If you’re planning on making an international payment or transfer with PayPal, it’s important to understand the charging structure.
While PayPal can be used for international transactions or payments, many users don’t realize that PayPal may prove pretty bad value, as the fees can be fairly steep. Plus, the PayPal exchange rate includes a ‘currency spread’ markup, which means it’s may not always be the best value for customers.
This article focuses on US-based PayPal accounts. For more information on the fees applied on UK-based PayPal accounts, check out this article instead.
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Before you get started, a word.
You may have been familiar with banks and money transfer providers when you were previously trying to exchange money.
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Now, back to what you came here to read.
What options are there to fund a PayPal transfer?
If you need to make an international transfer with PayPal, the first decision you must make, is how to fund the payment.
Different funding options incur different fees — so it is important to understand which works best for your situation.
If you’re using PayPal for your international transfer¹, though, you have a few options:
Use PayPal balance
If you already have a cash balance in your PayPal account — because other people have transferred you money using the service before, for example — you can use this to fund your payment.
Use a linked bank account
You can fund your transfer with a bank account you have linked to your PayPal account, so the money moves directly from your bank account, through PayPal, and on to the recipient.
Use a credit or debit card, or PayPal credit
You can fund your transfer in full or part using a debit or credit card, or the PayPal credit option. This is the route that usually incurs the highest fees, so if you’re considering it, it’s worth reading the small print before you commit.
PayPal foreign transaction fees
If you are using PayPal to either send or receive money internationally, fees can greatly depend on many factors. For this reason, we're showing you all the possible use cases and the fees that can influence the final cost of a transaction.
PayPal international fees when sending money
When initiating an international transaction with PayPal, there are two main ways of funding your transfer.
One option is funding your international transfer via PayPal balance or a linked bank account, which is generally the cheaper option.
But if you choose to fund your transfer in full, or in part, using a credit or debit card, or PayPal credit, then there are higher fees involved than if you don’t.
Let’s see what foreign transaction fees PayPal charges you, depending on which payment method you choose to fund your transaction with:
| PayPal balance or a linked bank account | Credit card or debit card | |
|---|---|---|
| Cross-border transaction fee | 5% (Minimum fee $0.99, maximum fee $4.99)² | 5% (Minimum fee $0.99, maximum fee $4.99) + 2.9% + fixed fee based on currency² |
| Exchange rate | 3% - 4% on top of the wholesale rate² | 3% - 4% on top of the wholesale rate² |
| 💡When sending money abroad with PayPal funded by your credit card, there is a fixed fee added on top of other fees charged. For US dollars, this fixed fee is $0.30 per transaction.³ |
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International PayPal fees when receiving money
Receiving money from friends or family abroad
While there isn’t a base fee when you receive money from your friends and family via PayPal, keep in mind that there can be additional fees paid by the sender when currency conversion is involved.
For example, if your family or friends send you money from the UK in pound sterling, PayPal first need to convert it to US dollars before the amount lands on your account.
Usually, PayPal does this conversion themselves — although if you’re funding your payment with a credit or debit card, you might have the choice to have your card provider make the conversion instead.
If PayPal converts your funds, there’s a markup of either 3% or 4%, depending on your scenario, which is applied to the wholesale exchange rate.³ This can mean that you might receive less money from your friends or parents than you’ve expected by looking at the mid-market rate.
| 💡 When you process your transaction with PayPal, you’ll be shown the exchange rate they’re using before you commit to the payment. Don’t forget, you can always compare this with the mid-market rate with a quick Google search, or by using a currency converter online. If you don’t think the exchange rate is fair, you can then cancel the transaction, and try a different money transfer provider like Wise for your international transfer. |
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Receiving money from abroad as commercial transactions
When your international payment involves a business on either side, the costs jump up. A lot.
For example, to receive a commercial transaction online, there is a 2.9% base fee involved. On the top of this, PayPal adds 1.5% for an international commercial transaction, plus the fixed fee for US dollars — $0.30 per transaction.³
This is not all, because we still haven’t included the currency conversion fee. If the payment isn’t sent in US dollars, then there is a 4% currency conversion fee to be paid as well.³
All in all, there are a lot of fees involved. So, using a PayPal fee calculator can come in handy to figure know how much are you supposed to pay after all.
Also, you might be wondering — rightfully so — if there’s a way to reduce PayPal international transfer fees.
💡 If you make international business transactions, then Wise Business could save you time and money.
| Some key features of Wise Business include: |
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How to reduce PayPal fees on international payments
One of the easiest ways to reduce PayPal fees on international payments may just be to use another transfer service like Wise.
But if you’d like to use PayPal, it’s useful to know that they use a different exchange rate for balance transfers and for payments.
A balance transfer is where you convert cash which is already held in your PayPal account to a different currency within your account.
A payment is where you simply use PayPal as a means of transferring the payment, so the cash passes directly through your account without actually being held there.
If you convert money as a balance transfer within your PayPal account, you may get a better exchange rate.
That means, that for many PayPal users, the best idea is to transfer funds from your USD-linked bank account in the States, which is usually free, into your PayPal account.
If you then convert cash as a balance transfer to your destination currency within your PayPal account, and then use the new currency balance to make your international payment, you may end up saving.
All in all, it may be a much better bet to check out other money transfer providers like Wise, who does offer the mid-market exchange rate, to see if you can get a better deal when you transfer your money abroad. Just make sure, when you’re comparing the fees and total costs, to check that the exchange rate you’re offered is fair.
Sources:
All sources checked on 3 February 2023
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information. This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
