XE vs. eBay vs. PayPal Conversion Rates

I've done a quick bit of research on the various exchange rates offered by the above entities, and was a bit surprised by my findings, so I thought I'd share with you guys for you to be aware of, and/or use to your advantage.

Firstly, many of us use xe.com or google.com to get the currency conversion rate of the moment. I'm pretty sure this is an average of the wholesale buy and sell rates happening around the world at that moment. This is never the rate you get.

The next rate that many of us (when dealing with eBay) is eBay's built in conversion estimation. For those that don't know what I mean, if you are looking at a foreign auction at a foreign eBay, i.e., ebay.co.uk, you can replace just the ebay.co.uk with ebay.com.au leaving the rest of the URL alone, and eBay will show you an approximate AUD amount under the native currency. I have found this rate to be the most accurate, but consistently slightly low.

Now, when you go to pay for an item, you can use PayPal's conversion rate, which they describe as 2.5% above the standard wholesale rate. On their fees page (link requires you to be logged in), they mention this and give you a convenient link to their own Currency Converter. They even present the result as the "Paypal Exchange Rate". This rate was lower than XE in some cases, making it extremely optimistic, and equally as unrealistic. Do not trust this tool for any reason.

I then stumbled upon a dead accurate way of finding out the amount that PayPal will charge you. Once logged in, choose to "Send Money". On the following screen, you can enter an amount in any currency and PayPal will show you an estimate in your currency. Obviously, there is no need to proceed past this page if you are only after an estimate. Granted that you complete the PayPal transaction before the rate changes, and use PayPal to do the conversion, this is the exact amount that you will pay. I recommend this method.

Lastly, you might choose to pay the foreign currency amount using your credit card, allowing your bank to do the conversion. As STL recently pointed out, his bank's rate for doing this, as is my NAB Gold card, is the same as PayPal's 2.5%. However, when you do a credit card transaction, the money isn't actually withdrawn from your account for a business day, or two or three. You will be assessed the rate at the time of withdrawal, not time of transaction. So, depending on your rate, and the current currency trends, this might be a good option, but it is naturally somewhat unpredictable.

So, here are the numbers;

For an item priced at USD 37.50, I checked the following sources:

AUD 48.87 (.76734) - xe.com
AUD 49.42 (.75880) - eBay
AUD 47.61 (.78765) - PayPal Currency Converter
AUD 48.80 (.76844) - PayPal Currency Converter + 2.5%
AUD 50.09 (.74865) - xe.com + 2.5%
AUD 50.13 (.74806) - PayPal Actual Rate

For an item priced at GBP 17.99, I checked the following sources:

AUD 35.63 (.50485) - xe.com
AUD 35.71 (.50378) - eBay
AUD 34.78 (.51725) - PayPal Currency Converter
AUD 35.65 (.50463) - PayPal Currency Converter + 2.5%
AUD 36.52 (.49261) - xe.com + 2.5%
AUD 36.65 (.49086) - PayPal Actual Rate

In both cases, eBay's estimator was the most accurate, but still optimistic. The most infuriating one is PayPal's Currency Converter. Even if we apply the 2.5% that PayPal claims they charge, it's still grossly optimistic. Applying that same additional 2.5% to xe.com's estimates was definitely the most accurate, short of asking PayPal directly.

All of eBay and PayPal's numbers seem to insinuate that both PayPal and eBay are in the business of making you think you'll get more for your native buck. Be weary.

I'm very very weary :(

I think this is a great and very useful thread.

I've switched between using my own cc's conversion and Paypal's conversion at times b/c at times you'll find there's actually a lag in Paypal's rates which can be to your benefit on days when the exchange rates are depreciating.

On days where there's high upside, I often opt for my cc's conversion. Most times I've gotten it right though I generally avoid weekend transactions b/c the lag before it shows on your cc statement is longer (sometimes you have to wait to Tues/Wed before it appears if you pay on Friday). I try to make payments at the top of the week for that reason.

