Transferwise vs PayPal

If you need to transfer money abroad, or run a business with your customers overseas PayPal or Transferwise are your best bet.

While banks have been around since forever, these two fintech mega successes have emerged in recent years and truly shaken up the money transfer business – especially if you need the ability to “Request Money”.

It appears that both strive put the user experience and convenience at the heart of their product and sending or requesting money with either of these two companies is so much better then it was in the dark ages when we used banks.

What’s more is that they are both fairly cheap and convenient to use, especially when compared to your bank.

However, one must still rise to the top! In this battle of PayPal vs Transferwise, we compared both companies based on the following categories:

  • Cost
  • Speed
  • Convenience
  • Security

While we fully recommend you to read the whole article to see exactly how each service performed in each category, for those of you who need can’t wait (after all, time is money) Transferwise is the overall winner especially if you want the most money to arrive.

The reason is – for most people getting the most funds from A to B is the most important and on this score Transferwise is cheaper and faster than PayPal .

PayPal did have a clear advantage in that many people already have a PayPal account but this came at a steep price. However, if you and the person you are sending money to are already signed up and don’t mind paying more, PayPal could be the service for you.

At this point you have to ask yourself if getting up to 6% less is an acceptable for the convenience. Now that might not sound a lot but if you are getting paid a good proportion of your income this way or you are paying others – this can be a significant loss and worth making the switch.

A final thing to consider is that there are many variables depending on where you are transferring money. For example, the currency you are using, how you pay into the service, etc. To ensure you get the best price you could always get a quote from each company before sending your money. Generally though you will be hard pressed to beat Transferwise so we recommend taking a look look as this could easily result in hundreds if not thousands saved each year.

Now, before we move on to how we arrived at these results, let’s firsts take a quick look at the history behind each company.

PayPal

PayPal for Money TransfersOf the two companies, PayPal is the one you probably know the most about. It was founded in 1998 and rapidly expanded after becoming the payment method of choice on the auction site eBay.

It has continued to grow to the point where I would be willing to bet that a significant number of the people reading this already have a PayPal account set up and have probably used it.

However, before PayPal came along, everyone had a bank account. Yet we all know that this didn’t stop PayPal from tearing up the financial rulebook.

Perhaps now is the turn of…

Transferwise

Transferwise was formed in 2011, as Money Transfer Company with a few distinct points of difference – ridiculous transparency on its fees + it does enable you to request money from others overseas + the fees charged throughout the process are much less.

Like PayPal before it, Transferwise has grown rapidly over the years and now claims to send over 800 GDP every month!

It uses an innovative Peer to Peer transfer model that allows users to transfer money without technically sending their money to another country. This allows Transferwise to really reduce the amount they charge in transfer fees and it is a big reason behind its success and your savings.

So, now that you know a little about each of these companies let’s move on to finding out which one is actually the best at sending your money abroad. First, let’s take a look at the cost of sending money with each company.

Cost

For many people out there the best money transfer service will always be the cheapest. After all, the extortionate transfer fees are exactly the reason why you want to avoid using your bank and perhaps why you are looking beyond PayPal because of their high fees.

The overall cost of a money transfer service will generally come down to two different measures. These are the exchange rate that you are given and also any fees that are added on.

In addition are the fees added by your bank or your credit card company. These would most likely be the same on either service anyway.

Exchange rate

Exchange rates are one of those things. We all see on Google, or our finance apps, or on the news what the exchange rate is but we all also know we are never actually going to get that rate.

It is a commonly accepted fact that financial companies will always try to skim a little of the top making the actual amount we receive less than the exchange rate we see.

Well, hold on a moment.

When it comes to your exchange rate, what you see is what you get with Transferwise! Transferwise uses the mid-market rate and doesn’t actually make any money from the transfer rate. This basically means that when it comes to exchange rate, it would be very hard for anyone to beat Transferwise.

PayPal, on the other hand, say that they take the wholesale rate provided by banks and then add on an extra 2.5% – 4% to calculate the exchange rate you receive.

3.5 – 4% is what they charge for currency exchange. (2.5% is what they charge to exchange currency in your own account.)

Here is the chart they publish:

Exchange Rate Costs for PayPal

In our tests, even a bank will outdo PayPal for anything above about $300 but this is dependant to countries and amount.

