PayPal Quietly Increased Its Currency Conversion Fees. Here’s What You Need to Know

Even if you regularly log onto PayPal to send money to a faraway loved one or pay for goods sourced outside of your country, you may not know that the platform charges a commission for its currency conversions. The company keeps its fee schedule pretty close to the vest.o it makes sense, then, that you may not have realized that fee has recently changed. In fact, it’s increased by a not-insignificant margin: 15-20%, depending on what kind of conversion you request. 

Surprisingly, this shift has avoided public scrutiny or internet outcry, perhaps because it was slipped quietly into a user agreement update issued on September 3, 2019. 

Here’s what you need to know about PayPal’s quiet increase in currency conversion fees, and how this seemingly small change could take money out of your pocket.

PayPal’s September 3 U.S. User Agreement Update

User agreement updates are not uncommon. But in the amendment to the U.S. contract issued on September 3, major changes were made to PayPal’s foreign currency conversion policy.

Namely, before the update, currency conversion -- whether within your PayPal account or as part of an outbound payment -- was significantly less expensive than it is today.

PayPal’s previous currency conversion markup ranged from 2.5% up to 3.75% for balance conversions, and from 3.25% up to 3.75% for cross-currency payments. Today, those commissions have raised to 3% and 3.75%, respectively -- and there’s no mention of an upper limit to those numbers anymore. That’s an increase of at least 15% for cross-currency transactions and at least 20% for balance conversions, which is far from negligible.

What’s more, this commission on the exchange rate is only one part of the overall cost of a cross-currency transaction through PayPal. For a balance conversion, you’ll pay an additional fee of 5% of the converted total (min 99 cents, max $4.99). For cross-currency payment and transfers, you’ll pay yet another fee of 2.9%, plus a fixed fee between 15 and 55 cents (Spoiler: it's really high compared to other services on Monito.com). 

If those figures seem small enough to be mere annoyances, let’s take a look at an example. If you’re a U.S. user transferring $500 USD to a loved one in France, after the conversion and associated fees, your beau would get a total of about €434 in the best scenario and €421 in the worst -- as opposed to the €448 they’d get with one of the three cheapest providers available at the time of writing this article. That’s a difference of up to €27, or about $30 USD!

More Problems with PayPal’s Conversion Fees -- and How to Find a Better Option

As you can see, PayPal’s convoluted conversion fee algorithms make it difficult to ascertain exactly how much money users actually lose through transfers… which is probably why there’s been no pushback since the change in terms. While most of us would baulk if someone took $30 out of our pockets, doing the math with such complicated fee structures is, well, complicated -- to say nothing of our bad habit of failing to read the terms and conditions in the first place.

What’s more, this is not the first time PayPal has made such a change, and there’s no reason to think the company won’t continue to make such changes in the future. For instance, other recent user agreement updates in European countries have applied exchange fees to cross-currency refunds when they happen more than a day after the original date of payment. The company also increased the fixed fee for commercial and personal transaction payments for users in various parts of Europe in August of this year. 

Fortunately, there are companies that are far more transparent in the fees they charge for payments and transfers that require currency conversions. And although terms and conditions change all the time at all sorts of companies, you can compare your options quickly and effortlessly through comparison platforms like the one here at Monito.

Sending money abroad is already nerve-wracking and, in many cases, inconvenient. There’s no reason to add “costlier than necessary” to the list of drawbacks. Comparing conversion options can save you up to 90% on your foreign transaction fees, which translates to big savings on both ends of the transfer. (Just think about what that additional €27 could buy -- that’s enough for a night on the town including a posh dinner and drinks, or even an extra day or two at a hostel!)

Rather than taking money out of your pocket (or your loved one’s), make sure you run your next currency conversion transaction through Monito’s comparison tool to ensure you get the most bang for your buck -- whatever currency that “buck” ends up being.