There are at least 5 reasons why you should ditch PayPal as your preferred processor for online payments.
- PayPal is expensive with high transaction and currency conversion fees
- PayPal hides their fee in the conversion rate!
- It has territorial limitations as to choices of sending currency
- Using PayPal with multiple accounts hooked up to different cards in different countries is clunky at best
- There is a cheaper more convenient option – TransferWise
This applies as much to authors as it does to any small business whether you are an editor, cover designer, marketing consultant, publisher, or any other service provider you may think of.
Before I go further, an upfront disclosure. There are affiliate links in this post. I use TransferWise and have done for years now ever since I became domiciled in the Philippines, so I recommend from experience and personal conviction.
International transfers in foreign currencies are cheaper with TransferWise. They do not charge increases on the exchange rates, because the company uses its own accounts in the recipient’s country. How?
TransferWise does not literally transfer money from one country to another – instead, they transfer the requested amount from TransferWise’s own account in the recipient’s country to your recipient. This way, the surcharges that normally apply to cross-country transfers do not apply to TransferWise, allowing them to only charge a small fee from users. This fee is noticeably lower than both bank fees and PayPal.
TransferWise always uses the real exchange rate without surcharge. Instead, the sender pays a commission fee. Currently, for example, the GBP-USD conversion incurs a 0.4% fee of the amount sent.
With money received in your PayPal account, you pay an increase of 2.5% on the base exchange rate to convert it into another currency. For sending money that is not in GBP, a currency conversion fee of 3.5%-4% is added to the base exchange rate plus a cross-border fee of 0.5% for UK-based account holders. In addition, a fixed commission of £1.99 is applied to transfers to Europe, Canada and the United States, or £3.99 if you send to the rest of the world. That is expensive!
1. Transferring Money Between Accounts – Since I have bank accounts in multiple countries, I use TransferWise to transfer money between them. All I have to do is enter the bank details of each one and TransferWise initiates the transfer at the real conversion rate, only charging a minimal fee. That includes my royalties. I have previously written about KDP royalty payments here.
2. Paying Bills Abroad – TransferWise makes it easy to pay bills from overseas, no matter which country you’re in. Just enter the business info and their bank information/IBAN number and they take care of the rest. You can also open a business account and apply for a MasterCard debit card.
3. Sending Money to Friends – Last year a friend of mine told me this story: he was in Bangkok. His friend Bill lost his bank card. He continued, “Since he didn’t have any money on him, he logged online and sent me €400 with TransferWise. He paid €4 in fees, and I received the exact amount in my bank account in US dollars (within 24 hours and at the official exchange rate). I then withdrew Thai baht at the ATM and Ben could finally afford his dinner once again (though I obviously lent him enough to pay for dinner and a few beers in the meantime).”
4. Invoicing Freelance Clients – As an author, I do business with clients all over the world. I’ve found international wire transfers to be one of three things: costly, confusing, or unreliable. With TransferWise, I can send a simple money request or invoice to a client, who then initiates a standard bank transfer to TransferWise.
Because TransferWise has a bank account in each country, it’s technically a local transfer for the client and a local transfer for me, so they charge just 1%. The best part is that my clients don’t even have to sign up for an account, and neither one of us has to pay large fees! It’s all very simple.
TransferWise vs. PayPal vs. The Bank
For years, PayPal has been the big player when it comes to sending and receiving money online. Since a lot of people have a PayPal account these days, it’s the go-to option because it’s just plain easy. But is convenience worth paying 6.9%?
Not only do they charge about 3.9% to send money, but they charge you an extra 3% on top of their already criminal exchange rate. Once you have the money in your account, they force you to convert the currency with them. It’s locked in your PayPal account and you can’t withdraw it unless you use their conversion rates.
Paypal vs. TransferWise
PayPal hides their fee in the conversion rate!
I used to be a big fan of PayPal, but I’ve come to despise them. For a long time they’ve been the only option, and even today I’m forced to use them a lot to run my business only because some of my service providers such as editors etc. only use PayPal. I am trying to convert them all to TransferWise because it means I can phase PayPal out of my life.
The other difficulty with PayPal is that, if you want to transfer money between your own banks, you have to sign up for multiple accounts. Since you’re only permitted to have one PayPal account per country, you have to log in and out multiple times, and you’re still stuck paying the excessive exchange rate.
With TransferWise, you pay about 1% per transfer. So if I send $1,000, the fee is about $10. With Paypal, it would cost $69. Using an international bank transfer, sending $1,000 could cost up to $100 in fees. It’s kind of a no-brainer.
I recently published a multi-author anthology involving splitting royalties and paying individual authors. Nightmare! However, many of them signed up and opened a TransferWise account making life far less stressful for me at payout time. Thanks guys!
You can trust TransferWise with your money.
Why not try it? I promise you will find it a great move.
Here’s my TransferWise sign up link again.
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