Fees

You can see on the screenshot below that the fees for PayPal range at between 0.5% to 7.4% of the total amount transferred or slightly more if you are using money from a credit or debit card

Fees for PayPal

 

 

 

So the total cost to use PayPal

= Exchange Rate + Fees

= (2.5 + 0.5) to (4 + 7.4)

= 3% (min) to 11.4% (max) 

For most people, in the USA, UK, Europe, Canada or Australia for example and get paid or pay someone in those same countries;

Total Cost = 5 – 6% (Lesser known currencies will be higher)

By contrast the fee for using Transferwise is 0.5% for most major currencies.

However this can increase if you use different currencies. For example, sending GBP (UK) to CNY (China) will be charged at a rate of 1.5%.

Basically, when it comes to fees, with both of these services you will pay a slightly different rate depending on the currency pairing that you choose. However, what is clear is that due to the 2.5% extra that PayPal add to the exchange rate, sending money with Transferwise is almost always going to be your best option.

Winner: Transferwise is the clear winner due to its use of the middle market exchange rate and its relatively small transfer fees.

Speed

Like with cost, speed, is important and also highly dependent on the currencies you choose.

Transferwise claim that most transfers will be completed within 1-4 working days once they receive your payment. When I set up a transfer of USD to EUR it claimed that the money would arrive within 1-2 working days.

The average amount of time a PayPal payment takes is 3-5 business days. So again, while this is certainly slower than some transfers with Transferwise, it is at least competitive with other types of transfer.

Winner: Once again Transferwise is the winner here. While both companies say transfers can take up to 5 days, for many currency pairings a transfer with Transferwise will only take one or two business days.

Convenience

Both companies make signing up for their service very easy. I signed up to Transferwise by simply typing in my email address and choosing a password. Incredible! You can also use Facebook or Google to sign in if you please.

This is part of Transferwise’s overall strategy of making sending money abroad as simple as possible.

Of course, PayPal is no slouch either. Signing up for PayPal requires you to type in a few more details before your account is open but it really isn’t any hassle at all.

Also, while it may seem like you need to give more details to PayPal before signing up than you do with Transferwise, in reality, before making your transfer you give some extra information to Transferwise anyway.

After signing up to either service, you will have to transfer money to your account from a bank account in your home country. Alternatively, you can use a card to make a payment although this may be slightly more expensive.

One place where PayPal may have the edge is the simple fact that it is such a popular service. This means that there is a fairly high chance that you and the person you are sending money to already have a PayPal account!

If this is the case, not only will you save time when it comes to signing up to the service but sending money to another user of PayPal is ridiculously easy. All you need to do is type in the email address associated with their PayPal account, choose an amount of money that you want to send, and then confirm the transfer.

In all honesty, it is almost scary-awesome how easy it is to transfer money internationally using this method.

Winner: This winner of this category really depends on the person you are transferring money to. If you need to transfer money to a bank account then Transferwise is the winner. On the other hand, for sheer ease of use, if the recipient has a PayPal account already then PayPal is the winner.

Security

When it comes to transferring money, security is one of the most important factors. Luckily, for anyone considering using either PayPal or Transferwise, both these companies are about as secure as it gets.

As both companies do business throughout the world, they are regulated by various services depending on the country you use them in. This makes them incredibly safe. Here is a list of who regulates PayPal in each state while here is Transferwise’s security and regulation for each country it operates in.

If you need any more evidence about just how safe these companies are, then you can take a look at the numbers. As mentioned above, Transferwise transfers over 800 million GDP a month while, according to this article from way back in 2011, it is estimated that in 2011 PayPal was processing $315.3 million in payments every single day.

Basically, both of these companies are highly successful and this kind of success only comes if they are able to provide a certain amount of security to their users.

Of course, one place where they don’t have much of an influence is on human error. When transferring money, make sure you know and/or trust the person you are sending the money too as once it’s gone it can be hard to get it back.

As well as this, it is worth remembering that both these services put ease of use at the forefront of their customer experience. As we saw with how easy it is to transfer money using PayPal, all you need is the email address of the person you are sending money too.

Because of this, it would be worth making sure that you change your passwords regularly and choose a long, difficult to break password when using these services.

Winner: Hard to tell these two companies apart when it comes to security. As long as you are careful with who you are sending money too and keep your account details secure, you should have no problems using either service.

Conclusion

Overall, if you are looking to send money as cheaply as possible then Transferwise is usually going to be cheaper than PayPal. It does not make money off the exchange rate and only charges a small percentage of the overall transfer as its fee.

It is simple to sign up to, easy to send money with and should even be quicker in many situations than PayPal.

However, that doesn’t mean that PayPal doesn’t have its place.

