How To Avoid PayPal Currency Conversion Rate Fees - Monito

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Avoid PayPal conversion rates by using Revolut to pay at market-low costs in a foreign currency.

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François Briod

Guide

Co-Founder of Monito and money transfer expert, François has been helping Monito’s users navigate the jungle of money transfer fees, bad exchange rates and tricks for the last ten years.

Jarrod Suda

Reviewer

A writer and editor at Monito, Jarrod is passionate about helping people apply today’s powerful finance technologies to their lives. He brings his background in international affairs and his experiences living in Japan to provide readers with comprehensive information that also acknowledges the local context.

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When shopping online in a currency that's not your own, you may be tempted to select PayPal as your payment method. After all, with its convenient payments and trustworthy reputation, what's wrong with letting them handle the conversion?

Unfortunately, what you won't see on the checkout page is just how much money you can lose to hidden PayPal conversion rates by carrying through the transaction (yet another reason why we don't recommend PayPal for anything to do with exchange rates).

Here are the two main recommendations:

1. Via PayPal: Always click "See currency options" and pay in the seller's currency to avoid the PayPal currency conversion fee.
2. Via the cheapest option: Use Revolut to make instant, low-cost payments in a foreign currency.

Go to Revolut

How to Avoid Paypal's Hidden Fees: Watch Our Video

How To Avoid PayPal Conversion Fees

• 01. Option 1 — Select currency options to avoid PayPal's conversion rate scroll down
• 02. Option 2 — Use Revolut to bypass conversion rates altogether scroll down
• 03. FAQ about PayPal conversion rates scroll down

Option 1 — Pay in the Seller's Currency

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Let's learn how to avoid conversion fees on PayPal exchange rates by using the following example —

Purchasing From a Foreign Company

We recently bought a great film course online. The course was created by a seller living in the United States and the price was quoted in US dollars. Since we are using our banks in Europe to complete this $997 transaction, the US dollar is considered a "foreign currency" in our case.

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How PayPal Hides Their Currency Conversion Fees

Below, you'll notice that PayPal defaults to quoting the purchase in our local currency — British pounds — instead of in US dollars. PayPal shows us their exchange rate too, which was 1 GBP to 1.29189 USD at the time of purchase.

However, the PayPal exchange rate is not equal to the real mid-market exchange rate. In fact, it's not even close.

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Always Check the Real Exchange Rate

After visiting Monito.com on a separate tab, we found that the mid-market exchange rate at the time of our purchase was 1 GBP to 1.3535 USD. (You can also find the mid-market rate on Google or XE.com.)

At that real exchange rate, our $997 purchase should be worth just £736.60. In other words, the PayPal currency conversion is using a very weak exchange rate on us, charging us £771.74 instead of only £736.60.

The PayPal currency conversion fee: a 4.5% fee for conversion service.

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Of course, PayPal does not spell this out clearly — it merely lists its exchange rate. If we hadn't left the page to check how much the real exchange rate was on the day, we would've been unaware that PayPal's total charge was actually £35.14 more expensive.

How to Avoid PayPal's Hidden Fees

To avoid PayPal conversion fees, we need to make the purchase denominated in US dollars — a.k.a. the local currency of the seller.

To do so, click the "See currency options" button on the payout screen. Click on the merchant's local currency, which in this case is USD.

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When we switch to the US dollar option, we’ll be charged at the currency conversion set by our bank or card company (like MasterCard or Visa). While these companies also charge more than the current mid-market rate, the good news is that most banks will give you a better exchange rate than the one you'd find with PayPal.

MasterCard and Visa, for example, may set an exchange rate around 0.02% weaker than the mid-market exchange rate. This is why we highly recommend always choosing to pay a foreign seller in their local currency.

Alternatively, you can avoid these complicated currency conversions altogether by using a multi-currency card, which we illustrate below.

