What is PayPal International Fees and How Can You Avoid Them?


The world’s economy in today’s unprecedented globalization is now more interconnected than before. Technological advancements have made it a lot easier for businesses, both small and big, to connect with international partners, clients, and customers.

One critical development that has considerably aided this is the conception and implementation of money transfer services such as PayPal. Unlike traditional bank transfers, the service offers a cheap, easy, and fast solution for American businesses and organizations to make payments to partners based outside the U.S.

Can You Use PayPal for International Transactions?

Yes, you can! Considering that the service is available in over two hundred countries worldwide, businesses now have the opportunity to make cross-border transfers and payments via the service’s website (paypal.com) or through their app. However, it’s worth noting that the money transfer process slightly differs depending on whether the recipient and sender have a PayPal account.

If both the recipient and sender have an account, then the transaction is processed through PayPal. However, in situations where the recipient doesn’t have an account, the sender has the option to send money directly to the recipient’s account via Xoom, another PayPal-owned payment service.

Both services offer relatively fast payments with Xoom linking to PayPal for easier payment tracking.

PayPal International Transfer Fees

When it comes to international fees on PayPal, it offers two payment methods with different fee structures. When sending funds to another PayPal account, the service charges 5 percent of the transaction with a maximum fee of $4.99 and a minimum fee of $0.99.

This is assuming that a PayPal balance underwrites the transfer. However, if it’s funded by a debit card, PayPal credit, or a credit card, a funding fee of 2.9 percent plus a fixed fee (determined by the currency being used) is also applied.

Moreover, if the person sending the funds needs to convert the money to a different currency before transferring the funds, they’ll also be charged a 3-3.75 percent currency conversion fee.

For you, as the sender, to transfer funds directly to their recipient’s bank account, you will need to use Xoom to complete the transaction. Since PayPal owns the service, transfers can be funded from either a linked bank account or a PayPal account.

Unlike PayPal, Xoom doesn’t have fixed percentage fees for transferring funds; instead, it adds mark-ups to the current market rates.

For instance, if the EUR to USD currency exchange rate is .913, Xoom may offer to process the transaction at a rate of about .902. That means that the person receiving the funds will receive less than the current exchange rate, and the person sending the funds will have to consider that when making the payment.

How Can I Avoid PayPal Fees?

Something worth noting about PayPal is that it’s free only for personal payments made to family and friends within the U.S. However, when it comes to business transactions and international transfers, several fees (mentioned above) come into play, plus merchant fees for services and goods.

Depending on how often you send money to accounts outside the U.S., costs could add up quite quickly. While there is no way to avoid the service’s transaction fees, there are still ways to lower costs- they include?

Funding your transactions using your PayPal account

This is one of the easiest ways to reduce some of the fees PayPal charges. Funding your transfers using your PayPal account can help you avoid some of the fees added on when using debit and credit cards.

Make Larger Payments

The cost of transferring funds directly to a PayPal account is capped at $4.99. That means that transferring 100 USD costs the same as transferring 1,000 USD. Making fewer payments/transfers in larger amounts can help keep costs low.

Consider Factoring PayPal Costs into Your Pricing

When dealing with international customers, partners, and clients, consider factoring the payment cost in your pricing, more so if you handle large transactions often.

Ensure you work out the details in advance – the exchange rates, frequency of payments, and transaction amounts all need to be factored into your service’s cost. That way, you get to avoid significant setbacks and surprises in the future.

Deduct fees During Tax Period

The fees PayPal charges for its services are all considered necessary costs of running a business and may be deducted from your business’ taxable income during tax time. While this does not necessarily lower the cost of using the service, some of your losses may be recouped through tax savings.

Are There Any Other Options?

It is hard to beat PayPal’s convenience because of how popular the service is; however, it isn’t the only option available today for transferring funds internationally. Services like TransferWise offer far more competitive alternatives to Xoom and PayPal. Since factors like currency used, transfer amount, and frequency all affect the cost of sending funds, you must take them into account when picking a money transfer service.


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