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Why you shouldn't use PayPal for international money transfers

While PayPal is great to send money to friends living in your country, it's probably not a good idea to use PayPal for your international transfers.

PayPal takes a hefty margin on the exchange rates, which means you can save a lot of money by using alternatives to PayPal, compare your options now!

    Our review of PayPal for international money transfers

    Last updated November 2018
    Written by Pascal Briod

    People often ask us if PayPal is a good service to send money abroad. While PayPal is great to send money to friends living in your country, our in-depth review of PayPal shows that it’s probably not a good idea to use PayPal for your international transfers involcing a currency exchange.

    Of course, PayPal has some advantages. With 200 million active account holders and over 6 billion transactions every year representing a total volume of $354 billion, it’s the largest internet payment company in the world. Chances are, you and your recipient already own a PayPal account, and using PayPal for your international transfers should therefore be easy and convenient.

    With PayPal, you can send money from 161 countries to PayPal accounts in 78 countries and in 26 currencies. Your recipient can then use their PayPal balance to withdraw funds to their bank account, or to pay for goods and service online.

    Furthermore, you might be used to not paying any fees for transferring money with PayPal. Indeed, it is free to use PayPal for a domestic payment, i.e. when you and your beneficiary are in the same country, without a currency conversion (unless you pay with a credit card or debit card). This is great if you want to send money to friends or pay for goods and services from a local merchant for example.

    However, this changes as soon as you want to make an international payment. In addition to a high percentage fee and an additional fixed fee if you don’t pay directly from your PayPal balance (e.g. you use your credit card or debit card for example), you also lose a lot of money in the currency conversion. Each time you convert money between balances in different currencies in your own account, PayPal takes a hefty margin on the exchange rate. Indeed, the total cost of a cross-border personal payment with a currency conversion with PayPal is at least 2.8% of the transaction amount, including both payment and currency conversion fees. You will generally pay much more than this, and in the most extreme cases you could incur a total cost of close to 10%! This margin will be even bigger if the currency conversion happens during the transfer (as explained in our infographic below).

    If you’re now thinking you need to find another solution for your next money transfer, we’ve got you covered. By using our real-time comparison tool, you can compare money transfer providers available for your transfer, in order to save on fees and get much better exchange rates than those offered by PayPal.

    Since much cheaper services are almost always available, we recommend you always compare all your options. If you decide to make a money transfer with PayPal nonetheless, read our “PayPal Exchange Rate & Fees” section to find out how to save on costs.


    What we like about PayPal

    • Credibility, PayPal is the largest internet payment company in the world

    • Widely available and convenient

    What we dislike about PayPal

    • Total cost of a cross-border transfer with a currency exchange is at least 2.8%

    • In most extreme cases, you could lose close to 10% of the amount you transfer

    Better alternatives to PayPal for your next international money transfer

    How does PayPal works

    Open an account

    Visit PayPal's website and open a free account

    Enter the details about your recipient

    Tell PayPal where you need to send money and to whom.

    Set-up your transfer with PayPal

    Enter how much money you want to send and how you want to pay for your transfer.

    Pay for your transfer

    Fund your transfer by making a local bank transfer or pay by debit or credit card

    Let PayPal do the rest

    PayPal will convert your money in the recipient's currency and send it to him through the selected pay-out option.

    Fees & Exchange Rates

    PayPal fees

    For personal payments to friends or family members, PayPal charges a fee if the payment is international, i.e. if the PayPal accounts of the sender and the recipient are in different countries. Domestic personal payments generally carry no fees, unless you pay with a credit card or debit card.

    The fee for international personal payments depends on the payment method, the country of the sender, and the country of the recipient. The fee is calculated as a percentage of the payment amount, plus a fixed fee for payments funded by a debit or credit card.

    The personal payments fee is much lower for payments made from your PayPal balance (or linked bank account) than with every other payment method (e.g. debit or credit card). Therefore, if your payment isn’t urgent, it’s much cheaper to add funds to your PayPal account through a bank transfer to pay for your transaction, or to use your linked bank account (this can also give you a much better exchange rate as explained in the “PayPal exchange rates” section).

    PayPal generally does not charge fees for adding or withdrawing funds to or from your PayPal account, so you and your recipient should not have to pay any other fees.

