If you’re looking to learn how to transfer money from PayPal to a TransferWise account, the chances are you’ve started to understand just how much PayPal will charge you in both exchange rates margins and payment fees. The good news is that for freelancers and SMEs there’s a growing number of solutions available that will not only provide the same slick service as PayPal account but drastically reduce costs too.
Transfer from PayPal to TransferWise
Before you begin (Step 1):
You will have to be registered for a TransferWise Borderless Account, and receive your sort code and account number from TransferWise.
Once you’ve done this the process in order to transfer money from PayPal to a TransferWise account is just like adding any other bank account, and as follows:
Step 2: Go to Wallet and Click ‘Add Bank Account’.
Step 3: Input the sort code and account number that is available under ‘balances’ in the TransferWise online platform when you expand the account details and click on ‘Agree and Add’.
Step 4: Once the next screen appears which suggests setting up a direct debit to the account be sure to select ‘Finish later’ as TransferWise borderless accounts are not eligible for Direct Debits.
PayPal will then prompt you twice to add direct debit functionality so you can automatically fund payments with your bank account so be sure to click ‘Finish later’ twice.
You will have to pre fund your PayPal balance with the money required should you wish to make a payment through PayPal*.
Step 5: Once PayPal have credited your TransferWise account with 1p, input the 4 digit code that is included in the reference field.
Step 6 (Final): Voila – your TransferWise account has been added to PayPal!
*As a side note to instruction 3 we went through the set-up process also agreeing to the direct debit instruction although TransferWise, much like WorldFirst, are quite clear that their digital account solutions are not able to authorise direct debits. The underlying digital accounts themselves in the UK are provided by Barclays so we’re not sure where the direct debit issue lies here. In either way, the way described is the only way to transfer money from a PayPal account to TransferWise.
Why People Want to Transfer Money from PayPal to TransferWise
If you’re here, you’re probably interested in either of the below options:
- a) paying less for your international currency transfers by getting best currency exchange rates
- b) receiving more money as a freelancer/supplier.
It is almost always cheaper to use TransferWise instead of directly withdrawing from PayPal (see why on our Transferwise review). TransferWise launched their TransferWise Borderless Account solution in 2017 allowing users to hold balances in multiple currencies and both make and receive payments, in most cases with a bank account local to the currency it is in. Such as a pound sterling account in the UK, a euro account in the eurozone and a US dollar account in the US.
PayPal vs TransferWise: Deep Dive
|FX Rates/Fees||Free when you send same currency payments to another UK PayPal user. Otherwise considerably more expensive.||Cheaper across all transfers that require currency exchange and same currency cross border payments.|
|Speed||-Instant PayPal to PayPal transfers.
-Withdrawls to your bank account usually processed on the same day.
-Xoom international payments can take minutes but some 1-2 days.
|-Instant when converting own money through TransferWise borderless account.
-14.1% of transfers delivered under 20 seconds.
-Can be up to 1-2 day payment duration to some countries.
|Currency Availability||-Digital Account with 22 currency options.
-International payments with xoom to 30 currencies.
|-Digital accounts with 18 currency options.
-International payments to 53 currencies.
|Country Availability (User Registration)||Available in over 200 countries/regions.||Available in 39 countries.|
|Annual Transaction Volume||$578bn (US Dollars – across both domestic and international payments).||£48bn – predominantly international payments.|
PayPal vs TransferWise for Same-Currency Fees
Providing you are making or receiving a same currency personal payment within the same country and from your base PayPal balance (such as a GBP to GBP payment to a friend within the UK) then PayPal can prove a cheap solution. In fact this type of payment in the UK is free. The problems start to arise as soon as money is required to cross borders and the payment is for goods or services. We’ll look into the goods and services fee later but the cross border payment fees to the UK are set out as follows by PayPal:
PayPal’s Same Currency Fees
|Sender’s country||Cross Border Fee|
|US / Canada||2.0%|
|Rest of World||2.0%|
TransferWise, on the other hand, charge nothing for same currency payments from one borderless account to another and maintain a fixed payment fee for all same currency transactions to external accounts, regardless of whether it is your country’s domestic currency or not. Fixed same currency fees are available but popular currency pricing is as follows; USD 1.13, GBP 0.65, EUR 0.63.
To make a $10,000 same currency payment through PayPal from a UK user to the US it would incur a 2% fee of $200. As your TransferWise USD account is already held in the US then this same transfer to the US would cost $1.13 through TransferWise. Should you be using a UK based USD account TransferWise explain that when sending money overseas they’re required to use SWIFT which incurs a higher fee for them and they then charge the customer $3.20 – still way below the 2% PayPal fee.
What’s more, for each country that PayPal operates, they hold specialised T&C’s specific for that country. So if you’re a UK user looking to receive money from a user in the US, Australia or anywhere outside your specified user agreement it’s almost impossible to get an understanding of the payment fees that will be applicable to the sender and how much money you’ll actually end up with.
PayPal vs TransferWise International Payment Fees
A full breakdown on UK registered PayPal payment fees is available here and on our eWallet comparison guide. However, as noted above currency conversion fees are always somewhere between 3-4% and in 9/10 cases either 3.75% or 4%. TransferWise Borderless Account fees differ slightly to their main payment proposition but are generally between 0.3-0.6%.
For example, a £10,000 payment from GBP to USD would incur a 3.75% charge with PayPal, equating to a whopping £375 cost only through the FX conversion. The same payment with TransferWise incurs an FX cost of £37.97 – almost 90% cheaper. We also really like that instead of having to dig deep into the user agreement, TransferWise provide an easy to use tool named “price change” on their website, for users to quickly calculate their payments costs before sending.
PayPal vs TransferWise Convert Currencies Between Your Accounts
To convert currencies from one of your PayPal accounts to another the PayPal FX fee is 2.5%. So to convert £10,000 GBP to your USD account it would incur a cost of £250, however with TransferWise we can update the pricing tool for inter-account transfers to see this would incur a cost of £36.86. A comparatively cheaper saving with TransferWise vs PayPal when compared to external payments, but overall still significantly cheaper. Providing an insight into the profit margins the two firms are running.
Why You Should Consider Skipping PayPal Altogether (and Transfer Money Directly to your Borderless Transferwise Account)
Regardless of PayPal currency fees, all payments on PayPal, if you supply a good or service, incur a 3.4% goods or services fee. Consider this; a UK user is looking to be paid for a service directly from a US company in USD. The user would incur a 3.4% goods & services fee + a 2% cross border payment fee. To then transfer that with their PayPal accounts from USD to GBP (which proves cheaper than the sender completing the foreign exchange) it incurs an additional 2.5%. Adding all fees together the user is in all losing 7.9% of the price they quoted their customer!
It’s important to note too that as a user registered with a certain country that PayPal operates you can only withdraw funds to a bank account in that country. Despite being able to hold virtual funds in 22 different currencies, if you’re not looking to send this out via a costly international payment or to other users within PayPal then you will eventually have to convert this back to your primary currency should you wish to withdraw funds. You wouldn’t, for example, be able to set up multiple TransferWise accounts in different currencies with PayPal. As a UK user you’re only allowed to register UK based GBP accounts.
Even if you know how to transfer money from PayPal to TransferWise through the Borderless Account, it doesn’t mean you need to go through this circumvented way to receive funds! In the same scenario we mention above the user could have registered for the TransferWise Borderless Account, completely bypassed the goods and services fee and even received an ACH and routing number to provide US customers.