How To Avoid Currency Conversion Fees On Paypal
Paypal might be one of the most common and popular methods for people to pay for their online purchases or transfer money. It is indeed a fast, convenient and simple method to use for online transactions.
If you are a freelancer or even business owner selling goods online, it is an efficient way to get paid since Paypal operates in many countries and is popular enough for many people to already have an account. However, as with many types of fast and convenient online transfers, there are also significant downsides to it, one of which is the hefty fees you pay for currency conversion.
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“What? I thought that was free?”
Well, you thought wrong. So say you want to transfer a sum of money to a relative living in the UK. Let’s break down the process of how Paypal charges you along the way.
- Adding money to Paypal from your bank account – Free
- Converting the SGD in your Paypal Account to Pounds before the transfer – 2.5% processing fee + 4% currency conversion fees
So let’s say you are transferring S$2,000 to the UK, you will end up paying $130 worth of fees. If you use a bank or a specialist in money transfer, it might even be cheaper, depending on how much the agent bank charge. And you thought Paypal was better.
So what can you do if you need to transfer money overseas, or even worse, do it on a recurring basis to foot your bills overseas, pay for a mortgage or send money to your son studying overseas?
Well, the good news is that there are a number of money transfer services that you can use without paying the hefty fees charged by banks or Paypal. You might ask why these companies can offer a more competitive rate. There are a number of reasons:
Some Forex trading platforms provide money transfer services and are able to offer you exchange rates based on real-time trading rates which are much more competitive than the rates banks and Paypal charge. You can even lock in the rate by converting the currencies and making the transfers at a later time. If you are looking for such services, you might be keen to check out CurrenciesDirect.
Taking a smaller spread
The difference in the exchange rate charged by banks and the rate you see on Google is called the spread. This is the amount the bank charges when converting your currencies. Some money transfer providers make money using the spread as well, but they simply take a smaller margin compared to the banks, thus passing on the savings to customers like you. WorldFirst Money Transfer is one of them.
Making 2 local transfers instead of 1 international transfer
One company, Transferwise, showed on their website how they make international money transfer cheaper for their customers. Instead of transferring your SGD to Euro directly, they will transfer your SGD to their local account, and send out the Euro from their own Euro account. By doing this, they mitigate the high fees involved in international transfers since your money did not really move overseas.
Or if you want to compare a range of money transfer services that specialise in bank transfers, then check out the EnjoyCompare Money Transfer comparison engine.