Currency conversion: accept Paypal's rate or bank's?
Thread poster: Josephine Gardiner

Josephine Gardiner  Identity Verified
United Kingdom
Local time: 17:58
Spanish to English
+ ...
Sep 5, 2014

Hello all,

I have a new client who is paying me monthly via Paypal in US dollars. I live in the UK so obviously I have to convert this to UK pounds.

The Paypal site is offering me the choice either to accept their own conversion to pounds and transfer that to my bank, or to accept the payment in dollars. If I do the latter, then presumably I'll have to accept the bank's conversion rates.

What I want to know is which option is likely to give me the best exchange rate?

Given that this is going to be a regular payment, I was wondering if it was worth going to see my bank to negotiate the best rate they can offer.

Any advice welcome.


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ATIL KAYHAN  Identity Verified
Turkey
Local time: 20:58
Member (2007)
Turkish to English
+ ...
It all depends on the conversion rates that they use. Sep 5, 2014

Without knowing the rates, it is impossible to know which is better, really. Along the way if you decide that the other option is better, you should be able to switch. What I would do is to try both options for the first couple of months or so, and then decide on one of them after making the calculations.

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Anton Konashenok  Identity Verified
Czech Republic
Local time: 18:58
English to Russian
+ ...
Most likely bank's rate Sep 5, 2014

Paypal currency exchange rates are highway robbery. So, unless your bank is even more greedy, you really don't want Paypal to convert your money.

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Alexander Somin  Identity Verified
Germany
Local time: 18:58
Member (2014)
English to Russian
+ ...
Better to ask? Sep 5, 2014

A bank may convert currencies with even NO fee. It would be safer to ask your bank directly.

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Sheila Wilson  Identity Verified
Spain
Local time: 17:58
Member (2007)
English
+ ...
Keep a USD stream in PayPal? Sep 5, 2014

If this is going to be a fairly minor part of your income, you should consider setting up a USD stream in your PayPal account. In that way, the USD amount coming in doesn't undergo any conversion.

I personally find that there are often things I need to buy on the internet that can be, or must be, bought in USD - things for my business and personal purchases. So I just buy online using USD from my PayPal account. It also means that if I do want to bring the dollars into my bank account (which is a EUR account) I can choose the optimum time when the exchange rate is in my favour.

However, I wouldn't encourage anyone to leave too much money long-term in a PayPal account, just in case. I'm happy to risk a few hundred euros but I wouldn't leave thousands there.


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Samuel Murray  Identity Verified
Netherlands
Local time: 18:58
Member (2006)
English to Afrikaans
+ ...
Find out from your bank Sep 5, 2014

J. Gardiner wrote:
The Paypal site is offering me the choice either to accept their own conversion to pounds and transfer that to my bank, or to accept the payment in dollars. If I do the latter, then presumably I'll have to accept the bank's conversion rates.


Yes, and the bank may also charge an administration fee on top of that. On the other hand, the combination of fees and the bank's exchange rate may be less than PayPal's. On the other hand, your bank may charge you a transaction fee anyway, regardless of currency.

Anyone can check what PayPal's exchange rate + cost would be for any amount. In PayPal, go to My Account > Overview > Currency Converter. Then on the right-hand side of the screen, select "Payment conversion", and fill in the amounts that you want to check.

* PayPal's exchange rate for today for USD:EUR is 0,745218.
* My Dutch bank's exchange rate for today for USD:EUR is 0.768994.
This means that if a client sent me USD 1000, I'd get EUR 24 more if I used my bank's exchange rate.

In fact, I always get my bank's exchange rate because my PayPal account has separate balances for the different currencies. The downside of this is that you can't withdraw money from more than one balance at a time, and if your own bank charges a receiving fee per transaction, you's pay for every balance's withdrawal.


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María Cristina Fernández Hall  Identity Verified
United States
Local time: 09:58
English to Spanish
+ ...
TransferWise Sep 5, 2014

Hi,

I've read about this before and came across a website called transferwise (www.transferwise.com). Apparently they convert the money at lower rates than the bank does, and you can bill or send money directly. I've never used it myself but I've signed up. Looks like it could be the solution to your problems!
https://transferwise.com/

Best,

Cristy Fernandez


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Thanh Nguyen  Identity Verified
Canada
Local time: 09:58
Member (2011)
Vietnamese to English
+ ...
PayPal exchange rate is crazy! Sep 5, 2014

I do have PayPal account but it's always my least preferred method of payment as they charge a lot for withdrawal at crazy exchange rate.
I called PayPal complaining several times about their "Ice Age" exchange rate but they said the rates were updated everyday but for Vietnamese Fong, they could do nothing with it.
So this is why I'm mad at PayPal:
1. They always charge for receiving payment;
2. If I want to withdraw to my bank account, I have to pay VND60,000 ($2.9) for each transaction and wait for 2-3 business days for the amount to reach my account;
3. The exchange rate is way too low!!! Current exchange rate by banks is about $1 to VND21,180 while their rate is just around VND20,000.
So for each withdrawal of $500, I lose about $31. That's really crazy!
That's why I now only use PayPal for my online purchase and accept PayPal as the last resort for payment.


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Josephine Gardiner  Identity Verified
United Kingdom
Local time: 17:58
Spanish to English
+ ...
TOPIC STARTER
Thanks Sep 8, 2014

Many thanks for taking the time to reply, and apologies for the delayed response.

I just got back from my bank and their exchange rate is even worse than Paypal's.

For a payment of $362, Paypal offer £218.

My bank (Lloyds) offer £205.

Neither of these amounts include transfer or admin fees. Lloyds said that all the other UK high street banks would be offering a similar rate.

@Sheila Wilson - yes a USD account is a good idea, but these payments will be a substantial part of my income so I really need the money in a British bank.

@María Cristina Fernandéz Hall. Thanks, I will definitely have a look at this - the question is whether I can link Paypal to Transferwise as the client will only pay via Paypal in dollars.

Anyway, thanks again for your responses.


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José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 15:58
English to Portuguese
+ ...
PayPal exchange rate Sep 8, 2014

I don't know whether it's in Brazil (where PayPal has operations) only or everywhere, but they openly state on their help pages that "PayPal's exchange rate is 3.5% lower than the prevailing market rate on the closing date".

However your bank may have some fixed per-transaction fee (so that nobody will go there with quarters and dimes every other day), which may render small transactions less viable than via PayPal. If they do, you'll have to find out what's the breakeven threshold.


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Sheila Wilson  Identity Verified
Spain
Local time: 17:58
Member (2007)
English
+ ...
Different bank? Sep 8, 2014

J. Gardiner wrote:
I just got back from my bank and their exchange rate is even worse than Paypal's.

It sounds odd for the bank's rate to be worse. Have you actually checked other banks' rates? It might be worth opening a new account somewhere just for this payment. I can't believe they're all that bad.

Of course, even if the bank isn't charging any handling fee, you still need to factor in the PayPal one. I think they charge a fixed fee plus a percentage of the total amount received.

Another thing to check with your client is that they will be paying all fees at their end for a wire transfer. You don't want to get stung for those on top!


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