There is a wiser alternative
PayPal was a brilliant idea, an way for people to send money to each other easily, and pay for things without giving online retailers our credit card information (and having hackers steal it from them). The convenience outweighed its high cost: just specify the amount to send to an email address! It was particularly useful for receiving payments internationally, such as for someone like me, as nearly all my clients are are outside of my home country of Canada.
While PayPal costs nothing for buyers to use, sellers lose about 3.5% on every transaction, an amount that becomes painful with large amounts and when many smaller ones take place. Some transactions that PayPal states as "free," like moving US$ funds into my Canadian bank account, actually cost, as PayPal offers a poor exchange rate.
At a certain size of transaction, it become cheaper to use banks and their high fixed fees than PayPal. Worse, PayPal increases its charges over time. As well, PayPal is not universal, as some large retailers, like Amazon, block the use of it.
Fortunately, we have alternatives. The one that I have been using is Wise (formerly TransferWise) and its Visa-branded debit card. It works like this:
- You transfer funds from your bank to the Wise account.
- You get the Wise debit card mailed to you.
- When the exchange rate is favourable, you move funds into other currencies; I moved funds into Euros last summer, when the Canadian dollar was particularly strong against the Euro.
- Register the card with international online retailers like eBay USA and Amazon Germany.
- When it comes to buy things in US$ or Euros, I specify payment by the Wise card in that currency. You do not suffer the exchange rate fees imposed by banks with their credit cards.
The Wise card also works with local retailers. I used it for nearly all purchases I made earlier in the year while in Germany (no fee), even withdrawing Euros cash from bank machines (no fee but a limit of $350/day). I use the Wise account to send birthday money to relatives in Germany; for Euro to Euro payments, there is no fee.
In the figure at left, it cost me nothing to send the Euros to locations in Germany, and nothing to pay eBay in US$.
Where Wise charges fees is moving money into my account, as well as moving funds between currencies. To add CAD$ funds from my bank account costs:
- $100 -- $0.24 fee
- $1,000 -- $2.40 fee
However, the company keeps looking for ways to reduce the cost. For instance, a customer sending e1,000 to me costs e5.10 with Wise, but would cost me roughly e35.00 with PayPal.
I find the Wise app on Android much easier to navigate than the company's Web site.
(This is not a promotion prompted by Wise, but written by me as a fan.)
TIP: To send presents to friends and family in other countries, use the Amazon site for the specific country and receive free shipping. I found that when I enter a search phrase in English into Amazon.de, the site switches from German to English automatically, making ordering easier for me.