PayPal is well known and as such, it can be a convenient option and is likely to be especially useful for small amounts where the fact that they take a percentage won’t result in you losing that much money.

For amounts more than about $300 we highly recommend comparing Transferwise as your solution – it could save you a bundle.

Basically, check out either option, see how much it will cost for you to send money using each service, and then you can come to a good decision about which is the best money transfer option for you!

OFX Promotional Code

Well done – if you are looking to save on money transfers you are in the right place.

Every one wants the best deal possible and coupons and promos are a great way to do maximize your savings.

Until 30th April 2017, OFX has offered us an exclusive deal. It is simply this – you pay no fees until 31th July 2017!

So the sooner you sign up the more you save but be sure to click this link before you sign up!

There are some terms though which you should also be aware of:

  • Register before 30.04.2017
  • Fee free transfers valid from until 30.07.2017
  • Min Transfer AUD 250.                          
  • Occasionally, third-party banks may deduct a fee from your transfer before paying your recipient. This fee may vary and OFX receives no portion of it.

If you are wondering who OFX is or just want to understand how a money transfer company works – check out this review I wrote but to qualify for the promotion you need to click above or here.

YOUR WELCOME 😃

The Importance of Regulation and Who Does What

Sending money to another country has become extremely simple and convenient. All you need is a bank account and access to one of the many transfer services that are available.

Security and TrustBoth the person who is remitting the funds and the recipient should be aware that they need to adhere to the rules and regulations governing such transactions in their respective countries. In the normal course, your bank or the agency that you are using ensures adherence to the applicable laws.

If you are dealing with a reputed and well-established money-transfer service provider, you need not worry too much about regulatory compliance issues as these will be taken care of. But it is good to know about the various statutes in different countries that apply to your money transfer so you can check to see if the company you are using is registered.

Below Covers:

  • Australia
  • Canada
  • Hong Kong
  • UK
  • Europe
  • USA

Australia

The Australian Securities and Investment Commission (ASIC) is responsible for overseeing the foreign exchange market and all money transfer providers.

The agency that you use should have an Australian Financial Services License (AFS). This certification is given only if the representatives of the firm are adequately trained to carry out money transfer transactions.
If you use an ASIC registered money transfer provider you can be sure that the relevant Australian legislation regarding fraud and money laundering has been complied with.

Another advantage in dealing with an ASIC licensed agency is that it will have a suitable dispute resolution mechanism in place if you are dissatisfied with your transaction.

Canada

The agency that is responsible for monitoring financial transactions in Canada is the Financial Transactions and Reports Analysis Centre (FinTRAC). Its mandate requires it to pay special attention to the detection and prevention of money laundering and terrorist activities.
Money Services Businesses (MSBs), which include money transfer providers and foreign exchange brokers fall under FinTRAC’s purview.

FinTRAC regulated MSBs are required to maintain segregated client accounts. This regulation protects consumers as their money is kept independent of the money transfer providers’ other funds. In the event that the MSB gets into financial difficulties, the customer’s funds are not in danger of being lost.

Hong Kong

The Hong Kong Monetary Authority (HKMA) functions as the central bank and is responsible for ensuring compliance with local and international regulations. Banks that provide money transfer services are monitored by the HKMA.

Other money transfer providers fall under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). They are required to apply for a licence from the Commissioner of Customs & Excise.
The rules governing international money transfer providers are very strict and it is in the interest of persons seeking to remit money abroad to ensure that the agency that they are using is licensed by the Customs & Excise department.

UK

Money transfer agencies in the UK can be either ‘registered’ or ‘authorised’ by the Financial Conduct Authority (FCA). The FCA is an independent body that protects the interests of consumers in the UK.
The FCA ‘registers’ a money transfer agency on the basis of two conditions. The first is that it should be based in the UK and the second, that none of its managers have been convicted of financial crimes.
An “authorised’ agency, on the other hand, offers customers greater protection as the process of authorisation by the FCA is more stringent.
If you are dissatisfied with the services of the agency that you have used, you can approach the Financial Ombudsman Service for redress.

Europe

The European Central Bank sets the policies for all member countries. But the central bank of each country is responsible for implementation.
Recently, a number of new rules have been implemented to prevent money laundering. These require that any transfer of €10,000 and above requires stricter customer due diligence. EU countries are also required to set up registers to record the ultimate parties who are receiving the funds.

USA

Money transfer providers are known as Money Services Businesses (MSBs) in the US. They are overseen by the Financial Crimes Enforcement Network (FinCEN), which is part of the US Treasury department.

However regulation of money transfer agencies is done at the state level.

