TransferWise VS PayPal: Best Solution for Your Online Business?

If you receive US Dollar payments and don’t have a US bank account, you will already have come face to face with PayPal & Amazon’s ‘less-than-optimal’ currency exchange rates.

Any time you use PayPal to withdraw US Dollar to your Euro bank account, the amount will be converted based on PayPal’s exchange rate, which includes their fees and is much lower than the ACTUAL market exchange rate.

Here’s a comparison of PayPal’s exchange rate VS. the market exchange rate (looked up via Google).

PayPal Exchange Rate

Nobody is going to offer you a real-time market exchange rate (at least not without charging fees in one way or another).

Instead, a better question to ask is where you can get a better exchange rate.

That’s where the TransferWise Borderless account comes in handy.

If you decide to receive monthly payments to TransferWise VS. PayPal then you’re able to save money when you withdraw USD funds to your EU bank account.

TransferWise Exchange Rate

TransferWise Fees

Looking at the screenshots above, you can see that the TransferWise exchange rate is significantly better than PayPal’s.

In fact, it’s actually close to the real exchange rate.

The reason why it’s only close to the real exchange rate is because you need to factor in the TransferWise fee of 1%.

Based on the example of withdrawing $3,000 USD, TransferWise’s exchange rate would now be 0.84 (while PayPal’s exchange rate is still 0.82 regardless of the amount).

TransferWise Fees

You can also wait until you have more money in your TransferWise Borderless account and then make a big transfer in which case you would only pay a 0.7% fee on any amount over $5,000.

Over time, you end up saving large chucks of money when comparing TransferWise VS PayPal.

TransferWise VS PayPal

Withdrawing Money From PayPal for Non-US Accounts

If you have a US PayPal account and a US bank account, then you can skip this part of the article.

When withdrawing money to your bank account, no currency conversion takes place = no problem.

The following info will be relevant only if one of the following applies to you …

  • You’re based in the EU
  • Your business is based in the EU
  • You have a EU/Euro bank account

If you make money online, you probably receive your payments in USD and hence your PayPal balance will be in USD.

If you withdraw funds to your EU bank account, you will be subject to PayPal’s poor conversion rate.

Any time I withdraw around $1,500 from my PayPal account, I end up ‘losing’ $50+ during the currency exchange process.

There’s nothing I (or you for that matter) can do about it.

By law, PayPal isn’t allowed to let you withdraw anything other than Euro to a EU bank account.

Enter …

TransferWise Borderless Account

Is the TransferWise Borderless account the solution to the PayPal/Amazon conversion-fee-dilemma?

Yes and no.

Yes in regards to Amazon payments. TransferWise offers the Borderless account for international business.

You are able to receive payments for free in GBP, EUR, AUD, and USD. Amazon problem solved. Yeah!

Amazon sends you USD payments, you can then transfer funds from your TransferWise Borderless account to your real bank account (if you wish) using the actual exchange rate (plus a small fee).

TransferWise = PayPal Obsolete?

If in the past you used PayPal to receive USD payments because you couldn’t receive USD directly to your Euro bank account, you can now use the TransferWise Borderless account instead and bypass PayPal entirely.

Payments are sent to your TransferWise bank account, then you can make a withdrawal to your Euro bank account (at a superior exchange rate).

What is TransferWise?

No need for me to explain what TransferWise, this video does a great job and it’s only a minute long!

You can use your TransferWise Borderless account to receive all sorts of regular payments:

  • Amazon FBA
  • Amazon Kindle
  • CreateSpace (= Amazon printed books)
  • Gumroad (opt for bank transfer instead of PayPal payout)
  • Audible (ACX)

You can also make bank wire transfers in any of the currencies mentioned.

If you came here to find out how you can use TransferWise in combination with your e-Residency Estonian company, continue here.

PayPal Withdrawals To TransferWise

That would solve all of our problems, right?

We could still use PayPal and simply send USD funds to TransferWise, then convert to Euro using a much better exchange rate.

Transferwise versus Paypal

The reason why this doesn’t work has to do with the way PayPal verifies a newly attached bank account.

PayPal makes a micro-deposit to that bank account and then pulls back the money. The TransferWise account doesn’t allowed PayPal to pull back the money.

As of today, that’s the reason PayPal & TransferWise are in a complicated relationship.

Let’s hope that there’s a solution coming soon – perhaps an option where you’re able to submit documents to proof ownership of the bank account instead of going through the micro-payment verification process.

PayPal Alternatives – Selling Online

Maybe you’re thinking TransferWise sounds like a nice solution but it doesn’t really help you. You’re selling products online and still need to use PayPal, which means …

You’re still subject to PayPal’s conversion rates.

As long as you use PayPal to sell your products, that is true.

However, there are viable alternatives that allow you to process credit card payments.

  • Stripe
  • Gumroad (opt for bank transfer instead of PayPal payout)
  • MerchantInc
  • EveryPay (Can be used if you have a LHV bank account; most likely the case if you operate an e-Residency business.)
  • BitPay (Limited use, but depending on what business you are in, it might be an option. Payouts are made directly to your bank account.)

When PayPal Doesn’t Suck

Lastly, I want to point out that PayPal is not always a bad choice. Not at all – depends on what you plan on doing …

PayPal might have some uses for your business if you have to make recurring monthly payments in USD, such as paying for website hosting,or email marketing.

In such a scenario, it would actually be beneficial to have USD funds in your PayPal account.