If you have a PayPal account that you regularly use for collecting payments, and your main home currency is not US dollars, you would do well to read on.

Not too long ago, I had written about biding your time to get the best exchange rate possible when transferring your money from PayPal to your bank account. Soon after that, I discovered that there is another area of optimization which we should be aware of.

My home currency is the Euro, so my bank account uses Euro by default. Online I collect payments in USD since that’s the de facto currency on the web. That means that when it’s time to get the gold home I am subject to conversion rates when changing from USD to Euro. This is precisely where many people lose a good chunk of money, so you have to be careful.

Since your bank account is in Euro and your PayPal account is in USD, a conversion needs to take place. Now it’s a well-known fact that PayPal currency conversion rates aren’t the best; they incorporate quite a healthy profit for themselves here. So it might actually be better for you to let your bank handle the conversion at their exchange rates.

All you need to do is check out your bank’s exchange rates, make your calculations on how much Euro they would give you for a given amount of USD, then compare it to what PayPal would give you via their currency converter.

Beware also that some banks charge an extra fee for currency conversions. My bank charges around 1 Euro each time there is a conversion.

If you establish that it would indeed be beneficial for the bank to handle the conversion, you can change your PayPal account from being Euro-based to USD-based via this link.

Setting the currency to use when withdrawing money

On a related note, you can check the net amount you will receive from a PayPal money transfer via this PayPal fee calculator. Sadly, it appears that the calculator’s formulae are a bit out of date as the net amounts didn’t exactly correspond when I tested it on my account.

Note that if you have a Europe-based USD bank account, you will not be able to send USD directly from PayPal to that USD bank account. There will always need to be a conversion happening on the bank’s side, and the money will then go to your Euro account. You can try your luck with linking a multi-currency account like Wise Borderless to go around this issue, but it doesn’t always work.

As a test, I made a few transfers of $2,500 to my Euro-based bank account just to test the difference in money between using PayPal’s exchange rates and those of the bank.

Here are the results:

• $2,500 converted to Euro by PayPal: €2,171.92
• $2,500 converted to Euro by my bank: €2,216.06

Crazy huh?

More than €44 difference on each transaction!! That’s around 2% more added cost on each transaction. Keep in mind that PayPal is already charging you $2.50 per transaction as a fixed fee.

It definitely works better for me to use USD as my PayPal account currency, then withdraw directly in USD to my credit card. Note that changing your withdrawal currency has to be done manually by following my guide.

Note: If you have any questions after reading this and the several other articles relating to PayPal on this site, please leave a comment or contact PayPal directly. Unfortunately, due to time constraints, I am unable to offer any advice over email so all emails related to PayPal will remain unanswered.