TransferWise vs PayPal: What’s the Best Value?

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With over 295 Million active PayPal accounts out there, it’s little wonder that it’s the obvious choice for moving money from one place to another. However, in this article we look at an alternative, and consider TransferWise vs PayPal.

Most importantly, we look at whether making the switch could save you a bunch of money.

There are lots of reasons why you may frequently move money around, or deal with online transactions. These range from selling things on eBay to freelancing to working in one country and being paid in another.

For example, as a freelancer, I’m often paid in US Dollars, when I actually live in England and do all my banking in Pounds. It’s certainly easy to just dish out a PayPal address for payment, but after a while those PayPal fees and currency transfers all begin to add up.

When I started to look at TransferWise vs PayPal, I realised how much I could potentially save. Hopefully, you might be able to do the same.

A Quick Introduction to the Services

PayPal

Established as Confinity in 1998, PayPal has been around a long time. Many people first encountered it as a means to spend and earn money on eBay.

PayPal

Since then it’s become far more ubiquitous as a means of easily moving money around online – whether that means purchasing physical products or paying (or being paid) for work.

PayPal is extremely convenient, primarily because you can pay people with nothing more than an email address. However, it’s not without its faults. The main one, as you probably know, is significant fees. These can seriously eat into the amount of “real” money you receive.

If you earn online or sell products, these fees can soon mount up. When I began to add up just how much I was handing to PayPal, I knew I needed to find an alternative.

TransferWise

TransferWise is an international online money transfer service. It’s been in operation since 2011, and more than $4 Billion moves across its network every month.

TransferWise

TransferWise isn’t a copy of PayPal. It’s conceived as a different type of service. However, it’s possible to use it in many of the same ways. You can move money quickly from one place to another, “hold” money in a TransferWise account, and process transactions in multiple currencies.

Whereas PayPal requires the people at both ends of a transaction to have a PayPal account, the same doesn’t apply to TransferWise. It’s possible to transfer money directly to international bank accounts via wire transfer, although these payments can take a little longer.

It’s also possible to set up “borderless” accounts within TransferWise. This means, for example, that you can give a US-based client American bank details and receive money into that account, even if you don’t live in the US. 

TransferWise vs PayPal: Rates and Fees Comparison

The simplest way to look at how much the real-life costs compare between PayPal and TransferWise is to try a real-life transaction.

To that end, I looked at what it would cost to send $1000 to somebody in the US, from the UK – at the same time on the same day (2nd January 2020).

Via PayPal, using the cheapest “friends and family” option with no added fees, it would cost GB£792.73.

PayPal vs TransferWise fees comparison

Via TransferWise, even allowing for their “Low Cost Transfer” fee, it would cost GB£760.39 to send direct from a bank account. (For a couple of Pounds more, you can send money via credit or debit card).

TransferWise fees

That’s a far-from-small saving of £32.34 ($42.76 at current exchange rates). Imagine if you’re doing transfers like that regularly? It soon adds up to a really significant amount.

It quickly becomes clear that PayPal must make an awful lot of money on currency exchanges. It’s also worth noting that their fee-free transactions are only for payments to friends and family – if you’re being paid for goods or services, you can end up losing twice over, once on the PayPal fee, and again on the currency conversion.

My Own Experience

As an example of how much difference this can make in the real world, I myself started thinking about a TransferWise review and switched some of my transactions over from PayPal in July 2019.

There’s one US company I work with who pay me a fairly regular amount each month. As well as the poorer exchange rate shown above, I was also charged a fee by PayPal, as it was a commercial transaction and not a transfer to friends or family.

I calculated that for every $500 I received, I was able to keep $38 more of it by receiving the money by TransferWise instead. I’ve already ended up with around $1000 more in my account just six months later.

TransferWise payment example

It’s worth noting that although TransferWise is intended as an international service, there’s nothing to stop you from using it to send money from one US account to another.

Use this TransferWise Referral Link to sign up.

Transparency

As you’ll see from the screenshots above, TransferWise shows you exactly what exchange rate you’re getting before you make a transfer.

As you can see from this link, PayPal’s currency fees are way more complicated. There are cross border fees, fixed fees, and currency conversion fees. The latter are typically 3.5-4% above the “base exchange rate.” You can see from the comparison how quickly these add up.

While PayPal doesn’t exactly hide its fees, it doesn’t make them at all easy to understand either. As such TransferWise wins – big time – on transparency.

Is TransferWise Safe?

TransferWise processes Billions of Dollars worth of transactions per month, so you can be sure it’s perfectly safe. Obviously you must make sure you check details before you send any money to ensure you don’t send it to the wrong account!

Speed

One area where PayPal does creep ahead in the TransferWise vs PayPal competition is raw speed.

Although PayPal sometimes says that transactions can take a couple of hours, the vast majority are almost instantaneous.

In fairness to TransferWise, once you have your accounts properly set up, you can move money around instantly in certain ways. Once a client has paid money into my “borderless” US Dollars account, for example, I can move it to a linked UK bank account in seconds.

However, I still have to wait for money to arrive in that account, which – thanks to America’s glacially slow banking system – can take a few working days. International wire transfers can take a bit longer than that.

Extras and Add-Ons

PayPal and TransferWise are both modern fintech companies keen to bolt on extra services and keep you using their ecosystems.

PayPal now offers PayPal Here card readers, which can give you the ability to take card payments. Meanwhile, TransferWise has recently started offering a debit card, which lets you spend your funds directly in multiple countries and currencies. PayPal does offer a pre-paid card, but it’s really not the same as a real debit card.

TransferWise debit card

None of these added extras are reason to choose one service over the other. In fact, the chances are you’ll probably want to make use of both – but more on that in a moment.

Online Reviews

When it comes to online reviews of TransferWise and PayPal, it’s clear which wins the most fans.

While PayPal has a rather stinging TrustPilot rating of 1.4 out of 5 (at the time of writing), TransferWise’s TrustPilot score is 4.6.

It goes to show that one way to win loyal customers is to save them money!

Conclusion and Recommendation

A quick read through this TransferWise vs. PayPal article would seem to suggest a damning verdict for PayPal and a huge victory for TransferWise. However, it’s really not as simple as that.

PayPal is incredibly useful in many ways, and I still use it almost daily. If you’re just talking about moving $50 around, paying a couple of bucks in fees isn’t an enormous deal.

However, I would still highly recommend that everybody gets a TransferWise account, and thinks proactively about when it could be used instead.

If you’re a freelancer (or even an expat or frequent traveller), you probably won’t have to think very hard about how TransferWise could save you money.

What I find particularly useful is the borderless accounts, complete with your own unique bank details. Now, if I take on a new client, I can give them a choice of doing a wire transfer to my “local” account, or paying via PayPal. If they opt for PayPal, I feel justified in charging a small percentage fee to cover what I lose.

Regardless of which option they choose, I’m no longer losing money I am earning into PayPal’s coffers.

There are lots of different permutations for using TransferWise, especially thanks to the borderless accounts and the free debit card. It’s well worth signing up and getting everything set up before you need it. It adds to your options in a big way, and makes sure you don’t lose out because PayPal’s the only “easy” way to move money.

TransferWise vs. PayPal? Get both, and use them wisely!

Sign up to TransferWise Here

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Founder of HomeWorkingClub.com - Ben is a long-established freelancer with a passion for helping other people take control of their destiny and break away from "working for the man." Prone to outbursts of bluntness and realism.

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