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PayPal Conversion Rates

As of the third quarter of 2018, PayPal has about 254 million active registered users across the world, showing how significant a presence PayPal has in the world of e-commerce. With such a large global presence, it’s not surprising that one would wonder how PayPal comes up with the exchange rate they use when one is making an international purchase or transfer.

Whether you’re using eBay, making a purchase on a plethora of PayPal supported websites, signing up for a subscription service or sending money to a friend, loved one or client, if currency needs to be exchanged it is PayPal who determines the exchange rate.

From there the questions become how do they determine the exchange rate, and what options do you have from there. That’s where this guide comes in, as we’ll answer those questions and more, giving you the inside scoop on PayPal’s currency exchange rates. You should know that some of PayPal’s policies and services may vary depending on your home country, so take that into consideration if you don’t find a particular option or service that we discuss in this guide.

What Exchange Rate Does PayPal Use?

Any financial institution, including banks, credit card companies (like Visa and MasterCard), PayPal and others, sets their own exchange rate based on the globally traded exchange rate they pay. Think of the global trade system like a manufacturer selling currency at a wholesale price. The financial institutions buy the currency at that price, and then sell it to individuals and businesses at a price they add a markup to, much like a store will often set their own price (or use the MSRP).

All financial institutions set their own exchange rate by marking up the rate to make money on it.

Where Do I Find the PayPal Exchange Rate?

In the wallet section of your PayPal account, you can select your PayPal balance, go to Manage currencies and then choose the two currencies you’ll be exchanging with to find out what the exchange rate is. Also, when making any purchase or transfer through PayPal, they will allow you to see the exchange rate before confirming the transaction so you can decide if you’re ok with it. But, that’s not the only option available to you, depending on the country you live in, as PayPal gives some users the option to use the exchange rate from their credit card or debit card issuer (if using one of those cards for the transaction). In fact, if you use an American Express card, they are your only option as they handle the conversion instead. It is important to note that this means they will not be able to show the exchange rate if it from your credit card or debit card issuer.

PayPal Balance Transfer vs PayPal Payment

An important thing to note when considering the PayPal exchange rate is what type of transaction you’re using, as there are a couple different options available; PayPal payment transfers and PayPal balance transfers.

When you use PayPal, the default option is to use your PayPal balance to cover a payment. But if your PayPal balance is empty or doesn’t have enough funds it diverts to a secondary source, a debit card or credit card. This is important because depending on which of they two you use, you can get a different exchange rate as the rate is often lower if you’re exchanging your balance within PayPal, rather than making the payment through PayPal, but with a debit or credit card.

PayPal often allows you to host multiple currencies, allowing you to exchange currencies within your PayPal balance and pay with that. If you choose that option, rather than just using PayPal as a third party, it can provide a variety of benefits including lower costs from fees and markups on conversion rates.

PayPal Fees

PayPal’s main fees to consider when you’re making a transfer or international transfer are the exchange rate and the transaction fee. We’ve talked extensively about the exchange rates and how to find them, but the transaction fee is important too. On Canada to Canada transactions, you have to pay an additional 2.9% of the transaction amount and $0.30 CAD on each transaction you make. For Canada to US transactions you have a 3.7% of the transaction amount fee with a $0.30 USD cost and then on Canada to International transactions you have a 3.9% of the transaction amount fee with a fixed fee in the local currency based on the country you’ve chosen.

Who Pays The PayPal Fee

Generally for international transfers, the sender is the one who pays the fees. When invoicing, it’s important to note those fees as the recipient doesn’t directly pay them, but instead they are taken off the amount you receive. So, if you need to receive a set amount, you can ask the sender to pay a little extra to cover that amount. It can vary for each type of transaction, so be sure to ask PayPal directly if you are unsure of the fees and who covers them.

PayPal Exchange Rate vs Credit Card Exchange Rate

As we noted earlier, every financial institution will set their own exchange rate, making it important to know what the rates are for each before deciding what is best for you. Most credit card companies (like Visa and MasterCard) don’t tell you what their exchange rate is (unless you hunt for it), so it becomes harder to compare them directly. But, that’s where Knightsbridge Foreign Exchange comes in.

At Knightsbridge Foreign Exchange, we provide the best exchange rates and a variety of different exchange services including straight currency exchange, international transfers and international payments. We have no additional transfer or payment fees, and provide rates that are often around 2% lower than banks, credit card companies and even PayPal. The more you exchange, the more you save with KBFX as it can make the difference of hundreds or thousands of dollars. We work with all major Canadian banks, meaning you can use us to make your experience with PayPal even better.

Four Benefits of Using PayPal

PayPal is a money transferring platform that has been operating since 1998. People first used PayPal as a way to buy online goods on auction sites such as eBay. Eventually, PayPal evolved into a way to send funds to other people and establishments for a variety of reasons. The following are five benefits of using PayPal.

Send Money Within Seconds

The biggest benefit of using PP is the quick transaction process. You can send money to a person within seconds, or you can have someone send you money in the same record timing. No other process is quite as fast as a PP transaction is. Therefore, it's beneficial to have an account because you never know when an emergency will arise.

Connect to Your Bank Account

You can connect your PP account to your bank account at any time. Once you have your account linked, you can send money to and from it in the blink of an eye. Linking your account will also give you access to larger spending limits and more account privileges.

Debit MasterCard

You can obtain a PP debit MasterCard once you have your account open for 60 days. The issuing bank links the PP debit MasterCard with the balance that you have in your PP account. You can use the card to make online purchases, in-store purchases, rentals, reservations and more. It can work like a debit card or a credit card, and you can earn cashback on each transaction you conduct.

International Capabilities

PP offers a real exchange rate so that you can conduct business with people and businesses that are in another country. The system will automatically calculate the exchange rate and convert your money into the appropriate amount in the other country. You no longer have to be confined to shopping in one country. You can do business with people around the world.

Popular Payment Platform

PP is a popular payment platform, which means that many people use it, including employers. Many businesses pay their contractors by PP and don't offer any other way for them to receive payment for the jobs they do. If you sign up for a PP account, you'll have access to a larger number of potential jobs.

Now that you know how popular and useful PP is, you may want to sign up for an account. Signing up for an account is free, and you can start sending and receiving money the same day. The process is simple and only takes a few minutes. You will need to have an email address and a reliable and valid phone number. You will need to provide PP with your address information and name, as well. Once you start the signup process, you'll receive an email to verify your email address. You can then log on at PP and verify your bank account so that it will be verified, and you will have more privileges. If you've had problems with other providers, you may want to try PP and see how it works.

Sources:

https://www.paypal.com/sg/smarthelp/article/where-can-i-find-paypal's-currency-exchange-rates-faq1976

https://www.paypal.com/ca/webapps/mpp/merchant-fees

By Victor | August 16, 2019 | Guides | 0 comments

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