Believe it or not, PayPal is soon going to celebrate its 20th birthday. From its roots in the US in 1998, PayPal is now a global favourite in payment systems, with 244 million users worldwide¹. If you shop online, or have needed to make payments to friends and family members, chances are you’ve got a PayPal account already. But have you ever read the small print to check out what those payments and purchases are actually costing you?
No? Don’t worry, we’ve got you covered.
Before you get started, a word.
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Now, back to what you came here to read.
Read on for more about PayPal’s fees for personal customers, with Australian registered accounts.
PayPal has built a huge business from acting as a middle man, and facilitating payments of different types, all over the world. With PayPal you can shop online, pay back a friend for a shared meal, or make a payment for things you’ve bought on eBay². Here’s a summary of the different services PayPal offer to customers based in Australia.
It’s important to note that the services and costs listed here are for personal PayPal customers in Australia only. If you have a business account, or your PayPal account was opened outside of Australia, then don’t forget to check the terms and conditions which apply to you, as they may be different to those set out below.
PayPal makes it easy to send money to a friend or family member in Australia - handy if you need to split the costs of a gift or a night out for example. As long as they have an account, they can access payment and either spend the balance or withdraw to their regular bank account³. If you send money, and the recipient doesn’t have a PayPal account yet, they’ll be prompted to open one to get their hands on the payment⁴.
You can also use PayPal to send money to a friend or family member overseas - for example, if you’re in Australia for work, and want to send some money home to friends and loved ones. Your recipient will need a PayPal account to access the funds, and it’s important to note that the fees added are different for international payments compared to domestic, and there could be an exchange rate markup to pay, too⁵. More on that in a moment.
One of PayPal’s most common uses is ecommerce. You can use your PayPal account to quickly and easily process payments in any online retailer which supports the PayPal network. That means you could be using your PayPal balance to pay for anything from a new pair of shoes, to your next city break⁶.
Check out the cost structure for domestic online shopping, below - the fees can vary depending on how you fund the payment.
Of course, one of the joys of internet shopping is that you can access merchants based all over the world. So if you spot a perfect gift for a friend being sold by a chic store in Italy, you can still get your hands on it - and PayPal can help support the payment. PayPal can be used to shop at retailers all over the world, just look out for the PayPal logo on their website⁶.
Be aware, however, that fees are higher for international ecommerce payments, compared to local, and the exchange rate used to convert your Australian dollars to the local currency of the retailer might not be the best available.
PayPal offers various different account types, including those designed for personal and business use. If you’re running a business you should open a specific business account - however if you’re a personal customer you can still do a little ‘casual selling’ using your PayPal account. That means that if you’re having a home clearout, you can use PayPal to accept payment for selling your second hand goods on eBay, for example⁷.
Fees will vary depending on whether you’re selling items to a customer based in Australia or abroad, and how they pay. We’ll talk a bit about that later.
You can use PayPal to receive payments from friends and family too. Typically, if you have an Australian PayPal account, and you’re getting a payment from a friend who also has an Australian PayPal account, this can be a reasonably cheap way to go. However, the exact fees will depend on how your friend funds the payment, so it’s important to read the small print before you confirm a transaction³.
Finally, you can receive payments to your Australian PayPal account, from friends and family who have PayPal accounts in other countries too. In this case there will be a fee, and a currency conversion cost, which could be removed from the amount transferred before it reaches your PayPal account. More about international payment fees with PayPal - and how to avoid them - later.
PayPal charges differently for payments made to friends and family, compared to those made to businesses for commercial transactions. There are also different payment structures depending on whether the payment is being made internationally - from a PayPal account based outside of Australia - or domestically.
In the below table you’ll find the fees for sending money to a friend in Australia and outside of Australia, buying something within Australia, and buying something from outside of Australia⁵.
|Payment funded by linked bank account or PayPal balance||Payment funded in part or full by credit or debit card|
|Sending money to a friend in Australia||No fee||2.6% of any part of the payment funded by credit or debit card + small fixed fee|
|Sending money to a friend internationally||AUD5.99 + possible exchange rate markup of 3.5%-4%||AUD5.99 + 2.6% of any part of the payment funded by credit or debit card + small fixed fee + possible exchange rate markup of 3.5%-4%|
|Buying something domestically||No fee, assuming the purchase is made in AUD||No fee, assuming the purchase is made in AUD|
|Buying something internationally||For purchases made in a currency other than AUD, you pay a currency conversion fee. 3.5% above the normal exchange rate for Canadian and US dollars 4% above the exchange rate for all other currencies.||For purchases made in a currency other than AUD, you pay a currency conversion fee. 3.5% above the normal exchange rate for Canadian and US dollars 4% above the exchange rate for all other currencies.|
You’ll notice that for many transactions, PayPal attach a ‘fixed fee’ on top of other charges related to currency exchange and so on. These small fixed fees vary depending on the currency being used, and are listed in full in the PayPal terms and conditions⁵.
