As discussed in previous posts, once you’re using PayPal to sell your stuff online, you will also want to eventually withdraw the money you make into your bank account so that you can actually use it. Here’s where things get a bit nasty unfortunately.
If you have a US bank account and a US PayPal account, you can stop reading right here. You’re in luck. All you have to do is attach your bank account to your PayPal account and withdraw USD from your PayPal account to your bank account. There are no currency conversions to worry about, and the transfer itself is free from PayPal’s side.
If you are the owner of a non-US PayPal account and you don’t have a US bank account, things are not so pretty.
You are given two options (depending on your home country, it might even be just one option):
- Withdraw to a debit or credit card
- Withdraw to your local bank account.
If you sell online you probably use USD as the main currency on your store and hence your PayPal balance will be in USD. What happens is that since your local credit card or bank account are not in USD, an automatic currency conversion takes place on PayPal’s end as the money is on the way out. The conversion rates are bad, to put it mildly. Hence you’re going to lose a lot of money on that conversion.
Withdrawing to Cards
In the case of cards, you can ask PayPal to switch off automatic currency conversion, and have the conversion happen on your bank’s side, which will give you a better rate. I wrote about how to do this in my earlier post on currency conversion and PayPal. There are still two inconveniences when withdrawing in this manner:
- You will be forced to convert USD to your home currency upon withdrawal.
- There is a limit per transaction of $2,500, and an associated fee per transaction.
These two points are problematic. Let’s say that your home currency is in a weak position and you would therefore store money in USD and convert later when things improve. You cannot do this as you can’t do a straight through USD-USD transfer, given that your card will be denominated in the local currency. You can open a local bank account in USD but you won’t be able to get a card associated with it. At least that’s the case with all the banks I’ve checked so far. If you find a bank that lets you do that, please leave a comment and let me know.
The limit per transaction poses some obvious problems. Let’s say you are a high volume seller and you want to withdraw $100k per month from PayPal. You will have to make 40 separate transactions and you will be charged for every single one of them. Of course, all you ever wanted to do is one transaction, if only PayPal let you do that. Apparently this limit per transaction is dictated by the card providers (for example MasterCard or Visa). Still it’s not convenient for serious sellers.
Withdrawing to a Local Bank Account
Withdrawing to a local bank account does not present any limits, so you can pull out that $100k without any problems at one go, however you will be hit by PayPal’s bad exchange rate plus currency conversion charges. It is usually easy to open a USD account with your local bank, the big problem is that PayPal will not allow you to transfer USD from your PayPal balance into your local USD account.
Real Example – Withdrawing to Card vs Local Bank Account
As an example at the time of writing this article, if you transferred $10k out of PayPal via a bank transfer to a local bank in Malta (the country where my bank is account is located in), you would have ultimately received €8,839 in the bank account. My bank does not charge any fees for currency conversion.
On the other hand, if you were to withdraw that same $10k out of PayPal to a debit/credit card linked to the same account, you would get €8,911. That amount is after deducting PayPal’s card withdrawal charge ($2.50/€2 per withdrawal, up to a max of $2,500 per withdrawal; hence four withdrawals would be needed in this case to get $10k out).
The local bank was using 0.8921 as the exchange rate between USD and EUR. PayPal, on the other hand, was using 0.8839, a significantly different rate. PayPal includes the charges within the exchange rate, so if you accuse them of having a really bad exchange rate their excuse will be that it includes the currency conversion fees.
At the end of the day then, we would be better off when withdrawing to a card by €72.
Not that small of an amount, especially if you start considering transferring higher amounts. The difference would be around €700 on a $100k transfer, which is ridiculous.
Another problem is that PayPal does not send you any kind of bill for the currency conversion fee, hence you cannot expensive it in your company’s books. It is totally hidden within the exchange rate they use so there’s nothing you can do about it from an accounting point of view.
Other Options
The difficulties detailed above affect every country in the world except for Canada. In Canada users have found a loophole that allows them to perform USD to USD transfers without any charges. See here and here. Once again I had this confirmed by a PayPal support agent, as can be seen in the email excerpt below:
While not being familiar with all of our 200+ countries’ user agreements, I am fairly confident saying that Canada is the only country we have with an exception that allows a local USD denominated bank to be added and used.