    PayPal fees calculator

    As you can see, calculating PayPal’s fees for an international personal payment can be quite complex. If you’re looking for a PayPal fees calculator, look no further. You can calculate PayPal’s fees and compare them to all other money transfer services here.

    PayPal exchange rate

    The exchange rate which PayPal applies to personal payments is calculated based on PayPal’s wholesale exchange rate. PayPal’s exchange rate for personal payments includes a 2.5% to 4.5% margin subtracted from the wholesale rate, depending on the sender’s country and the receiving currency.

    PayPal usually applies different exchange rates for the conversion of balances in different currencies (a “balance conversion”) than for the conversion of currency during a personal payment (a “payment conversion”). What is the difference between the two?

    • In a balance conversion, you first must hold a balance in one currency, which you convert into a balance in another currency.
    • In a payment conversion, you convert your currency into another currency while making a personal payment. The currency you are converting into is entirely sent to your recipient, you will not hold a balance of the new currency after a payment conversion.

    If you use any other payment method than your balance in the receiving currency, PayPal will automatically make a payment conversion. Since the exchange rates for balance conversions are nearly always much better than those for payment conversions, it’s best to load money on your PayPal account (which also attracts less fees as explained in the “PayPal fees” section), make a balance conversion and then use that balance to fund your transaction. This will give you the best exchange rate (and the lowest fees).

    Credibility & Security

    PayPal is one of the largest independent, publicly traded, consumer financial technology companies in the world. Headquartered in San Jose, California, the company was founded in 1988 and now employs more than 18’000 employees across the world. PayPal is listed on the Nasdaq Stock Market under the ticker symbol PYPL, and has a current market capitalization of approximately US$50 billion.

    PayPal’s brand is recognized worldwide and used by 200m people for its convenience, security, and global availability. More than US$354 billion have been transacted using PayPal, including US$102 billion from mobile devices. That’s 6 billion transactions in total, and 2 billion on mobile!

    PayPal offers its service worldwide, which requires the company to be registered, authorized and/or licensed in many jurisdictions. In the US, Paypal is licensed as a money transmitter in 55 states. In the European Union, PayPal is licensed as a bank in Luxembourg. Thanks to EU regulations, PayPal can “passport” this license and operate in other countries throughout the EU. PayPal also holds local entities in Australia, Brazil, Canada, Hong Kong, Mexico and Russia. In every other country, PayPal provides its service through PayPal Pte. Ltd., a Singaporean company.

    Clients’ funds are held in pooled accounts which are segregated from PayPal’s own accounts. The funds are never used by PayPal for its own expenses, and are not voluntarily paid to creditors in case of a bankruptcy.

    PayPal’s dedicated security team monitors every transaction 24/7 to identify theft, and prevent fraud and email phishing tactics. All transactions and private information are secured with state of the art encryption and security measures.

    So, can you trust PayPal with your money? Yes, definitely. PayPal is a leading financial institution with a worldwide recognized brand, duly regulated, with pioneering technology and millions of customers. We have to note that some customers, mostly merchants, have expressed complaints that PayPal was holding their funds for some time for security and compliance reasons, but it doesn’t seem to concern individuals making international money transfers.

    Customer satisfaction

    PayPal has very poor reviews on Trustpilot, with close to 50% of the over 2’700 customers who have given their feedback rating the company 1 star out of 5. However, the reviews on Trustpilot concern all of PayPal services and might not reflect the opinion of people using PayPal’s specific personal payments service.

    Note: PayPal is not inviting its users to share their experience with TrustPilot which could explain part of the reason for the high proportion of bad ratings.

    PayPal Payment Methods

    PayPal will use the first available payment method in the order above to fund the transaction. If any of these payment methods are not available in your account (or are only partially sufficient for your transfer amount), PayPal will automatically use the next available method in the list to fund the transaction (or its remainder). If multiple payment methods are available to fund a transaction, PayPal will sometimes let you choose your preferred payment method.

    Note that not all payment methods are available in every country. More importantly, the payment method chosen can also significantly influence the cost of your transaction, as certain payment methods attract additional fees and/or more expensive currency conversions. The cheapest solution is usually to add funds to your PayPal account, convert your balance into the receiving currency, and then use this balance to fund your payment. See the section on “PayPal Exchange Rate & Fees” for more information on this topic.

