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Ismayil Khayredinov
Works at hypeJunction


In the recent months I have started paying closer attention to where my money goes (as I never seem to have any). As a result, I have started thoroughly inspecting every transaction from start to finish. Living in between Prague and Berlin, having clients accross EU, US, Australia and Canada, makes multi-currency transactions a norm for me. With PayPal I can accept any currency, but have to transfer any balance to CZK or EUR to withdraw them. Here are some incredibly sad things I have noticed:

1. Officially, PayPal merchant fees are 3.4% + 0.35 EUR (this would apply to EUR transaction from the United States buyer to a Czech PayPal account). However, when the transaction is made in USD, the fee goes up to 3.9% + 0.30 USD.

See your rates here:

2. I have no use for USD, so every time my clients pay me in USD (don't argue with a client, right?, especially with an imperialist accountant by his side) or any other currency than CZK/EUR, I have to make exchange currencies. I have looked at my currency exchange history and compared the exchange rates to those historical mid-rates, and on average PayPal exchange rate is 3% lower than e.g. your bank's mid-rate.

Obviously you do not notice the exchange rate difference in decimal points. Here is an example:

The exchange rate I have received today on PayPal is 1 USD = 0.7054 EUR. Exchange rate on a USD Visa Card making EUR transaction would apprx. be 1 USD = 0.7213 EUR, while Commerzbank mean yesterday was 1EUR = 0.7243 EUR. 

This discrepancy in exchange rates is consistent, though it fluctuates on average PayPal grabs it's 3-4% profit an any currency exchange operation.

3. So, for me this puts up a cost of doing business via PayPal to at least 6% of the transaction, average 7%. 

To illustrate, on a 400 USD payment I have received today via PayPal, I will be getting 271.54 EUR on my bank account. If I were to:

- get cash from the client and exchange it at an exchange point, I would have received ~288 EUR or 5.7% more

-  charge my client's credit card in USD via, I would have recieved 274.26 EUR (after all transaction fees and 2% currency conversion fee) - 1% more

-  charge my client's credit card in EUR via, I would have received 280.03 EUR or 3% more - the buyer's credit card would have been charged an amount that's very close to 400 USD (perhaps even less if I charged the client 288 EUR) + whatever bank fee applies (normally 1-3%)



1. If you have a choise, do not use PayPal for cross-border money transfers. You are bound to loose money and make PayPal richer.

2. If you have an option, only deal in your primary currency and let your customers deal with their own banks. So, if you primary currency EUR, invoice and accept payments in EUR. If you have to have an option to accept multiple currencies, you will increase your gain by switching from PayPal to another provider (e.g. Stripe or PayMill)

3. PayPal is notorious at hiding the details of the transaction from you. Always review the activity with balance (that's where all the juicy stuff is). Go to My Account > Overview > View all activity > Activity (with balance)

4. When given a choice in what currency to pay using your PayPal account, always choose your primary currency.

5. When using your PayPal account to make subscriptions or authorize automatic payments, always view what funding sources are used. Go to My account > Profile > My preapproved Payments. Each profile has a backup funding source associated with it. Make sure you get the proper currency matching if you have multiple credit/debit cards in multiple currencies.

6. Do not let PayPal convert the charges before charging your cards. On My preapproved payments page, find Set available funding sources. In the list, select Conversion Options for each card you have associated with your account. I love the disclaimers there. 

Here, you might want to consult your card issuing bank to compare whether or not you loose or win. In my case, I win. My credit card charges 1.75% fee for foreign currency charges and offers me a MasterCard exchange rate. Here is a real life example:

My Buxfer subscription of 4.99 USD a month is billed directly to my Credit Card. On March 28th, that cost me 3.64 EUR (1.37088 USD/EUR) + 0.06 EUR fee.

My Toggl subscription of 5.00 USD is charged to the same card via PayPal. On March 25th, that cost me 3.74 EUR (1.3371 USD/EUR).

7. Avoid PayPal Fees, even with the given exchange rate, it is better to convert money within your own account before sending them to someone. E.g. if you are sending money to your friend in Germany, who will have EUR as their primary currency. 

So, if my primary currency is USD or CZK and I want to send money to my friend in Germany, I would pay a 12 USD fee (or 19.90 USD if I use a credit card) for a 400 USD transaction. Now, your friend will recieve 400 USD, and does not have to pay any fees, but the catch is, they will have to use the above rate to get their EUR out of their PayPal account (so today they would get 271 EUR or so).

Now, if you were to use your PayPal balance to buy 271 EUR, that would cost you as of this second 385 USD and it would be free to send!!!

There, PayPal would have made 27 USD off you just on that transaction. Madness
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    web developer, 2011 - present
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