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UK Warriors - PayPal Currency Conversion Fees

by CharlesL
9 replies
UK warriors, I need your help!

I live in the UK, but most of my money lands in my PayPal account in $. PayPal charge a 2.5% currency conversion fee whenever I withdraw to my bank account. Is there a way round this that you know of?
#conversion #fees #paypal #round
  • Profile picture of the author kayfrank
    Do you mean when you put money from your paypal account into your bank? I don't know a way around this - I tend to think of it like this:
    I benefit from making sales worldwide - if it means I have to pay out currency conversion fees then so be it! I'm still in profit!
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    • Profile picture of the author CharlesL
      Originally Posted by kayfrank View Post

      Do you mean when you put money from your paypal account into your bank? I don't know a way around this - I tend to think of it like this:
      I benefit from making sales worldwide - if it means I have to pay out currency conversion fees then so be it! I'm still in profit!
      Yes, that's what I mean. I wish I could share your enthusiasm for the fees. I tend to think of it as, 'I've worked hard to earn this money, and I want to keep as much of it for myself as possible. I'm already giving a third of it to the taxman, so I'd rather not give another 2.5% over to PayPal if I can help it!'

      Originally Posted by Mikaedi View Post

      Hi Charles, I agree with Kay, and would also state why the PayPal fee would be an issue anyway, paying fees for banks and other business related providers are all part of doing business anyway.

      Mikaedi
      It's an issue because it's a fee I believe it might be possible to avoid. I've had a PM from someone who has suggested opening a US dollar account with a high street bank. Does anyone know about this? I know Barclays do such an account, but I'm unclear how much I would then be charged to transfer money from it to a sterling account.

      Originally Posted by wtatlas View Post

      There's no way around it. Regard it as a cost of sales, just like advertising or your web hosting costs. You could always increase your prices to take account of the 2.5%.
      Where there is a will, and boy is there a will, there is a way! Unfortunately, I earn most of my money via affiliate commissions, so I cannot simply raise my prices.
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      • Profile picture of the author Thomas Smale
        Originally Posted by CharlesL View Post

        It's an issue because it's a fee I believe it might be possible to avoid. I've had a PM from someone who has suggested opening a US dollar account with a high street bank. Does anyone know about this? I know Barclays do such an account, but I'm unclear how much I would then be charged to transfer money from it to a sterling account.
        I have a Barclays business account with USD, GBP and EUR accounts. I make most of my income in USD so it sits in my USD account. When I need to transfer/pay/withdraw in GBP, I move it from my USD account (they charge a fee for this).

        Barclays exchange rate isn't great, so I tend to use a FX broker. I don't know how much you are making, but it's only economical for me as I transfer $XX,XXX a few times a month. I pay a 0.5% spread (the difference between the actual exchange rate and the rate the bank/broker gives you) which is about as good as you're going to get - if you're doing decent volumes you should be able to negotiate that fee.

        The 2.5% from Paypal is expensive, but if you're doing relatively low volumes, it's probably the easiest way to do it. Having a USD, GBP and EUR account makes managing cashflow difficult so changing it straight away isn't necessarily a bad thing.

        Also, regarding tax, if you're paying 1/3 of your income and are working for your own company/self-employed, speak to a good accountant. Unless you're paying yourself 6 figures GBP a year (which isn't very smart if it's your own company) then you should be paying much less tax than that.
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        • Profile picture of the author CharlesL
          Originally Posted by Thomas Smale View Post

          I have a Barclays business account with USD, GBP and EUR accounts. I make most of my income in USD so it sits in my USD account. When I need to transfer/pay/withdraw in GBP, I move it from my USD account (they charge a fee for this).

          Barclays exchange rate isn't great, so I tend to use a FX broker. I don't know how much you are making, but it's only economical for me as I transfer ,XXX a few times a month. I pay a 0.5% spread (the difference between the actual exchange rate and the rate the bank/broker gives you) which is about as good as you're going to get - if you're doing decent volumes you should be able to negotiate that fee.

          The 2.5% from Paypal is expensive, but if you're doing relatively low volumes, it's probably the easiest way to do it. Having a USD, GBP and EUR account makes managing cashflow difficult so changing it straight away isn't necessarily a bad thing.

          Also, regarding tax, if you're paying 1/3 of your income and are working for your own company/self-employed, speak to a good accountant. Unless you're paying yourself 6 figures GBP a year (which isn't very smart if it's your own company) then you should be paying much less tax than that.
          Thanks. I may apply for an account then and see how that goes. In the meantime, I've set an alert for when the dollar reaches 0.62, at which point I'll convert. May take a while (last time it was at that level was November 2013), but there we are. I don't need access to the money immediately, so.

          Speaking to a good accountant is on my to-do list, certainly before the next tax year starts. I'm currently operating as a sole trader, but will probably have a company set up to help reduce the tax bill. I was considering staying out of the country for all but 16 days of the next tax year, and thereby qualifying as non-resident (so wouldn't have to pay income tax), but am not sure now. Might be easier to stay in England 6 months of the year, and spend 6 months of the year (the winter: Nov-March) somewhere warmer and cheaper, e.g. Thailand.
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          • Profile picture of the author Charmed Life
            Originally Posted by CharlesL View Post

            Speaking to a good accountant is on my to-do list, certainly before the next tax year starts. I'm currently operating as a sole trader, but will probably have a company set up to help reduce the tax bill. I was considering staying out of the country for all but 16 days of the next tax year, and thereby qualifying as non-resident (so wouldn't have to pay income tax), but am not sure now. Might be easier to stay in England 6 months of the year, and spend 6 months of the year (the winter: Nov-March) somewhere warmer and cheaper, e.g. Thailand.
            I would advise that you pay the extra and use a chartered accountant. If you use a chartered accountant you are covered for any mistakes they may make with your tax, company registration etc. If you use a regular accountant then you are liable if any mistakes are made. It does cost more to use a chartered accountant, but I believe that it's worth the extra for that peace of mind. After all, the last thing you want is HMRC breathing down your neck because your accountant made a mistake!
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  • Profile picture of the author Mikaedi
    Hi Charles, I agree with Kay, and would also state why the PayPal fee would be an issue anyway, paying fees for banks and other business related providers are all part of doing business anyway.

    Mikaedi
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    • Profile picture of the author wtatlas
      There's no way around it. Regard it as a cost of sales, just like advertising or your web hosting costs. You could always increase your prices to take account of the 2.5%.
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  • Profile picture of the author magneticweb
    If I knew of a way around this I'd gladly tell you and anyone else interested.

    The fact is that when you withdraw to your bank account you're effectively selling dollars and buying sterling. Any bank in the world will charge you a fee for doing this, because unless you're a bank you can't do it for yourself.

    Of more concern to me is the rate at which they perform the transaction. Recently when the pound was valued at around $1.51 PayPal were converting at around $1.59, when most banks or brokers would have done it at around $1.54-$1.55.
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  • Profile picture of the author bradstern
    If you are still looking for a workaround at how to avoid these paypal fees, this article may help you out: 5 ways to send money to offshore workers cheaper than PayPal

    Some of the alternatives might be less convenient but at least you are saving some money.
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