To give an idea, this fixed fee when a payment is made in AUD is usually AU$0.30, if you’re using New Zealand dollars it’s NZ$0.45, and euro payments are charged at €0.35.
When you’re receiving a personal payment through PayPal, from a friend or family member, it’s usually the sender who’ll agree to pay any fees involved. However, this sum could be taken off the total amount being transferred, and so you might receive less at the end of the transaction than you expect⁵.
|Payment funded by linked bank account or PayPal balance||Payment funded by credit or debit card|
|Receiving money from a friend in Australia||No fee||The sender will agree to pay 2.6% of any part of the payment funded by credit or debit card + small fixed fee|
|Receiving money from a friend internationally||Costs depend on the country in which the sender has a PayPal account. Likely to include a flat fee + possible exchange rate markup of 3.5%-4%||Costs depend on the country in which the sender has a PayPal account. Likely to include a flat fee + a percentage fee of the portion funded by credit or debit card + possible exchange rate markup of 3.5%-4%|
|Receiving payment for casual selling done domestically||Exact fees depend on payment method. Usually around 2.6% + fixed fee||Exact fees depend on payment method. Usually around 2.6% + fixed fee|
|Receiving payment for casual selling done internationally||Exact fees depend on payment method. Usually around 3.6% + fixed fee + possible exchange rate markup of 3.5%-4%||Exact fees depend on payment method. Usually around 3.6% + fixed fee + possible exchange rate markup of 3.5%-4%|
To understand the PayPal exchange rate, you first need to know about the mid-market exchange rate. The mid-market rate is the real exchange rate, which is used when banks and large institutions trade big volumes of currencies on global financial markets. It’s what you’ll see if you Google your currency pairing, or use an online currency converter.
Unfortunately, though, most banks and payment services don’t offer this real exchange rate to their customers. In fact PayPal’s exchange rate comes with a markup, described as a currency conversion fee.
Here’s what you can expect to pay on top of the real exchange rate:
- Converting AUD to US or Canadian dollars: 3.5%
- Converting AUD to any other currency: 4%
- Converting AUD balance within your PayPal account (not for a purchase): 2.5%
This currency conversion fee is another cost to take into account when choosing PayPal - on top of the fees laid out in the table above. It can mean that your recipient gets less than you expect, if you send money to a friend or family member overseas for example.
Many banks and money transfer services will say that it’s not possible for a regular customer to access the mid-market rate. They’ll say it’s only available to huge institutional customers trading millions of dollars at a time.
However, that’s not true. You can send money to friends and family abroad - or make commercial payments - using the real exchange rate, if you know where to look. Read on to learn how to beat excessive fees, and get the real exchange rate for all of your international payments⁵.
PayPal offers a great range of services, and for domestic payments made using either a linked bank account or PayPal balance, they’re a great resource. However, when it comes to international payments, there are alternatives out there which can be a better fit for many customers.
A great PayPal alternative is Wise. With Wise, you can make payments internationally using the real exchange rate - no markups, and no sneaky hidden fees. There’s just a small upfront fee for every transaction. Your payment will be arranged online, and arrive directly in your recipient’s bank account. That means it’s also simple to use - and there’s no need for your recipient to open a Wise account themselves to get their money.
If you make international payments frequently, another great option is the borderless multi-currency account from Wise. This is a new account type, which lets you hold your money in any of dozens of different currencies, all in the same place. You can generate local bank details which let you receive money with no fees in Australian and US dollars, British pounds and euros. You can also make payments in over 40 different currencies, all using the real exchange rate, and with just a small upfront fee to pay. You can also get the Wise debit card, so you can withdraw cash from ATMs, and pay for goods and services wherever you are in the world. Check out the details today, and see if you can save.
There are many options out there for sending money to friends and family, and for doing your online shopping. However, it’s important to understand the fees which are charged by different providers, so there are no nasty surprises. PayPal can be a great option for some payments - and is a deservedly popular channel. However, for sending or receiving international payments, there are cheaper options out there. Don’t get caught out.
1.https://www.paypal.com/au/webapps/mpp/about (August 29, 2018)
2.https://www.paypal.com/au/webapps/mpp/home (August 29, 2018)
3.https://www.paypal.com/au/smarthelp/article/how-do-i-receive-money-with-my-paypal-account-faq1664 (August 29, 2018)
4.https://www.paypal.com/au/webapps/mpp/send-money-online (August 29, 2018)
5.https://www.paypal.com/au/webapps/mpp/ua/cfsgpds-full?country.x=AU#int_18_Fees_and_charges (August 29, 2018)
6.https://www.paypal.com/au/webapps/mpp/shop-with-paypal (August 29, 2018)
7.https://www.paypal.com/au/webapps/mpp/receive-payments-online (August 29, 2018)
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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