The Consumer Financial Protection Bureau (CFPB) is the federal agency responsible for ensuring that customers utilising money transfer facilities are treated in a fair manner.

The CFPB has framed rules that require money transfer agencies to disclose the fees that they charge. In fact, you will receive an initial disclosure statement that clearly lays down the amount you have requested to be sent, the exchange rate, taxes, and the amount that the recipient will get.
You can use this information to compare the offers of several MSBs. When you actually use the services of the MSB that you select, you will get another statement furnishing complete details of your transaction.
Rationale for money transfer regulations

The greatest advantage of online money transfers is the speed at which they are completed and the convenience they offer. But the service can also be used for fraudulent activities and money laundering.

It is for this reason that the financial regulatory authorities across the globe have implemented a number of measures that seek to curb the illegal use of international money transfer facilities.

Easy $100 in 10 min with No Risk Video

Using a money transfer company I recommend with save you thousands but in this video I show you how to make $100 in 10 min really easily with no risk.

Transcript

Well hello there. Quinn here from Transumo.

Good to have you guys here.

I am just about to make a trade and show you how you can make an extra few hundred dollars, absolutely risk free.

I know that sounds tacky. But it really is – it’s true.

So this is the easiest, easiest, easiest, way to make a couple hundred bucks that I know of in the entire world.

Here it is.

I open two tabs in my favourite money transfer company’s website, and then I basically quite a few minutes for the time to elapse so that I can just click to get a new quote.

So I started out moving CAD 50,000 Canadian to Australia and I started out actually below. This was just below $50,000. I’ve got up to an extra $70 and this is just in 10 minutes.

Seriously, it’s as quick and easy as this.

While I was recording this video, if I click on this and it goes down, that’s okay. What I will do is locking this row, and if it goes up then I’ll just wait another couple minutes. Do a little bit of Facebook, whatever you want to do.

There you go. Ninety dollars.

So I’m over $100 now for this that I’ve made in 10 minutes.

This could potentially easily spike one cent which is the equivalent of $500 here. I’ve seen that happen many times. Usually it’s more in this kind of realm, an extra $100, something like that.

But it’s risk-free money and you aren’t spending really any time. I mean you can go into Facebook or whatever you want to do, whatever takes your fancy while you’re making extra dollars.

Hope you enjoyed this video.

If you’d like to find out more tips and tricks, check out my ebook. I’ve got it on transumo.com. There’s no opt-in. You can just download it at the moment.

I also reveal who I use as my money transfer provide. They have international offices in Australia, Canada, US, UK, New Zealand a few others. Basically got the world wrapped up in terms of money transfer. So I do recommend them amongst others depending on which country you live in. I explain that all on Transumo.

Thanks for listening

Happy Transfers!

The Cure to Money Transfer Jitters – Currency Exchange Alerts (with a Twist)

Have you ever noticed that sometimes emotions get in the way of good decisions?

I am definitely guilty!

For example, in the past I have tried to save a few extra bucks by watching the charts every minute…

I waited, thinking if I waited for some news to be announced like an interest rate announcement, maybe I could get a better rate only to discover a few days later that if I had only just gone ahead and made the damn transaction I would have saved a few hundred bucks.

Here is the way to end that craziness!

Currency Exchange Alerts

This morning I got an email that saved me $262 (or 1.3%) on a money transfer that I wanted to do sometime this week and it only took me 5 minutes to set up.

As I was making the transaction I thought – “This takes me 5 mins and just saved $262, why not do a little video to show others how it works”

Here it is that video:

List Free Currency Exchange Alerts:

Apps for Currency Alerts

After you have registered with one of these, simply use their alert service.

 

 

 

Should You Transfer USD Now? – October Update 2014

Want to move US Dollars from the States to CAD, GBP or AUD?

Transferring money overseas can be challenging – news, market commentators, forex analysts and changing economies can be sources of confusion for someone who simply wants to know if they should transfer US Dollars to the UK, Canada or Australia.

Transumo Man with US FlagI have shown how I saved $2500 or 10% in one transaction  by using simple chart analysis.

But I understand even simple chart analysis can be a challenge to get right so I will show weather you if you should WAIT or SEND your US dollar NOW for the CAD, GBP and AUD.

I will also provide some guidelines if I indicate WAIT as to what you do in the coming weeks.

Finally I will show on a monthly basis if my analysis and the charts have been correct and you can get the latest monthly analysis and charts sent to your inbox as soon as they are published.

