Paypal, TransferWise, Stride September 24, 2019 bizadmin From the news this morning, Paypal has made Germany its headquarters while TransferWise is London-based and Stride is in Silicon Valley. There are over 244 million PayPal users globally, making it one of the most popular ways to send and spend money online. Whether you’re paying back a friend after splitting a restaurant bill, or sending money home to family based abroad, PayPal has a solution. However, it’s good to look at the fees PayPal charge before you decide if this is the best way to make your payment. In some cases – for international payments, or transfers in a currency other than pounds, for example – PayPal might not be the cheapest option out there. More on that in a moment. If you’re using PayPal, you might choose to hold a balance within your account for ease, which you can then use to pay for goods and services, or send to your friends and family. This article covers how you can do that, and what the costs of payments might be. However, this information is based on holding a personal PayPal account, so if you’re a business user, you’ll need to double check the small print – and especially the fees – before you proceed. Are you making international money transfers? TransferWise could save you up to 8x versus your bank Before you get started, a word. Banks and money transfer providers often give you a bad exchange rate to make extra profits. TransferWise is different. Its smart new technology skips hefty international transfer fees by connecting local bank accounts all around the world. Which means you can save up to 8x by using TransferWise rather than your bank when you send your money abroad. Check out how to make your first transfer with TransferWise. And give it a try. Oh, and while you’re at it, check out TransferWise’s free borderless multi-currency account. Where you can manage and send dozens of currencies all from the same account. Now, back to what you came here to read. Why would you add money to PayPal? You can pay and be paid from your PayPal account, and just like your main bank account, you can hold money in your PayPal account until you need it. You might have a positive balance if you’ve sold something online, and taken payment via PayPal, or if you’re a freelancer working with clients who pay using PayPal, for example. When it comes to making payments or shopping, you can either use the balance you hold already, or link your PayPal account to your regular bank account, credit or debit card. If you use a linked bank account or card, the payment comes directly from that card or bank account whenever you send money using PayPal. Alternatively, if you want to pay for things using your PayPal balance, you might want to top it up from time to time for convenience. PayPal payments You might use PayPal to collect money from friends, if you’re arranging a holiday together, to buy things on eBay, or to make a charity donation, for example. You can send money to someone easily, using their name, email address or mobile number. To access the payment, the recipient will need to have a PayPal account, or will be prompted to set one up to get their money¹. Making a payment is easy. Log into your PayPal account, and find the ‘Send Money’ button. Click on this, and you’ll be asked to give the recipient’s details, and the amount you want to send – PayPal remembers previous payments you’ve made, so it’s even easier if you’re making a transfer to someone you’ve already sent money to before. However, although PayPal payments are easy, they’re not necessarily cheap, so you’ll need to watch out for the fees charged. If you’re sending money to friends or family in the UK, in pounds, and the payment is funded using your PayPal balance, linked bank account, debit card or a prepaid card, then there’s no fee to worry about². However, if you want to pay for the transfer using a credit card, you’ll have to pay a charge² – more on that later. The fees can get even higher if you have a UK based PayPal account, and you make an international payment in a currency other than pounds. Sending money in a different currency to someone with a UK PayPal account will mean you have to pay a conversion fee, and there’s a charge for funding your payment using a credit, debit or prepaid card, too. Sending money in a different currency, to someone with an overseas PayPal account is even more expensive, as there’s a cross border fee, as well as a conversion fee, and potential other charges depending on how the transfer is funded³. The fees add up quickly, and can be really confusing, so it might be a bit of a struggle to understand what your international payment is really costing you. We will look at these costs in detail later, but one which often catches people out is the currency conversion fee. This is applied whenever PayPal change your payment currency – so if you’re sending money from your UK PayPal balance, to a friend in France, using euros, for example. The conversion fee is added on top of the real mid-market exchange rate – and will increase the cost of your transfer by 3.5-4% compared to a provider which uses the real exchange rate to process your payment³. If you’re sending money to someone based abroad, you could get a much better deal with TransferWise. The costs of your payment are set out upfront, and every transfer is made using the real, mid-market exchange rate. This matters because the mid-market rate is the one banks use to trade currency between themselves – and the best rate available at any point in time. Making a payment with this exchange rate, instead of one with a markup like the