Should You Use Paypal to Send Money Overseas?
PayPal is a fast and convenient way to transfer money, but in many cases the fees can be very high. Find out if PayPal is the best choice for transferring money between different currencies.
In a nutshell:
PayPal is a good choice if:
- You are sending money in the same country (not across international borders).
- Both you and the recipient have a PayPal account.
- You can fund your account via direct debit from your bank account.
PayPal is not a good choice if:
- You need to fund your account via a debit or credit card.
- You are transferring money internationally.
- In these cases, the costs can add up very quickly and will often be between 3% and 7% of the amount you transfer.
Alternatives to PayPal
- If you want speed, convenience, are transferring a small amount and do not mind paying the fees, PayPal is a reasonable choice.
- In any other circumstances, you might be better off using the Wise Borderless Account
What we will cover
- How PayPal works
- PayPal fees
- Paypal Exchange Rates
- Who should use PayPal and why?
How Paypal Works
1. Open an account
You’ll need to open a free account with PayPal before you can use it. You’ll need to add your name, address and some other personal and payment information. As PayPal is one of the most popular and widely-used payment services in the world, it’s highly secure.
2. Get the PayPal address of the person you want to send money to
If you want to transfer money, you’ll need the PayPal account of the person or organization where you’re transferring money. This is normally the email address they have associated with the account. If they don’t have an account, they can set one up as well.
3. Fund your account
Before you can send money, you’ll need to credit funds to your account. You can do this from your bank (fee free) or by using a debit or credit card (which PayPal does charge fees for.)
4. Send the money
You can then arrange to send money. You can pay in your local currency and they’ll receive money in their currency, after PayPal have exchanged the funds and deducted their fees.
PayPal International Money Transfer Fees
PayPal makes money in two main ways; through providing an exchange rate slightly below the interbank rate, and by charging you (and possibly the receiver) fees on a transfer.
Paypal fees for transactions within New Zealand
| Transaction | Using Paypal balance or linked bank account | Using credit or debit card |
|---|---|---|
| Purchase payments (eBay, Gumtree, etc.) | Free | 3.4% plus fixed fee |
| Personal payments (friends, family) | Free | 3.4% plus fixed fee |
| Sending money | Free | 3.4% plus fixed fee |
Paypal fees for sending or receiving money outside of New Zealand
| Currency Conversion | Using your PayPal balance or linked bank account | Using credit or debit card |
|---|---|---|
| Worldwide | 6.99 NZD | 6.99 NZD + 3.4% + Fixed Fee |
The Currency Shop Says
- Warning: The fees for sending money internationally (across country borders), especially via a debit or credit card can add up quickly. If you do want to use PayPal, use a direct debit from your bank account to pay whenever possible.
- In any other circumstances, you might be better off using the Wise Borderless Account
Paypal Exchange Rates
PayPal uses what’s called a “retail exchange rate.” This rate is seldom as good as the rate you can get from dedicated currency exchange providers.
PayPal themselves say the rate should be compared to an airport currency exchange rate. Unfortunately, airport exchange rates are always higher than you can get elsewhere.
The Currency Shop Says
- Tip: Always compare exchange rates ; it’s very likely you will find better deals elsewhere.
Who should use PayPal and why?
It’s best to use PayPal when:
- You’re sending money in the same country (not across international borders).
- Both you and the recipient have a PayPal account.
- You can fund your account via direct debit from your bank account.
The Currency Shop Says
- In almost all other circumstances you will be better off using a dedicated currency provider. They will give you better exchange rates and charge lower fees.
- PayPal is great for transferring money between friends in New Zealand, or paying for ebay purchases. But not for large amounts.
- It is fast and convenient, but their fee structure can be complicated
- Avoid using a debit or credit card to fund your account or to send money internationally, the fees add up very quickly
Frequently Asked Questions
How are PayPal fees calculated?
Here are the fees typically charged by PayPal for international transfers.
- 6.99 NZD (cross-border transaction fee) for direct debit from a PayPal account or a bank account linked to Paypal
- 6.99 NZD + 3.4% + Fixed Fee (cross-border transaction fee) for debit or credit card
What other options are there to transfer money internationally?
1. A Bank
Banks in New Zealand have higher fees and uncompetitive exchange rates but this doesn’t mean you should never use them. Using a bank is also the quickest way to transfer money internationally.
2. Paypal
This is a great option for anyone sending smaller amounts under $1000. The exchange rate you’ll get are comparable to a bank but the fees are significantly lower. It is particularly handy when the person you are paying has a Paypal account.
3. A Money Transfer Company
Money Transfer Companies like OFX are often the cheapest option when you are sending between $1000 and $1,000,000 at a time. This is because they offer better exchange rates and lower (and sometimes no) fees. The downside to using a transfer company outside of a bank is that you’ll have to set up an account with them first. This can take between 10 minutes and 2 days depending on how much information they need from you. Also, the transfer itself will usually take 1 day longer than using a bank.