Option 2 — Use Revolut

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If you'd like to avoid currency conversions altogether (whether from PayPal or your bank), we recommend opening up a Revolut instead, which is free to do and available online in most countries worldwide. While Revolut is not a licensed bank in the UK and operates as an Electronic Money Institution, it is still a great choice for avoiding currency conversions.

8.6

• Trust & Credibility 8.9
• Service & Quality 7.9
• Fees & Exchange Rates 8.3
• Customer Satisfaction 9.3

Go to Revolut

Using your multi-currency Revolut account balance, you can add money in many foreign currencies from your main bank account before your online purchase. This is then done at one of the best exchange rates on the market.

When we load US dollars onto the card, sellers in the United States and other merchants that sell their products in US dollars will treat our card like a local card. When we tap, swipe, or input our card details, we will never be asked to choose between GBP and USD. In the example above, we would pay the $997 in US dollars — plain and simple.

Since this is a debit card and not a credit card, you will have to wait until your bank transfer is reflected in your Revolut account balance. The money will then be deducted from your Revolut balance in the relevant currency (even if multiple currencies are on the card).

In addition, you'll also get the following features with the account:

• Local account details in the Eurozone (Lithuania) or the UK, depending on where you're from.
• A multi-currency debit Visa card that allows flexible payments in foreign currencies.
• Transparent, upfront fee structuring.
• Access to Revolut's powerful international money transfer service right from your account balance.
• Hold 50+ currencies and exchange them at competitive rates.

Take a look at our in-depth Revolut review to find out more about how this works.

Go to Revolut

Frequently Asked Questions About PayPal Conversion Rates

• 💹 Should I convert with PayPal or the card issuer?

  We always recommend avoiding conversions with PayPal and choosing conversions with your bank or card issuer instead (which are normally much cheaper).

• 💱 Is PayPal conversion rate good?

  No, PayPal's conversion rate is often significantly poorer than those of its alternatives, ranging from 3.5% to 4% worse than the mid-market exchange rate, as seen on Google.

• 💳 Is PayPal's conversion better than Visa's?

  No, PayPal's conversion rate is significantly worse than Visa's. Depending on the currency pair, PayPal conversion rates are usually in the range of 3% to 3.75% worse than Visa's, to be exact.

• 💳 Is PayPal's conversion better than Mastercard's?

  No, PayPal's conversion rate is significantly worse than Mastercard's. Depending on the currency pair, PayPal conversion rates are usually in the range of 3% to 3.75% worse than Mastercard's, to be exact.

• 💸 What are PayPal's currency conversion fees?

  PayPal's currency conversion fees range between 3.5% and 4.5% above the mid-market exchange rate, as seen on Google. Compare money transfer services on Monito to find the best alternative in real-time.

• 💲 Can PayPal convert dollars to euros?

  Yes, PayPal can convert dollars to euros, but it's one of the most expensive ways to do so. Read this guide to find the best way to buy euros. If you're sending money overseas, compare money transfer services on Monito to find the best alternative in real-time.

• 🏛 Is PayPal's exchange rate better than bank's?

  No, as a rule of thumb, PayPal's exchange rate is usually worse than the bank's. Of course, this can differ from bank to bank, and sometime the bank can offer the worse rate. However, according to our analyses, PayPal is usually the more expensive option.

• 💩 Why is PayPal's exchange rate so bad?

  PayPal's exchange rate is so bad partly because it offers a very convenient service, which means that many new customers use it to exchange money, and partly because the foreign exchange market is hugely complex, with many rules, regulations, and industry standards that companies are obligated to follow.

• How do I avoid PayPal conversion fees?

  Always pay in the local currency of the merchant you are buying from. For example, if you are a British cardholder paying for goods in the United States, then always choose to pay in USD and not in GBP.

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You’re probably all too familiar with the often outrageous cost of sending money abroad. After facing this frustration themselves back in 2013, Monito co-founders François, Laurent, and Pascal launched a real-time comparison engine to compare the best money transfer services worldwide.

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