How to Send Money by PayPal and Cut Costs on Overseas Transactions

PayPal Money Transfers

Even though I use PayPal almost daily for my own business and personally for many years, I must confess I had no idea what it cost and and how exactly it worked… it just worked.

Question is, was I wasting money in exchange for convenience?

How does PayPal work and are there better options in certain circumstances?

That is exactly what I will uncover here.

BOTTOM LINE: For small amounts PayPal can be a super convenient and a surprisingly low total cost option. However for more then a few hundred dollars it is usually expensive compared to almost any other method. But international money transfer services are normally as quick, charge you lower fees, and give you a better exchange rate. Cut to the Chase: Check out our PayPal V Transferwise comparison.

The results of my test may shock you:

Here is how they faired in our $5000 comparison when sending money abroad.

Paypal Example for Money Transfer

However because PayPal has very low or zero fees (depending on the countries) as the amounts being sent become smaller PayPal becomes more competitive.

So why are the Total Costs so high?

Total Costs – include the difference between exchange rate offered and exchange rate big financial institutions like banks and PayPal get (which is called the wholesale or interbank rate).

A much more common transaction for PayPal is when transferring money less then a few hundred dollars. Less than a hundred dollars and PayPal is hard to beat.

In our example, a transfer of $100 would cost $7.50!

While that is still 7.5% of your money to do the transaction it is a lot cheaper than other options and very quick and easy if your recipient wants to get paid into a PayPal account.

However, there are much cheaper options for international money transfers for amounts of more then a few hundred dollars. If you want to send small amounts though – here are the steps.

How does PayPal work for international transactions?

It really couldn’t be simpler.

All you need to open an account is:

  • An email address and
  • A bank account or a credit card

Get on to the PayPal website and create your account by entering the details that they ask for. The individual steps are below in the infographic.

Now you can send or receive money using your PayPal account.

Sending Money

It is possible to send money to anyone in practically any corner of the world. You only need to know the email address that is linked to the PayPal account of the intended receiver of your payment.
PayPal operates in 200 markets and has the flexibility to make payments in more than 100 currencies.

Step-by-Step How to Send Money Overseas using PayPal

(below this graphic is How to Receive)

Step by step instructions for using PayPal to send money overseas

Receiving Money

Transfer of money from one PayPal account to another is almost instantaneous regardless of the location of the sender and the receiver. The only caveat – if the person who has received the money wants to transfer it to a bank account, it may take several days.
The receiver also has the option of holding the money in a PayPal account. Amounts can be held in any of 26 specified currencies.

Paypal Security


PayPal was established in 1998. Since then it has grown into one of the largest and most trusted companies for individuals to send money across the globe.
In 2015, it processed 4.9 billion payments for its 179 million active account holders.

In the last quarter of 2015 alone, the payment volume totalled $82 billion.

PayPal lays great stress on the security of the data that is generated by the millions of transactions that it handles on a daily basis. A recent report in MIT Technology Review explains how the company is at the forefront of the branch of artificial intelligence technology known as ‘deep learning’ that enables it to minimize frauds.


Fees and charges

As a recipient of money sent through PayPal, you will have to bear a fee imposed by the company. Although this varies in different countries, it is usually a small fixed amount and a percentage of the sum that has been remitted.
If you are sending money from Australia to some other country, the fees would vary from 0.5% of the amount that you are sending to 3.3% depending upon the location of the receiver. This rate would apply if you are using your PayPal balance or a linked bank account.

If you are using a credit, the amount that is payable is higher. A charge of 3.9% or more, based upon which country the money is being sent to, would apply. There is also a fixed fee.

If you are sending money from UK to the U.S., the applicable expenses would be:
1% of the amount sent using your PayPal balance or a bank account. (3.9% of the amount if payment is funded entirely or partially by credit card.)

A fixed fee of $0.30 would also apply.

Currency would be converted using the wholesale exchange rate. A currency conversion fee of 3.5% of the wholesale exchange rate would be levied.

