Is PayPal really the kingpin of business international money transfers, or is there a cheaper, faster and more convenient way to send money overseas? Find out if PayPal is the most competitive option for your business.
Every day, millions of people around the world send money overseas for a range of reasons. Everyone can agree that transferring money online is efficient, but is it actually cheap?
To answer that question, we take a look at PayPal and their fees to find out if they really are a cost-effective money transfer solution for your business.
What is PayPal?
PayPal is the most recognised digital-payment brand in the world. It offers a quick, hassle-free way to send and receive money online using an email address and your credit or bank card.
Owned by eBay Inc., and established in 1998, it processes about 9.3 million payments every day, trading across more than 200 markets in 100 currencies.
Australians love using PayPal too, with over five million active Aussie accounts opening up since 2005.
What makes PayPal so popular?
- Security. PayPal securely encrypts your financial information.
- Flexibility. You have the ability to link all your cards and bank accounts and then choose which one to use at checkout.
- User friendly and mobile convenience. You can check out with one click on your computer, mobile or app. It’s great for people on-the-go.
- Buyer protection. You can get a refund, including return shipping costs, if something goes wrong.
- Software Integration. PayPal syncs in well with accounting software such as the popular XERO, so you can send invoices with absolute ease.
- Free within Australia. You can send money and make purchases within Australia absolutely free.
While PayPal looks to be a quick and easy way to transfer money and has great features, further inspection of their fine print shows that fees can be very high, especially for those who need to send large amounts of money overseas regularly.
First, let’s take a closer look at the types of PayPal accounts available and what exactly those fees are.
PayPal personal vs PayPal business accounts
PayPal charges different fees depending on the nature of the transaction. These fees aren’t very transparent on the PayPal website, and yet they can often be between 3% and 7% of the amount you transfer (more on fees below).
Firstly, take a look at the different types of PayPal accounts you can get to justify whether a PayPal business account is for you.
PayPal account types:
1. PayPal personal account:
- There are no fees when buying goods within Australia.
- This account is best for individuals who shop and pay online.
- It’s best for those sending money to or receiving money from friends and family.
2. PayPal business account:
- PayPal charges set rates based on your sales volume.
- If you have multiple businesses, you can have a PayPal business account for each business providing each business is registered and has its own email, bank account and credit card.
- This account is best for merchants who operate under a company or group name.
- Your customers won’t need a PayPal account to purchase from you since they can pay as a guest.
- PayPal offers additional features, such as allowing up to 200 employees limited access to your account and a customer service email alias so customer issues can be routed for faster follow-ups.
3. PayPal premier account:
- This account is best for casual sellers or non-businesses who wish to receive payment online and who also make online purchases.
- You cannot display a business name or business logo graphic with a premiere account. Customers would only see your email address on the PayPal checkout screens.
PayPal allows users to have two accounts under the same email, bank account and credit card, giving you the convenience of keeping your personal PayPal account while also opening up either a business PayPal account or a premier PayPal account.
PayPal business fees: Sending money overseas
When it comes to fees, PayPal’s fine print is rather complicated and exhaustive.
While creating a PayPal business account is free (and there are no withdrawal or cancellation fees or locked-in contracts), PayPal does charge set rates based on a business’s sales volume.
When sending money overseas, the sender does not incur any cost, but the recipient is slugged with a fee of up to 4.6% plus another fixed fee. This is in addition to any exchange rates and associated fees that PayPal applies. The fixed fee for a commercial transaction is AUD$0.30 while the exchange rate is the market rate plus 4% for most currencies.
In addition, these fees can rise even higher as a result of the selected payment method (eg, if payment was with a debit card or credit card rather than a bank account or PayPal balance) and the payment destination (ie, country recipient).
1. Cross-border transaction fee
PayPal charges a fee for transactions outside of Australia and PayPal determines the amount of this fee based on the country recipient. The fee is up to 3.3% for money sent from your PayPal balance or linked bank account and up to 5.2% for a transaction using a debit or credit card. There is also a fixed fee of AUD$0.30.
2. Foreign exchange fee (currency conversion)
If you are receiving or sending money overseas in currencies other than Australian dollars, then PayPal will charge you a currency conversion fee based on their retail exchange rate. At checkout, you have the option to compare PayPal’s currency exchange rate to your card provider’s currency conversion rate. If you’re with American Express, they will convert it for you.
- To US or Canadian dollars. PayPal’s rate is 3.5% above the exchange rate.
- To all other currencies. PayPal’s rate is 4% above the exchange rate.
- Within your PayPal account (not as part of a purchase) to any currency. PayPal’s rate is 2.5% above the exchange rate.
For business merchants accepting and sending money to international receivers, your monthly sales volumes determine the above fees.
