I’ve been making some cross-border PayPal transactions recently for internet purchases. I thought I had a pretty straight forward understanding of how their foreign transaction fees worked until I got some surprising numbers on my PayPal dashboard. So the investigation began — first to paypal.com to reread the fee schedule. At the bottom of their home page is a link titled “fees”, and at the bottom of the fess page is a section titled “Multiple Currency Transactions.” Perfect. So far it doesn’t get too much easier than this when it comes to searching for company’s foreign transaction fees.

For both PayPal’s premiere and personal account, they say: “Exchange rate includes a 2.5% fee**.” OK, not bad, but not what I was charged either. The fine print expands a little:

** If your transaction involves a currency conversion, it will be completed at a retail foreign exchange rate determined by PayPal, which is adjusted regularly based on market conditions. This exchange rate includes a 2.5% spread above the wholesale exchange rate at which PayPal obtains foreign currency, and the spread is retained by PayPal. The specific exchange rate that applies to your multiple currency transaction will be displayed at the time of the transaction.

Nothing too crazy there and certainly not as bad as companies promising to charge you the highest wholesale rate they can find for any given transaction (I’m thinking of AmEx). But so far this still doesn’t explain the rate I calculated or even why I was charged a fee in the first place. For this given transaction, I was hoping that the other party would pay the fees. To get the answers I was looking for, I needed to dig a little deeper and email customer support. The truth about PayPal’s actual fees finally comes out when clicking on the “Fees for cross border payments” link which shows a chart looking something like this:

Hmm… Now we’re closer to what I’m seeing as the fee charged to me. But this is just for USD - USD cross border purchases. If I want to see the cost for another currency I need to click the drop down menu. USD to Canadian Dollars, for example, is a little more expensive:

I didn’t manage to find a rate listed at 2.5% as specified on the main fee page, but I’ll keep an eye out. Now, to figure out who PayPal charged the fees to, I needed to email customer support three times. I finally ended up with this relatively satisfying answer:

Thank you for taking the time to contact us with your concerns. I am happy to assist you further.

I understand that your query is as to who is getting charge for the currency conversion fees. It actually depend on the situation. If the sender of the payment let say has only USD as his currency, when he sends a payment is different currencies he will be the one charge for the fee. If the receiver only has USD in his currency balance and he has receive a payment is AUD, the seller is the one who will be charge the fee

If you have any further questions, please feel free to contact us again.

Sincerely,
xxxxxxxxxxxxxxxx
PayPal Community Support
PayPal, an eBay Company

So there you have it. Working with PayPal can sometimes be tedious, but the service is still pretty convenient most of the time. That said, if low foreign transaction fees are important, you’ll probably be better off with a low transaction fee credit card.