First a Disclaimer: This website is intended to provide general information and opinions. The information contained in this post, page and website does not constitute and is not intended to be financial advice. You should make your own decisions and potentially in conjunction with a registered financial professional.

Scroll down to see if you should SEND NOW or WAIT for the following currencies:

  1. US dollars to Canadian dollars
    • My recommendation: SEND NOW (short term) – Long Term WAIT
  2. US dollars to British pounds
    • My recommendation: WAIT (see notes for when to exit)
  3. US dollars to Aussie dollars
    • My recommendation: WAIT (see notes for when to exit)

 Should You Send USD to CAD Now?

USD to CAD 2yr Chart 1 October 2014Based on the two year chart the US dollar is strengthening against the Canadian and is pretty clearly in a long term uptrend.

The question is, should we sit tight or send our money now – I have found the three month chart is usually the best indicator when shown within the context of longer and shorter term trends.

USD to CAD 3 month chart 1 October 2014

Based on the 3 month chart, the trend is pretty clear. Interestingly the trend is at the top end of the channel right now so it looks as if you want to move your money now now will be a good opportunity to do it.

Longer term, clearly it might be best to wait. That said, if the USD to CAD was to fall significantly below the lower trend line (currently at $1.10) I would have no hesitation to move my money.

Lets take a quick look at the five day chart.

USD to CAD - 5 Day - 1 Oct 2014

The 5 day chart shows a continuation along the top end of the current trend with a slight dip recently. This tracking of the upper limit of the trend line is a clear signal to me that the risk is to the downside.

So should you send your USD to CAD now? – SEND NOW

You probably will save a cent or two in the short term.

Longer term however – if you have weeks or even months on your side, it looks highly likely that the US dollar will continue to strengthen. That said, all bets are off if the currency falls significantly below the three month trend line. A cent below the trend line would for me be enough to hit the “transfer money now” button.

 Should You Send USD to GBP Now?

USD to GBP - 2yr Chart - 1 October 2014

No shortage of excitement in this chart! The short sharp most recent trend is a strong turn around but the three month chart will be super important especially in light of the most recent little spike we can see in September which was caused by the Scots wanting, “Freeeeedoom!”

But since then the trend looks to have resumed – the three month chart will tell us if this is the case.

USD to GBP - 3 Month Chart - 1 October 2014

Well the Scots are staying, but that has not helped the GBP. Looks like the US dollar has continued along it very well defined upward trajectory.

The next chart, the 5 day, should always be taken with a grain of salt – just really checking nothing has radically changed.

USD to GBP 5 Day Chart - 1 October 2014

 

The 5 day chart just confirms the current trend. Right now, the trend is confined to a narrow band of upper and lower limits. So…

Should you send your USD to GBP now? – WAIT

However if the lower trend line is breached by more than 1/2 pence I would move my money immediately, or at least part of it. For now though, it seems like a good idea to hold on to this nicely entrenched uptrend and in the short term there is not much to be gained.

 Should You Send USD to AUD Now?

 

USD to AUD - 2 year chart - 1 OctoberThe two year chart shows some pretty amazing volatility, with the most recent trend sharp, short and sweet if your funds are in US dollars and need a home in Australia.

At $1.15 we are at a two year high, but the real question is does the three month chart show we are still in the same trend? The answer to this will significantly help our decision.

USD to AUD 3 month chart 1 Oct 2014

The three month chart seems to pretty clear show that the USD is gaining ground on the AUD. We never know how long this trend will continue of course, but we do know that it is in our interest to hold on tight for the ride – ready to jump if the time is right.

Lets to a quick check of the five day chart just to be sure the wheels are still on.

USD to AUD - 5 Day Chart - 1 October

 

The five day chart just further validates current trend.

So to answer the question, should you send your USD to AUD now? – WAIT

But be ready for decisive action.

The lower trend line on the three month chart indicates the ride might be over. If it was my USD on the line I would be enjoying this ride for all it has to offer, but with a very itchy trigger finger. As the two year chart shows the USD/AUD make uneasy bedfellows and a move of 1 cent below the bottom trend line would be enough fun for me.

Final Word

The only reason I suggest sending your money from the US to Canada now is that the currency pair is at the top end of the trend line right now.

Longer term the USD is clearly strengthening against all major currencies. If you have a longer term time horizon the trend shows that it will most likely pay to wait.

However, this of course can change without notice which is why I suggest keeping an eye on the lower trend line in all cases and be confident in when capitalizing on the majority of the most recent gains.

You know what they say – “Bulls make money, bears make money, pigs get slaughtered”

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