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Yes, you can use PayPal to send money internationally or to pay overseas suppliers, but it's not necessarily the best option. In this guide we take a close look at PayPal and its fees and compare these to alternative money transfer options for businesses and for people selling products and services online. Plus, you can compare money transfer services and dedicated accounts for online sellers.
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 debit card. It processes over nine 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.
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 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.
1. PayPal personal account:
2. PayPal business account:
3. PayPal premier account:
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.
Read our review of PayPal for international money transfers
When it comes to fees, PayPal’s fine print is rather complicated. 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).
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.
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.
For business merchants accepting and sending money to international receivers, your monthly sales volumes determine the above fees.
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 a fictional 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
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 linked (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.
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.
PayPal is a great choice for transferring small amounts 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:
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.
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.
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.
Our top picks are our selection of the best money transfer services, based on our extensive research and market experience. Here's how we choose them.
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