is rapidly growing in popularity. Last year it grew its total active user base by 35 percent to 235 million total.
Expensive for large amounts – PayPal is practically the best way to transfer money to other countries if the sum being sent is small – say, a few hundred dollars.
Sending bigger amounts can be expensive because most of PayPal’s fees are charged as a percentage of the amount being transferred. If you need to send a sum exceeding $300, it is better to explore other options here.
FAQs
1. Does PayPal accept credit cards?PayPal accepts Visa, MasterCard, Discover and American Express.
2. Are there any fees for opening a PayPal account?
No, opening an account is absolutely free.
3. Can I call back an amount that I have sent using PayPal?
Yes, if the status of the amount that you have sent is ‘unclaimed’. This status indicates that the recipient has not received or accepted the amount yet.
4. Is PayPal a bank?
No, it is not a bank. It provides a quick and easy way to send and receive money.
5. I think that the exchange rate that PayPal uses for currency conversion is expensive. Can I opt to use my credit card’s exchange rate instead of PayPal’s?
Yes, you can. If you choose to use MasterCard or Visa’s exchange rate, the applied conversion rate will appear on your credit card statement and not at the time of your PayPal transaction.
6. If I am sending money overseas from Australia to a friend, what are the charges?
If you use your PayPal balance or a linked bank account, the charges would be 0.5% to 3.3%, depending on the country you are sending the money to.
If you use your credit or debit card, the fee would range from 3.9% to 7.4% plus a fixed fee, depending on the country.
7. What are the fees for various countries?
| Recipient country | PayPal balance or bank account | Entirely or partially funded by Credit Card |
| Brazil | 1% | 5.99% + fixed fee |
| Canada | 1% | 3.9% + fixed fee |
| China | 0.5% | 3.9% + fixed fee |
| Hong Kong | 0.5% | 3.9% + fixed fee |
| Singapore | 0.5% | 3.9% + fixed fee |
| Taiwan | 0.5% | 3.9% + fixed fee |
| US | 1% | 3.9% + fixed fee |
| Germany | 3.3% | 5.2% + fixed fee |
| Italy, Netherlands, Belgium, France | 1.8% | 5.2% + fixed fee |
| Poland | 2% | 4.9% + fixed fee |
| Other European countries* | 1.5% | 4.9% + fixed fee |
| All other countries | 0.5% | 3.9% + fixed fee |
8. Do I have to pay anything in addition to the fees in question 7 above?
YES! This is the conversion fee and above more than about $300 there are better options.
| Currency conversion | Currency conversion fee |
| Converting within your PayPal account and not as part of a transaction | 2.5% above the wholesale exchange rate |
| Converting to US Dollars or Canadian Dollars | 3.5% above the wholesale exchange rate |
| Converting to all other currencies | 4% above the wholesale exchange rate |
9. Can PayPal close or temporarily suspend my account?
Yes, there are various reasons that PayPal may stop you from using your account. These include suspected fraud, a failure to prove your identity or a sudden change in the amount or number of your transactions.
Your account activities may also be suspended if the company thinks that you are using your personal PayPal account for a business activity that requires you to upgrade to a premium or business account.
10. Can I have more than one PayPal account?
Yes, you can have one personal account and one premier or business account.
11. What is the transaction limit on PayPal?
The maximum amount allowed for a single transaction is $10,000 USD by a PayPal member. For PayPal members living outside the US, the maximum transaction limit depends on the currency in use. In Australia, it is $12,500 AUD.
12. Can I use my mobile phone for PayPal transactions?
Yes, you can. Just download the PayPal app. You can even send money to someone who does not have a PayPal account. You just need the intended recipient’s email address. PayPal will help them create an account so that they can access their money.
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