    The sources used by PayPal to fund a transaction are the following, in order:

    1. Your PayPal balance in the receiving currency
    2. Your PayPal balance in another currency
    3. (An instant bank transfer from your linked bank account)*
    4. (PayPal credit)*
    5. (Your PayPal-branded debit or credit card)*
    6. Your debit or credit card
    7. (A regular bank transfer from your linked bank account)*

    * Only available in a few countries

    To better understand how this works, imagine you are in the United Kingdom and wish to send EUR 100 to your mother in France. Let’s consider a few examples:You have a balance of EUR 150. In this case, PayPal will use your EUR balance to entirely fund the transaction.You have a balance of GBP 50, and a balance of EUR 75. In this case, PayPal will first use your entire balance of EUR 75, and will then use part of your GBP 50 balance which it will convert into EUR to pay for the remaining EUR 25.You have a balance of GBP 50 and have a credit card linked to your PayPal account. In this case, PayPal will use your entire balance of GBP 50 which it will convert into EUR (e.g. giving you EUR 55), and will then charge your credit card for the remainder of the transaction. (e.g. GBP 40.91 which it will convert into EUR 45).

    • Mobile apps

      PayPal’s mobile app is available for Apple iOS and Google Android. It is beautifully designed, and is a real pleasure to use. The PayPal app allows you to view your balance and account activity, add and withdraw money, and send and request money. The app is very highly rated across both app stores, with a 4.5/5 rating on the Apple App Store and a 4.3/5 on the Google Play Store.

      The only feature which the PayPal app is missing is the ability to convert your balance between different currencies. If you send money through the app in a currency for which you do not hold a (sufficient) balance, you will be forced to make a payment conversion which is more expensive than a balance conversion (as explained in the “PayPal exchange rates” section). Therefore, if you frequently use that PayPal mobile app to send money, it is best to make a balance conversion on the PayPal website before making your transfer from the mobile app.

    Additional services

    PayPal offers many services in addition to personal payments to friends and family. In fact, PayPal’s main and original territory is e-commerce. PayPal is now a group of several different companies offering various payment-related services.

    Commercial payments

    PayPal is one of the most widely accepted methods to pay merchants for goods and services online. PayPal can also be used on mobile applications and at offline retail locations (through the “PayPal Here” service, available only in the US, the UK, Australia and Japan).

    For consumers, PayPal provides a wide array of different payment methods for their purchase (as described in the “ PayPal Payment Methods” section). Another key value proposition is the PayPal Buyer Protection Program, which completely insures consumers against the risk of unauthorized charges to their account, as well as damaged and incorrect orders, or orders which are never delivered. Consumer’s financial information is also never shared with merchants, which protects consumers’ privacy.

    For merchants, the advantage of using PayPal is that it is a payment system used and trusted by millions of consumers worldwide, allowing them to cater to a wider variety of consumers and needs. While accepting payments through PayPal can be costly for merchants, PayPal’s end-to-end solution takes care of everything and provides an instant access to funds. Merchants are also protected against fraudulent or abusive claims.


    Xoom, founded in 2001 as one of the first digital remittance providers in the world, was acquired by PayPal in 2015. The service allows migrants in the United States to send money back home to 41 countries, pay bills in 7 countries, and reload prepaid phones in 25 countries. For more information, read our review of Xoom.

    The story behind PayPal

    PayPal was founded by legendary entrepreneurs Elon Musk, Peter Thiel, Max Levchin, Luke Nosek, and Jack Selby in 1998 in San Jose, California. PayPal was launched as an e-wallet service allowing merchants to process payments, and individuals to send money to one another. Shortly after the company’s IPO on the Nasdaq Stock Market in 2002, PayPal was acquired by eBay, as it was the payment method used by most of eBay users. PayPal grew exponentially inside eBay, generating up to 40% of eBay’s revenue. At that point, it was time to separate the two companies and for PayPal to become independent again. The spin-off of PayPal was completed on July 2015, the same month the company announced it was acquiring the digital money transfer company Xoom. In 2016, PayPal employed more than 18’000 people, had 198 million users, and generated US$10 billion in revenue.

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