- Up to $2,500 monthly sales (no application required): 3.6% plus a fixed fee
- $2,500.01-$5,000 monthly sales: 3.2% plus a fixed fee
- $5,000.01-$15,000 monthly sales: 3.0% plus a fixed fee
- $15,000.01-$150,000 monthly sales: 2.5% plus a fixed fee
- Over $150,000 monthly sales (excluding Website Payments Pro – Hosted Solution): 2.1% plus a fixed fee
PayPal business fee examples
Typically, we would expect PayPal to charge the following for a commercial currency transfer between Australia and Germany. Fee summary: Example 1: Example 2:
Let's look at an example
Transfer value $100 Cross-border transaction fee + $5.20 Fixed fee + $0.30 Currency conversion fee Currency exchange rate + 4% Total cost $105.50 + currency exchange costs Out of pocket $5.50 + currency exchange costs Transfer value $10,000 Cross-border transaction fee + $520 Fixed fee + $0.30 Currency conversion fee Currency exchange rate + 4% Total cost $10,520.30 + currency exchange costs Out of pocket $520.30 + currency exchange costs
Typically, we would expect PayPal to charge the following for a commercial currency transfer between Australia and Germany.
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How to send money overseas using PayPal
Want to learn how to send money online with PayPal? Luckily, it’s simpler and easier to understand than their fees!
You can send money to almost anyone, 24/7, from either the PayPal website or downloading the PayPal App for more on-the-go convenience.
To get started, all you need is a bank account or debit/credit card that is tied (and verified) to your PayPal account. You also need to know the recipient’s email address (or their mobile number) to start sending money. If the recipient doesn’t have a PayPal account, PayPal will send them a link to sign up so they can access the money.
Here are the detailed steps on how it works:
Step 1. Open a PayPal account. It is free to open up any type of PayPal account.
Step 2. Verify your email address.
Step 3. Add your bank account or debit/credit card.
Step 4. To verify your PayPal account, PayPal will transfer a small amount into your bank account.
Step 5. Verify the account.
Step 6. Once verified, upload funds.
Step 7. Click on “Send Payment” once funds are available and enter the recipient’s email address or mobile phone number.
Step 8. The recipient will receive the money into their PayPal account or will receive a link to sign up to PayPal in order to withdraw funds to their bank account.
With their mobile-friendliness and security, you can send money from the comfort of your own home or wherever there is an Internet connection. This certainly beats waiting in line at the bank to send money or being put on hold over the phone for an hour.
However, keep in mind that PayPal’s fees are not very transparent. They do add up if you regularly send large amounts of money overseas and require it to be converted into multiple currencies.
Rest assured, there are other online money transfer services out there (besides PayPal) that offer similar processes with better exchange rates and lower fees.
Summary: Is PayPal great for business?
PayPal is a great choice for transferring money between family and friends in Australia, or even shopping online. You can keep fees to a minimum if you fund your account via direct debit from your bank account and if both the sender and recipient have a PayPal account.
Now let’s look at it from a business perspective.
For individuals and small to medium enterprises that just want to make a quick payment overseas to a recipient’s PayPal account (and don’t mind paying the fees) then PayPal could be a reasonable option:
- PayPal integrates well with accounting software XERO, which enables you to send customisable online invoices.
- If you are an eBay business, you can attract more buyers with PayPal as your preferred payment option.
- Flexible business loans with PayPal Working Capital can give you funding in minutes.
You can read more about how PayPal is a growing SME lending competitor.
If you have a business that needs to regularly transfer large amounts of money overseas or expects a turnover of millions (and in multiple currencies), you will be better off using a dedicated international money transfer provider.
Unlike PayPal’s varied fee spikes, a dedicated provider will offer better competitive deals on exchange rates and usually charge lower fees.
PayPal alternatives to send money overseas
There are plenty of foreign exchange businesses available online that let you send money overseas in minutes and have lower rates than PayPal.
OFX is currently offering finder.com.au exclusive exchange rates and a $0 transfer fee on all transfers.
Free international money transfer calculator
Need to send money overseas? Make an informed decision before committing. Do your research and compare to ensure you’re getting a fair deal.
Compare your international money transfer options side by side with our free calculator below.
Can’t find what you’re looking for? Have a TorFX currency expert contact you for free
What happens when I submit this form?
After you've submitted your details, a TorFX consultant will contact you via the phone number you've provide for a free consultation. You will typically receive a response within one business day.
TorFX are international money transfer specialists and have an office based in Surfer's Paradise Queensland and have the AFS Licence number 246838. We will not collect your personal information unless it's necessary to provide the information, advice or service you've requested and, where possible, you'll be able to use our services anonymously.
Why would I want to use this form?
If you have never transferred money before or have a large amount of money to transfer (like paying back an overseas home loan or receiving an inheritance), you may feel more comfortable speaking to a person instead.
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