I also use:
http://markets.theage.com.au/apps/mkt/forex.ac

as my source for rates. It's fairly accurate if you take the average of the two buy and sell rates.

Very helpful Jay, and interesting to boot.

Will keep all this info in mind for future reference.

Yes thanks for this info it should be useful to many. I have been aware of this recently. The exchange rates will differ between these institutions and will always lag behind the actual and sometimes will be well under. I don't expect them to be in line with the actual but it is infuriating when they are well below.This will really make a difference on large purchases.

Good example tonight. I just made payment for some Botcon 2006 items at $636 USD for a large lot.

The current spot rate via the Age website was 0.7551 without the 2.5%, so if you factor it in it the exchange rate is approx 0.7301. Paypal's effective exchange rate after 2.5% was 0.7497. I used the lag in rates and pocketed myself the difference between

$636/0.7497 = $848.34
$636/0.7301 = $871.11

which comes to $22.77. I basically saved myself a deluxe by using Paypal's conversion rather than the interbank. The good thing about Paypal's convertor is you get the exact amount taken from your account straight away and you know what it is as discussed above.

Given that where I work our short-term forecast for the AUD is downwards and in light of current day-to-day trading in the US, the Dow Jones and Nasdaq down by 2.4% and other markets doing about the same, I went with the Paypal conversion. There's no way the AUD will push back above 77 US cents in the next two days so the lagged Paypal conversion worked out in my favour.

Good to see we have our own little group of financial / economic advisors on the board.

I've been thinking about this for awhile now - I tend to use the google and xe sites just bc I hate the damn load time on paypals "send money" conversion page.

But anyhow, thanks for the info. Very helpful stuff you guys !

[Also] Great to see the AUD regaining strength :p

So in practical terms how can I use this?

Point in question; I have three overseas ebay auctions I have to pay for at the moment. How do I (or even can I) exercise my right as to which conversion method I use to pay for these through ebay?

If you have a credit card attached to your PayPal account, you can use that as a funding source instead of a pre-existing balance or bank account. I believe the link is labeled as "More Funding Options". If it's a foreign currency, you also will then see PayPal's EXACT AUD amount they'll charge you. You can alternatively choose to have eBay pull from the credit card in the sold currency, and then your bank will likely give you a different rate. I believe the link is labeled as "Other Conversion Options".

It's best to KNOW your credit card's foreign currency markup as if it's less than PayPal's 2.5%, you'll tend to do better using the card's conversion, but when you use your credit card, you usually get the currency rate of two days in the future, so try to be aware of trends as best as you can be.

Pitty us New Zealanders don't live in a world that Paypal loves, so we are stuck with only using a credit card so we always get hit with the 3% fee, 3 days after we brought.

This is a tad off topic - but I was thinking of setting up a mastercard debit card just so I can pay for items instantly through paypal. Currently, paypal withdraws funds direct from my bank account but obviously this takes up to a week each time.

This may or may not sound stupid but I was wondering, with a debit account attached to my paypal - how will it work? Will paypal ask me how I want to pay for an item each time? If I pay using my debit, will I have to load it up first with enough funds to pay for the item before completing the paypal transaction? Will the conversion rates be any different?

If you are talking about a Visa or Mastercard debit card, to PayPal, that's seen and treated completely like a credit card.

Paypal will always default to your bank account. You have to change this for every transaction. You need to manually choose to use your Credit Card (which we know is a debit card ;) ;)), and then you still have the choice of whether PayPal or your debit card does the currency conversion. You have to look at your debit card documentation to see their currency surcharge (typically the same 2.5% as PayPal nowadays).

However, just like a credit card, if you choose to have your debit card due the conversion, you won't be assessed the rate at the day of the transaction. Rather, the 1-3 business days later when the money is actually taken out of your account. It's up to you to know when/how to use this to your advantage.

Ah good to know. I'll go ahead and set up the debit tomorrow - sick of those damn weeklong waiting times.

Thanks jay.

For those who are looking at overseas purchases through PayPal and want to compare how different countries stack up, I found PayPal's currency converter.