PayPal’s Role in International Transactions

International money transfers have risen in popularity as the world continues to grow more connected online and in-person. Historically, banks were the best place to go for better exchange rates, but now they are often the most expensive option. Freelancers, avid travelers, and online marketplaces need easy and more affordable options for money transfers. That includes the ability to calculate exchange rates no matter where the money is going.

PayPal allows anyone to transfer money between more than 200 countries and 25 currencies, even allowing—in some cases—the ability to reload a cell phone for someone abroad. The method depends on whether the recipient has a PayPal account or not. Like all money transfer services, however, the process is not free.

PayPal Conversion Rates vs. Bank Exchange Rates

When anyone sends a payment via PayPal overseas, they will have to pay an exchange rate markup. This is a common practice with banks and international money transfer services. Bank exchange rates also include a similar markup, which pushes up prices and makes it difficult to know what you’re really paying for a transfer.

PayPal’s exchange rate markup is also known as a currency conversion spread, usually set at 4.00-5.00% added onto the mid-market—or wholesale—exchange rate. Meanwhile, bank exchange rates fluctuate with the market, on top of their own fees for using their conversion services. This makes PayPal one of the better options for sending money internationally if you are trying to keep costs low.

You should also consider the time it takes for the transfer to go through. With banks, the speed relies on the bank’s operating hours and business days. Unlike other money transferring services, there is no guarantee that the transfer will reach the recipient’s bank account within the same day. Generally, if you request a transfer before the bank’s cutoff date, an international wire transfer should arrive within 1-5 business days.

With PayPal, the transfer is instant. However, the money is transferred into the other recipient’s PayPal account, where it may be subject to other fees once the recipient transfers the money to their local bank. For many, the ability to instantly transfer money outweighs the charges incurred when moving your money internationally or when the recipient moves the money to their bank account.

PayPal International Transfer Fees

When you start an international transfer with a PayPal account in the United States, it is important to understand both the fee structure and the currency conversion rate applied. The international transfer fees you will be charged depend on where the money is going and how you will pay for the transfer.

Here is a breakdown of PayPal’s most important international transfer fees:

• PayPal balance: 5.00%
• Linked bank account: 5.00%
• Card: 5.00%, plus an additional 2.90% and fixed fee

Depending on the transfer amount, PayPal will also charge a minimum of $0.99 USD and a maximum of $4.99 USD in international transfer fees. All of these fees are applied on top of PayPal’s domestic transfer fees. Often, there are none, but using a card as a payment transfer method can incur them.

Why Transfer Money Internationally?

Businesses and individuals can have a variety of reasons for transferring their money overseas, though the most common are goods and services. Hiring freelancers and working from anywhere with a good internet connection is a common practice in today’s global economy. While this had already been an established industry, the Covid-19 pandemic made it especially important for businesses and the freelancers working for them to have access to easy payment systems.

The global trade network has also made it easier for businesses to ship across the world, no matter where their customers live. Online marketplaces, including Amazon and Etsy, can provide smaller shops with the opportunity to build a consumer base outside their own economy, making it even more important to have access to easy international payments.

And what about entertainment? The rise of the internet has also made it easier for anyone to take part in games like poker and slots offered by international online casinos. For players looking to win big, how they get paid matters, especially if they’re not local to the casino. Bank transfers are always an option, but many may find better peace of mind by not sharing details about their direct bank accounts. This is where a service like PayPal can come in handy. Well-known names in the money transfer industry, PayPal especially, offer security for both the players and the casinos. If you’re in this boat, make sure you do some research to verify the online casinos that accept PayPal before playing.

Still other businesses may want both security and simplicity without the costs associated with bank or PayPal transfers. In this case, they might opt for a specialist money transfer service.

Money Transfer Services That Accept PayPal

An easy way to save money when transferring internationally via PayPal is to use your PayPal balance to fund a transfer with a specialist provider. Some of the top providers accepting PayPal payments include:

Wise

Wise, formerly TransferWise, provides you with online currency accounts that you can link to your PayPal. Once they are linked, you can withdraw any money you need to send through your Wise account and use the Wise app to send money abroad. This option offers a small, variable fee for transfers that are calculated before you make your transfer.

OFX

Business accounts using OFX can also accept payments via PayPal. This is good news for those making large international transactions, since OFX has a high minimum transfer limit of $1000. There are no fees, but there is a markup to the exchange rate.

Xoom

Technically, Xoom is a PayPal service that allows users to easily move money across borders. It tends to have low upfront fees, especially if users opt for using a direct bank or PayPal transfer. However, its exchange rate markups tend to be above 3.00%.

Is PayPal Still the Leading Option?

PayPal is popular because of its range of services and convenient user experience both on mobile and desktop. Though its exchange rate may not always be the best, it still offers a more convenient option for certain people or industries. While other international money transfer apps and services often have lower fees and rates for exchanging money across borders, PayPal continues to adapt and adjust its strategies so it can remain relevant.