Sending money abroad can be a complicated undertaking. Not all money services work internationally, and, for those that do, the fees can be incredibly high. Plus, if you need to perform a currency exchange during the transaction, you can lose a significant amount of money if the transfer provider doesn’t provide favorable exchange rates. Both TransferWise and PayPal make international transfers with currency exchanges an option. The question is, which one is right for you?
PayPal International Transfer Fees
When you need to send money internationally and perform a currency exchange, you need to find an option with reasonable fees. Otherwise, a big chunk of the money you send might get eaten up by the cost of completing the transfer, and that can be frustrating.
With PayPal, when you send money to friends and family in the U.S. or Canada, you don’t pay any fees. But, if you want to send cash to someone in any other country, including friends and family, you’ll encounter transaction fees.
The amount you owe as a transfer fee on PayPal depends on how much you are sending, the destination country, and where the money is coming from. If you use a PayPal balance or linked bank account, the fee typically comes in at 0.3 to 2 percent of the amount you are sending. That means, for a $1,000 transaction, you’d lose $3 to $20 in transaction fees alone.
However, if you use a debit or credit card on PayPal, you’ll pay more in fees. Usually, the transaction fee will be between 3.4 and 3.9 percent. For $1,000, that’s between $34 and $39. Plus, you’ll owe an additional small fixed fee, which varies depending on the currency.
Currency Conversion Rates
Along with those fees, you’ll deal with currency conversion rates. How much that costs depends on the current wholesale exchange rate (sometimes called the mid-market, spot, or interbank rate) and PayPal’s structure. PayPal typically tacks on a 2.5 to 3 percent currency conversion spread to the transaction, meaning you aren’t getting an exchange rate that is less favorable than the wholesale rate. PayPal pockets that difference, allowing it to make a profit on the conversion.
Exactly how much a currency conversion will cost you through PayPal can vary by the minute. Exchange rates fluctuate throughout the day, as currency values aren’t stable. As a result, you can’t calculate your full cost accurately until you are preparing to initiate a transfer.
TransferWise International Transfer Fees
With TransferWise, your biggest source of savings is that TransferWise uses the wholesale exchange rate for each of its transactions. You won’t encounter a currency conversion rate that’s tacked onto the exchange rate. As a result, more of your money will go to your friend or family member.
However, that doesn’t mean TransferWise is fee-free. As with any business, they need to generate revenue to support their operations.
The TransferWise fee structure is fairly straightforward. On a $1,000 transfer from U.S. dollars to euros, the total fee (as of this writing) was $7.54, or 0.754 percent of the total amount being sent if you use a bank transfer. If you send larger amounts directly from a bank account, the transaction fee percentage actually falls. For example, if you send $20,000, the fee is just 0.48 percent, or about $96.
However, the fee does go up is you use anything other than a direct bank transfer. For that same $1,000 being converted into euros, wire transfers come with a slightly higher cost ($10.86) while debit cards are a bit more ($12.95). If you use a credit card, the transaction fee is pretty substantial, coming in at $38.28.
As with PayPal, the fees vary depending on the destination country and currency involved. Plus, they could be subject to change, so its best to use the TransferWise calculator to determine how much you receive and the fees you’d pay.
Is TransferWise Cheaper Than PayPal?
If you want to find the cheapest option for sending money internationally, you might assume that TransferWise is the best option. After all, they don’t have a currency conversion rate added to the currency exchange rate, and that can represent a savings in comparison to PayPal.
If you send $1,000 to Germany directly from a bank account, where it gets converted to euros, TransferWise comes out ahead. You’d only pay $7.54 in fees, and your recipient gets €904.68 (based on the exchange rate on October 3, 2019). With PayPal, there’s no transaction fee to send the money straight from your bank account, but the less favorable exchange rate would mean your friend or family member only receives €903.60.
However, TransferWise doesn’t always beat PayPal. If you are sending $2,000 to India (directly from and to bank accounts), PayPal actually wins. Through PayPal, your recipient would get INR 141,336.00. With TransferWise, they’d only receive INR 140,851.07.
As a result, you don’t want to assume that TransferWise is universally cheaper, because it might not be.
How Fast Transactions Complete Through TransferWise and PayPal
By and large, TransferWise and PayPal have comparable timelines for bank-to-bank international transfers. Usually, they will complete within a few business days, though this can vary depending on the destination country.
However, if you send money internationally to another PayPal account (and not directly to a bank), that approach is slower than TransferWise in many cases. When you route between PayPal accounts, your recipient might not get the money in their PayPal account for a couple of business days. Then, they have to transfer the funds out of their PayPal account to their bank (if they want to use it outside of PayPal), and that can take another several business days to complete.
Can You Cancel TransferWise or PayPal Transactions?
There are options for canceling both TransferWise and PayPal transactions. On TransferWise, you can stop any pending transfer through the Activity section of the app or website. Once the transfer is in the processing phase, it may be cancelable, but you might have to contact TransferWise to stop it, or it might not be stoppable. After the money has been sent, there’s nothing you can do unless the receiving bank rejects it.
With PayPal, if the payment is either pending or shows as “unclaimed,” you can cancel it online or through the app. However, if the recipient already has the money, you would have to either request a refund or open a dispute.
Dealing with Transaction Issues
When you send money internationally, there are several financial entities involved in the transaction. As a result, issues may arise that delay your transfer, cause it to fail, or even lead to your money becoming seemingly lost.
PayPal and TransferWise are generally reliable, but that doesn’t mean issues can’t occur. Both companies have had their fair share of problems, so it isn’t appropriate to say that one is better than the other in this regard.
If you have an issue with TransferWise, you can make a formal complaint over email. For PayPal, you can use the company’s contact page, which will allow you to use a form to send an email, or you can reach out by phone.
Choosing Between TransferWise and PayPal
TransferWise can be a suitable alternative to PayPal. However, it isn’t always the best deal. Before you set up an international transfer, it’s a good idea to compare how much your recipient will receive through each service. That way, you can make sure that the largest amount ends up in the hands of your friend or family member, which is really the most important part.
Do you think TransferWise is a suitable alternative to PayPal? Share your thoughts in the comments below.
Read More:
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- What You Need to Know About the Square Cash App
- Should You Be Using Cleo?
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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