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PayPal: currency conversion with no fees
Thread poster: Dawid Mazela, MA, MCIL

Dawid Mazela, MA, MCIL  Identity Verified
Poland
Local time: 21:57
Member (2008)
English to Polish
Oct 9

As you probably know, PayPal is charging high fees – not only fees for sending money (which are often passed onto the receiver in our case), but also fees for converting currencies, which are hidden in currency exchange rates. Unfortunately, in order to withdraw money to your bank account the balance must be in your local currency, which forces you to convert it via PayPal.

There seems to be an easy way to avoid those inflated conversion rates. Here's the example based on my current situation:

I have funds in USD that I would like to convert to GBP. PayPal allows sending money between ”friends” free of charge (fellow translators belonging to one community and helping each other can certainly be regarded as friends). Therefore, I could exchange funds with another PayPal user who needs to exchange GBP for USD, eg. by sending USD 200 to that person and receiving from them GBP 153.14 (based on current exchange rates).

Since either party gains no additional funds from this exchange, this can’t be regarded as a commercial transaction, and therefore does not breach PayPal’s User Agreement.

The difficult part is that you have to find a trustworthy partner to exchange the funds with. However, I believe most screened professionals here would be a safe bet. Plus, large payments can be always split into smaller one to minimize the risk.

What are your thoughts on that? Is it something you have tried or would be willing to try?


 

EvaVer  Identity Verified
Local time: 21:57
Member (2012)
Czech to English
+ ...
Not true Oct 9

Dawid Mazela, MA, MCIL wrote:

Unfortunately, in order to withdraw money to your bank account the balance must be in your local currency, which forces you to convert it via PayPal.

I have never tried to do so (I use my money on PayPal to pay through PayPal). But I suppose that if you have an account in USD and USD on your PayPal account, you can transfer USD as such? If PayPal refuses, try to change your primary currency to dollars - it is fast and you can change it back any time.


 

Dawid Mazela, MA, MCIL  Identity Verified
Poland
Local time: 21:57
Member (2008)
English to Polish
TOPIC STARTER
I thought it was the case as well. Oct 9

Unfortunately, PayPal always prompts you to convert the payment to your local currency before sending it, no matter if you have a currency account or not.

PS. by "local currency" I don't mean "primary currency"

[Edited at 2018-10-09 09:38 GMT]


 

Michael Beijer  Identity Verified
United Kingdom
Local time: 20:57
Member (2009)
Dutch to English
+ ...
I ditched PayPal long ago and now recommend TransferWise Oct 9

They have way better rates than PayPal and your bank, even give you an actual bank account number (with IBAN/SWIFT) to receive money into, and also have their own debit card now.

Michael

Full disclosure: For every 3 people who join using my referral link (https://transferwise.com/u/michaelb391 ) and send over a certain over £200, I get a £50 gift.


 

José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 16:57
English to Portuguese
+ ...
There is no free lunch Oct 9

PayPal policies seems to vary from one country to another, so all I can tell you is about how it works in Brazil, where PayPal opened their own local offices a few years ago, located about three miles from where I am.

Long before PayPal had their Brazilian office, it was very complicated to get money from there, no point in delving into that now. One day Xoom came up, and they served "from PayPal to a Brazilian bank account" with lightning-fast efficiency. As PayPal opened their offices in Brazil, the first thing they did was to burn that Xoom bridge to Brazil; they'd handle it themselves. Later PayPal bought Xoom - yes, now they own it - but didn't reopen that bridge.

PayPal immediately deducts 7.5% as fees from any amount I receive at my account with them. I know that this fee varies depending on the receiving country. This is unavoidable. If a client pays me $100.00 via PayPal, I am credited only $92.50.

And then PayPal openly adopts (it's stated on their help screens) a 3.5% lower-than-market exchange rate for currency conversion. So my $92.50 become $89.26 worth in BRL.

Yet translation clients love PayPal, because they don't have to pay or deduct any extra fees, and it's so easy to operate. If they pay me via bank/wire transfer, they have to pay a USD 20~65 fee, which many deduct from the amount paid, as there is no budget for that. If they use P2P services (Western Union, Moneygram), on top of somewhat more complex paperwork, there is a USD 4.99 fee (up to USD 3K) to be either paid extra or deducted from the amount I receive.

