What is PayPal?

Samuel Clennett

PayPal has only existed for a little more than 20 years, but has played a large part in changing the way we shop, send and receive money by offering simple, secure online payment services.

With PayPal you can buy things from your favourite ecommerce stores, send money to a friend with just a few clicks, or even set up payments for your own online business.

It’s good to know that while there’s plenty you can do with payPal, you may pay a fee for some services. The costs of making or receiving certain payments - especially international transfers - can be fairly high. Before you decide to use PayPal for a cross border payment or to shop online with a retailer based overseas, you’ll want to check out the charges in detail.

Compare the price of using PayPal with smart alternatives like Wise, to make sure you get the best available deal. More on this, coming right up.

What is PayPal?

PayPal is a global electronic payment company, facilitating online payments around the world.

PayPal offers a broad range of services for personal and business customers. It’s worth noting that the exact features you can access depends a little on the country in which you’re based, and whether you have a personal or business account.

Here are some of the key PayPal services you may choose to use as a personal customer based in Australia¹:

  • Send money to friends and family at home and abroad
  • Make online payments
  • Shop online with eBay
  • Request payments from others or create money pools to share the costs of a purchase with friends
  • Buy and send digital gift cards for on and offline retailers²

As a business customer, you’ll be able to access these features:

  • Sell goods via your website
  • Sell goods in persona and take payment via PayPal
  • Invoice customers
  • Get a business loan
  • Access data about customer behaviour

What can I do with a PayPal account?

To get started with PayPal you’ll need to link your bank cards or bank account details to your PayPal account. These cards or accounts can then be used to pay for things via PayPal later.

Once you have a linked card or account, you can shop online with PayPal by simply selecting PayPal when you get to the checkout of your chosen ecommerce site. Using PayPal for online shopping means you don’t have to enter your bank details over and over again - just log into your PayPal account for an easy and secure payment.

PayPal also lets customers send money to friends or family without needing their full bank details. You’ll just need a phone number or email address and can send money to their PayPal account quickly from your linked card or account. If your recipient doesn’t have a PayPal account of their own, they’ll need to open one to get their payment. There may be a fee for sending money to friends if you fund the payment with a credit or debit card, or if you’re sending a payment in a foreign currency.

Payments funded using a card attract a 2.6% charge, plus a small fixed fee based on the currency being used. All overseas payments have a further 5% charge, to a maximum of AUD5.99.

You’ll also notice a few other smart features such as creating a money pool, which involves several people paying into one virtual PayPal wallet - to cover the cost of a group meal or day out, for example. With PayPal you can also make charitable donations or send virtual gifts to friends.

Paying with PayPal

PayPal makes shopping online simple. If your chosen retailer offers PayPal payments, you’ll just need to select this option, log into your PayPal account and make the payment there. You’ll have the option of paying from your PayPal balance if you have one, or with the linked payment method of your choice.

If you’re paying for something online using your PayPal account it’s worth knowing the possible charges³.

Buying things online from retailers based in Australia, using AUD is free. However, if you buy something from abroad or in a different currency you’ll pay a currency conversion fee of 4%..

PayPal cards

PayPal has a range of prepaid, credit and debit cards which are available in some countries. These cards are not currently available in Australia. Eligibility for a PayPal card is usually decided based on your residency. For example, for some PayPal cards you must be a resident of the US to apply, although you don’t need to be a US citizen⁴,⁵.

Some alternatives

Because PayPal charges fees for some services, it makes sense to check out the costs compared with other providers. The best option for you might vary depending on the type of transaction you want to make. Here are a few smart alternatives to consider.

PayPal alternatives if you’re sending money overseas

One of the places where PayPal fees are highest is for international payments. You’ll pay a 5% transaction fee, and may also need to pay an extra 2.6% if you fund some or all of the payment with a card. There’s also a small fixed fee which varies depending on the currency you use. Compare the costs of sending money overseas with PayPal, against the price and convenience of Wise.

Wise currency conversion uses the mid-market exchange rate with no markup. There’s just a small upfront transaction fee which can work out much cheaper than using PayPal or your normal bank.

PayPal alternatives if you’re making payments online and in person

There are a few options if you’re sending a domestic payment, shopping online, or want to pay using your mobile phone while you’re out and about.

You could consider using Apple Pay⁶ or Google Pay⁷, for example, to pay for things using your linked cards in a similar way to using PayPal. You can also use your mobile phone to make contactless payments in stores, or even to tap in and out of some public transport networks.

PayPal alternatives if you’re a business user

If you’re running a business, you’ll want to find the best value provider to accept customer payments online or in person - as well as the best available way to pay your own suppliers. PayPal has a range of solutions but may not be the cheapest option out there - which can put a dent into your profits.

One alternative to consider is Skrill, which allows online card payments with a lower fee than PayPal⁸. Skrill charges 2.5%⁹, while PayPal can charge 2.6% for domestic payments, and 3.6% for international, depending on exactly how the payment is made¹⁰.

If you’re sending invoices to clients who are based overseas, or paying international suppliers you might want to look at the smart new accounts from Wise Business. You’ll be able to open a free online multi-currency account which lets you hold dozens of different currencies, and get local bank details to receive payments for free in major currencies. Sending money to suppliers overseas is simple, secure and fast, and currency conversion is done using the mid-market exchange rate with no markup and no hidden fees.

PayPal has a lot to offer both personal and business customers - it’s globally popular for a good reason! However, it’s well worth checking the fees for the specific service you require before you decide to use PayPal. There are many competitors out there which may have lower costs. Do a little homework to check out your options, and you could find you save money.


  1. Paypal Australia
  2. Paypal - Gifts
  3. Paypal - Fees and Charges
  4. Paypal - Prepaid Card
  5. Paypal - Prepaid FAQ
  6. Apple Pay
  7. Google Pay
  8. Skrill
  9. Skrill - Fees
  10. Paypal - Seller Fees

All sources accurate as of 17 August 2020

Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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