PayPal currency conversion fees — bank robbery at its finest
I am sure this is nothing new for sellers, selling to foreign countries. But did you know that PayPal collects 3.33% and more in fees when you convert currencies?
Most people probably never notice, but I was shocked when I found out about this practice. Let's say you are an EU merchant, selling products overseas and collect USD and GBP. You might have bank accounts set up in these currencies, which is easy nowadays with online banks like Revolut.com
But did you know that even if you hold USD in a PayPal account, they will force you to convert it to EUR before you can transfer it? There is no way to transfer the USD to a USD account avoiding the ridiculous PayPal fees.
It may not matter much if you are transferring $100, but if you are selling in other currencies and have $10.000 or more each month to convert, these fees are starting to hurt really bad as there is no cap to them.
Most banks will charge a wire transfer fee of $5 or $10, but never will they charge a % of the money sent with no cap.
What PayPal does is completely immoral and fraudulent.
When I reached out to their support team about this, all I got was “read our terms and conditions, we mention this there”.
So yeah, I signed up for this and no, I did not read the terms and conditions when I did. My bad.
Instead of complaining, I was out to find a good way to get around this fee though, when I had to transfer USD out of my PayPal account.
Here is how you can get foreign currency out of PayPal avoiding their fees:
Open an account with eToro.
They will allow you to use PayPal to fund your account in USD for example. So I am using my USD balance on my PayPal account to fund my eToro account.
Now, instead of trading there, I wire the money from eToro to an EUR bank account. eToro uses interbank conversion rates, which are fair to both sides. They do charge between $5 and $10 wiring fee (unless you have a very large balance and qualify for their diamond status, in which case there is no fee). I will happily pay the $5 fee, which for larger amounts is just a fraction of what PayPal charges (on a $10k transfer that is $5 vs. $333). You could also leave the money at eToro and earn interest or put it into an ETF at no fee at all.
Now, I am not a huge fan of eToro as a broker as their spreads are crazy sometimes (their spread on Bitcoin, for example, is $70, which is nuts), but they are awesome when you want to get money out of foreign currency PayPal accounts.
Hope this helps others who feel betrayed by big and mighty PayPal.