The problem with P2P services is that I have to go to specific banks or currency exchange shops to withdraw in cash. There is an option to have it credited directly to my bank account, however apparently it makes paperwork more complex at the sending end, so no client so far has accepted using it. This means at least one hour of wasted time, comparatively. Count whatever you make in an hour as "fees".

Receiving a wire transfer also incurs a fixed fee on my side, about USD 30.00 per transaction. As PayPal fees are proportional to the amount, there is a break-even point, below which PayPal is cheaper than a wire transfer.

A new option came up: Payoneer. It works like PayPal, but cheaper. Fees are 1% for payments made in USD, 2% for EUR/GBP. One point is that they are fast (at least in Brazil); my account gets credited in the next, and sometimes the same, banking day it is requested. PayPal used to hold the funds for 3-5 days for no explainable reason; after Payoneer set the bar fastericon_smile.gif , they dropped this habit.

The bad thing is when a client pays ANY of these methods with an eCheck. They possibly don't know it, but an eCheck takes one week to clear.


Summing it all up, 2/3 of what PayPal chomps from your amount receivable is their receiving fee. If you do this trick you are proposing with a friend overseas to avoid bad currency exchange rates, at best you'll be improving on just 1/3 of the "unnecessary" expense you are having - and I doubt you will.

It's a matter of balancing cost x red tape.
The simplest and most expensive way is PayPal. All your client needs is to enter your e-mail and the amount, and you pay 11% of that amount for their convenience.
The other methods cost you less, however your client will waste more time with bureaucracy to pay you.
I balance it by offering a discount when a client uses any payment method other than PayPal. (Those 11% are incorporated in my price stated for payment via PayPal.)


 

Dawid Mazela, MA, MCIL  Identity Verified
Poland
Local time: 21:57
Member (2008)
English to Polish
TOPIC STARTER
still not peanuts Oct 9

I'm facing loosing about GBP 120 due to the inflated currency exchange rate, so if it can be done quickly without a hassle, why not.

[Edited at 2018-10-09 10:36 GMT]


 

José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 16:57
English to Portuguese
+ ...
Making it clear Oct 9

Dawid Mazela, MA, MCIL wrote:

I'm just not sure if you read my posticon_smile.gif


Guess you are talking about me.

I wanted to highlight most of the variables I took into account upon comparing the different options.

Using your proposed system, before the Xoom option I forwarded a payment I had received on PayPal to a close friend who lives in the USA, who is not a translator. They deducted some 6% in fees from the total amount.

My friend was furious... not at me, but at PayPal. He called them "thieves", and asked me if I knew that 6% was an outrageously hefty fee in the USA, utterly unacceptable.

So while your plan could mitigate PayPal's 3.5% lower-than-market currency exchange rate, both you and your friend would be paying the 7.5% (or whatever it is in your country) receiving fee to PayPal TWICE!


 

Dawid Mazela, MA, MCIL  Identity Verified
Poland
Local time: 21:57
Member (2008)
English to Polish
TOPIC STARTER
friends and family Oct 9

So while your plan could mitigate PayPal's 3.5% lower-than-market currency exchange rate, both you and your friend would be paying the 7.5% (or whatever it is in your country) receiving fee to PayPal TWICE!


I have been sending EUR and GBP without any fees. Did you have the "friends and family" option available?

I think USD transfer was a fixed fee of $2.50, when using this option.

[Edited at 2018-10-09 10:50 GMT]


 

José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 16:57
English to Portuguese
+ ...
Question... Oct 9

Dawid Mazela, MA, MCIL wrote:

I have been sending EUR and GBP without any fees. Did you have the "friends and family" option available?

I think USD transfer was a fixed fee of $2.50, when using this option.


AFAIK you SEND money through PayPal without paying any fees. They deduct the "local" fee (whatever it is, i.e. 7.5% in Brazil) from the amount they credit to the receiver.

Did your "friends & family" get the gross amount you sent via PayPal?

PayPal is owned by - and hence devised for - eBay. So they envision their users as someone selling, say, an old VHS VCR online. Like credit cards, the seller bears the costs of processing the payment. That's their supposed paradigm.


 

Cristina Crişan  Identity Verified
Romania
Local time: 22:57
Member
English to Romanian
+ ...
PayPal customer service Oct 9

Here's what they told me:

...according to an agreement with local banks and the central bank all withdrawals to a local bank accounts will be in EUR only...