PayPal rate⁴, can save you a lot on your personal payments – and even more if you’re a business sending money overseas. For business payments, research has shown that TransferWise can be quite a bit cheaper than PayPal. PayPal balance You can choose to hold a balance in your PayPal account, either by keeping funds in the account after someone has paid you using PayPal, or by topping it up yourself³. You can top up your PayPal balance using your linked bank account or debit card – explained below – and then hold your funds in a range of different currencies. It’s worth understanding, though, that switching your PayPal balance between currencies can be costly. Whenever you switch your balance between currencies with PayPal, you’ll pay a currency conversion fee of 2.5%⁵. That’s lower than the fee we mentioned above, which is added to make a payment internationally, but still means that PayPal will take the real exchange rate, and add a markup of 2.5% before they convert your money. Not all providers do this. If you want to be able to exchange your balance for a different currency, and pay just a small upfront fee with no markup, you might consider getting a borderless account from TransferWise, instead. You can keep your money in any of over 40 different currencies, make payments in all available currencies and receive payments in British pounds, euros and US and Australian dollars (with more to come in the future) like a local, and check your balance across all currencies at a glance in the app or online. You can also receive a linked debit card, which is particularly handy if you go abroad often and want to be able to spend money without paying high (conversion) fees. All currency exchange is done using the real mid-market exchange rate and will only cost you a small fee which you always see upfront, so you can be sure that you’re getting a fair deal. How can you add money to PayPal? If you’d rather hold a PayPal balance to cover your purchases, you can add funds using a bank transfer or debit card payment. Bank transfer To top up your PayPal account using a bank transfer, you’ll need to log into your account, and find the ‘Wallet’ button on screen⁶. If you’re using a laptop or computer, this is likely to be in the middle of the main task bar on the login screen. On a smartphone, you’ll need to click ‘Menu’ and select it from the drop down menu. The Wallet screen will show you the payment sources you have already linked to your account, and you can click on the linked bank account you want to use to top up the account. One of the options you’ll see is ‘Transfer Money’. Click this and you’ll be offered the choice of taking money from your PayPal balance to your bank account, or using the bank account to top up your PayPal account. Select ‘Money In’, and you’ll get instructions on how to make a bank transfer to your PayPal account. You’ll find that you need to log into your online banking, and arrange a transfer to PayPal there. You’ll get an email from PayPal once the payment has been processed, and the money is available in your PayPal account. This may only take a few moments, but can take up to 3 days depending on your bank’s processes. Debit or credit card You can not add money to your PayPal balance using a credit card. However, if you link your credit card to your PayPal account, you’ll be able to use that card to pay for goods and services using your PayPal account. If you want to use your debit card to top up your PayPal account, you’ll need to make sure the card is linked to your account. You can then click on ‘Wallet’, as we explained above, and follow the steps on screen to use your card to top up the account. What are the PayPal fees for adding money? Service PayPal UK fees Topping up your PayPal balance from your linked bank account or debit card Free Changing your PayPal balance from one currency to another⁵ Currency conversion fee of 2.5% Sending money to friends and family in the UK, in pounds² Free if the payment is funded with PayPal balance, a linked bank account, debit card, or prepaid card 3.4% +20p if the payment is funded using a credit card Sending money to friends and family in the UK, in any currency other than pounds⁵ Currency conversion fee of 3.5-4% applies to all transactions An extra fee of 3.4% + fixed fee is added on top of this, if you’re funding the payment with a credit, debit or prepaid card Sending money to friends and family outside the UK, in any currency other than pounds⁵ Currency conversion fee of 3.5-4% + cross-border fee of £1.99-£3.99 applies to all transactions There’s an additional cost of 3.4% + fixed fee if you’re funding the payment with a credit, debit or prepaid card PayPal is immensely popular, and has a huge user base in the UK. For domestic payments, made in pounds, the PayPal system offers quick and easy payments, for no fee, unless you need to pay using a credit card. However, the fees can ramp up quickly if you’re paying someone based overseas, or in a different currency. If this is the case, it’s well worth checking out the alternative options out there, as using a specialist in international payments can be much better value than relying on PayPal. An alternative option could be TransferWise. With TransferWise you can make international payments as well as open a multi-currency borderless account where you can hold money in 40+ currencies. Your money will always be converted with the real, mid-market exchange rate without any additional currency conversion fees, and you only pay a small fee for each transaction. You’ll see the fees clearly stated upfront so you’ll know exactly what you’re paying.