Click below for full fees lists for the following counties

See “Fees and Charges” on this document for Australia

See “Sending and Receiving Money” on this document for the UK

See “Cross-Border Payments” for the USA

See our FAQs below for comprehensive fees and conversion costs:


As you can see, the charges add up to a fair amount. Then why is PayPal so popular?

It is extremely easy to set up an account.

Transferring money takes almost no time and their systems and procedures are time-tested and fail-safe (as far as reasonably possible).

Practically no other money-transfer service is as efficient as PayPal. It has adapted to a changing market by making its systems capable of handling mobile transactions. In the fourth quarter of 2015, PayPal processed $20 billion in mobile payments.

The service is rapidly growing in popularity. In the last three months of 2015, it added about 75,000 new accounts per day.

Expensive for large amounts – PayPal is practically the best way to transfer money to other countries if the sum being remitted is small – say, a few hundred dollars.

Sending bigger amounts can be expensive because most of PayPal’s fees are charged as a percentage of the amount being transferred. If you need to send a sum exceeding $300, it is better to explore other options here.


1. Does PayPal accept credit cards?

PayPal accepts Visa, MasterCard, Discover and American Express.

2. Are there any fees for opening a PayPal account?

No, opening an account is absolutely free.

3. Can I call back an amount that I have sent using PayPal?

Yes, if the status of the amount that you have sent is ‘unclaimed’. This status indicates that the recipient has not received or accepted the amount yet.

4. Is PayPal a bank?

No, it is not a bank. It provides a quick and easy way to send and receive money.

5. I think that the exchange rate that PayPal uses for currency conversion is expensive. Can I opt to use my credit card’s exchange rate instead of PayPal’s?

Yes, you can. If you choose to use MasterCard or Visa’s exchange rate, the applied conversion rate will appear on your credit card statement and not at the time of your PayPal transaction.

6. If I am sending money overseas from Australia to a friend, what are the charges?

If you use your PayPal balance or a linked bank account, the charges would be 0.5% to 3.3%, depending on the country you are sending the money to.

If you use your credit or debit card, the fee would range from 3.9% to 7.4% plus a fixed fee, depending on the country.

7. What are the fees for various countries?

Recipient country PayPal balance or bank account Entirely or partially funded by Credit Card
Brazil 1% 5.99% + fixed fee
Canada 1% 3.9% + fixed fee
China 0.5% 3.9% + fixed fee
Hong Kong 0.5% 3.9% + fixed fee
Singapore 0.5% 3.9% + fixed fee
Taiwan 0.5% 3.9% + fixed fee
US 1% 3.9% + fixed fee
Germany 3.3% 5.2% + fixed fee
Italy, Netherlands, Belgium, France 1.8% 5.2% + fixed fee
Poland 2% 4.9% + fixed fee
Other European countries* 1.5% 4.9% + fixed fee
All other countries 0.5% 3.9% + fixed fee


8. Do I have to pay anything in addition to the fees in question 7 above?

YES! This is the conversion fee and above more than about $300 there are better options.

Currency conversion Currency conversion fee
Converting within your PayPal account and not as part of a transaction 2.5% above the wholesale exchange rate
Converting to US Dollars or Canadian Dollars 3.5% above the wholesale exchange rate
Converting to all other currencies 4% above the wholesale exchange rate


9. Can PayPal close or temporarily suspend my account?

Yes, there are various reasons that PayPal may stop you from using your account. These include suspected fraud, a failure to prove your identity or a sudden change in the amount or number of your transactions.

Your account activities may also be suspended if the company thinks that you are using your personal PayPal account for a business activity that requires you to upgrade to a premium or business account.

10. Can I have more than one PayPal account?

Yes, you can have one personal account and one premier or business account.

11. What is the transaction limit on PayPal?

The maximum amount allowed for a single transaction is $10,000 USD by a PayPal member. For PayPal members living outside the US, the maximum transaction limit depends on the currency in use. In Australia, it is $12,500 AUD.

12. Can I use my mobile phone for PayPal transactions?

Yes, you can. Just download the PayPal app. You can even send money to someone who does not have a PayPal account. You just need the intended recipient’s email address. PayPal will help them create an account so that they can access their money.

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