The only exeption is if you have an US bank account (actual American bank in USA) then you can add it and withdrawals will be in USD. Other solution is explained before in the email-to add a Visa card and if the card is in usd-please let us know and we will change it to USD and you will be able to withdraw usd to this visa card directlly.


 

Mirko Mainardi  Identity Verified
Italy
Local time: 21:57
Member
English to Italian
Except... Oct 9

Cristina Crişan wrote:


Here's what they told me:

...according to an agreement with local banks and the central bank all withdrawals to a local bank accounts will be in EUR only...

The only exeption is if you have an US bank account (actual American bank in USA) then you can add it and withdrawals will be in USD. Other solution is explained before in the email-to add a Visa card and if the card is in usd-please let us know and we will change it to USD and you will be able to withdraw usd to this visa card directlly.


Except EU/SEPA residents are not given the option to add a US account... There is no such option when adding a bank account and that's what I was told when I asked their support directly (although here and there you can read people saying it was possible in the past or that someone from PayPal "manually" did that for them...).

At any rate, last time I checked "United States" was not in the list of countries you can select when adding an account, and that can't be a coincidence... You gotta pay the toll.

Other than that, if things didn't change (and they might very well have, with all of those "unilateral modifications" big corps are so fond of...), I used to only pay the conversion fee when receiving payments in another currency initiated by the client. I also pay an additional (and IMO inexplicable) fee if I am sending a payment request to the client.


 

Cristina Crişan  Identity Verified
Romania
Local time: 22:57
Member
English to Romanian
+ ...
True... Oct 9

Mirko Mainardi wrote:

Except EU/SEPA residents are not given the option to add a US account...




My USD Visa card will be ready next week. We'll see whether that works.


 

Daniel Frisano
Switzerland
Local time: 21:57
Member (2008)
English to Italian
+ ...
  Oct 9

Dawid Mazela wrote:
Is it something you have tried or would be willing to try?


Did it in the past with USD/EUR.

Anybody exchanging CHF for USD? (Asking for a friend)

[Edited at 2018-10-10 01:07 GMT]


 

Cristina Crişan  Identity Verified
Romania
Local time: 22:57
Member
English to Romanian
+ ...
update Oct 13

I got my Visa debit card yesterday, linked it (had to credit it with a couple of dollars first), then asked the PayPal customer service to change the currency to USD.
They duly obliged.
There's a flat fee of 2,5 dollars/withdrawal.
It works for me.


 

Michael Beijer  Identity Verified
United Kingdom
Local time: 20:57
Member (2009)
Dutch to English
+ ...
recommend using a service designed for cross-country transfer + exchange of money instead of PayPal Oct 13

I don't understand why do many people still use PayPal, instead of a service specialising in what they are using it for: cross-country transfer and exchange of money. Obviously, a service designed for this will be cheaper.

I only ever get paid via PayPal by one company, in Japan, and in that case I have asked them to add 11% to my invoice amount to cover the PayPal costs. Like José said, PayPal costs are not just the PayPal fee, but are also built into (i.e. hidden) in their lower-than-market exchange rate for any currency conversions. I don't remember exactly as I haven't used it in such a long time, but I think PayPal systematically uses an FX rate of 3.5% in its favour.

If you're living in the EU and/or UK, and the bulk of your payments are in € and/or £, I guarantee that you will save a lot of money using something like TransferWise, CurrencyFair, etc. That is, specialised FX companies.

E.g., re TransferWise:

• Their transfer fees are way lower than any other service.
• They give you a fantastic FX rate
• They will give you your own real bank account number (e.g. I have one in Germany), incl. IBAN/SWIFT numbers, so your client can pay into that.
• They now also have their own fully functional debit card, which you can also use to take out money from ATMs across Europe.
• Their transfers are lightning fast. No idea how they do it, but all money sent/received always goes much faster than with e.g. my regular Barclays bank here in the UK, or previous Banco Popular account in Spain.

Michael

PS: I am using and am very happy with TransFerWise, but similar services exists, e.g. CurrencyFair, and Revolut (i.e. other new so-called ‘challenger banks’), etc. now also offer similar services.

[Edited at 2018-10-13 15:15 GMT]


 
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PayPal: currency conversion with no fees

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