I believe this is also related to how the US and Canadian bank network is cooperating. Regardless, this is not something we offer to a Maltese account, other than if you had an actual bank account registered in the US to withdraw USD to.
There are some other options one could explore:
- Use BrainTree instead of PayPal
- Open a non-resident Canadian bank account with RBC
- Open a Canadian PayPal account connected with an HSBC bank account in Malta
- Use Payoneer
- Use Etrade
- Open a US bank account
I’ve written about BrainTree already, so you can refer to my earlier post about the service, although I don’t really consider it a full alternative to PayPal as buyers would need to use their credit card instead of a PayPal account when paying.
Opening a Canadian bank account with RBS is easier than opening a US bank account. I don’t have much experience in this area except checking if it’s possible and confirming that it is. What one would do then is use the routing number of that bank account to add it as a US bank account within PayPal and withdraw money into the RBS account. Then one would use CurrencyFair or TransferWise to transfer the funds to a Maltese bank account. I am still checking to confirm 100% whether PayPal would allow this setup on a Maltese bank account or not.
The Canadian PayPal account plus Maltese HSBC USD account is an option that I’m still checking about so I can’t make any recommendations at this stage.
Until a few months ago it was possible to open a Payoneer account and then add that to PayPal as a bank account via the routing number you are given. The idea was to then withdraw the money into your Payoneer account as you would have done with a US bank account. From then you would then be able to transfer to your local bank account or else pay using the Payoneer Mastercard or even withdraw cash from an ATM. It appears that this is no longer possible, although it’s worth monitoring this option as things may change in the future or an alternative to Payoneer might crop up.
Opening an Etrade account and withdrawing money to it is also another option that I’ve seen being discussed, and again I need to look into it in more detail.
The last option would of course be to open a USD account with a US bank, something that is easier said than done. Usually a Social Security Number (SSN) is required, however some banks allow you to open an account without it when visiting the branch in the US. There might still be limitations though (for example, no bank transfers possible) which would limit the practicality of such an account for my particular desired usage. Some people have also asked me whether it is possible to open a US bank account for their non-US company. From the information I have this is impossible unless you are going to deposit a few million dollars into that account.
If you have found a solution I’d love to know how you managed, please go ahead and leave a comment!
Further reading
PayPal Steals from Its Customers with Hidden Fees – Peter Sandeen from Finland
Good afternoon Jean,
I am trying to sell an item and the buyer wants to pay via Paypal. However, it is not clear whether I can withdraw the funds to my credit or debit card (my bank accounts are in Malta). From your post, it seems that I can at least withdraw to a credit card, which is fine for me. However, given that this is the first time that I am using it, and you seem pretty proficient in the matter, your confirmation would be much appreciated.
Hi Abigail, you can withdraw to your Maltese bank account’s credit or debit card, as long as it is a Visa, Visa Electron or Mastercard one.
Dear Jean,
I have a business set up in Japan, with a Japanese paypal account. We get hammered with international fees and we do have a presence by means of a branch in the Eurozone. We are exploring our options right now, but do you have any suggestions on the matter? Since the majority of our customers are based outside of Japan, could we set up a eurozone account using the company we have established in the eurozone and just take advantage of the fees our bank there would provide. Similarly, another huge chunk of customers is based in the US. If we could incorporate in the states and set up a local paypal account there, could we do a similar process for our e-commerce site?
Hi Rodney,
If there are other reasons apart from avoiding PayPal’s international fees I would say that opening a company in the eurozone and the states would be a great idea. Possibly the volume of transactions is even high enough to open these companies solely for that purpose. In any case you will then be able to open a USD and a EUR bank account and link them up to PayPal.
If payments are sent manually youd’d be good to go with this setup. The potential pitfall I see is if the payments are done through a website. How will the website know which PayPal account to use for receiving the funds from the customer and avoid the international fees? This is an interesting case and I’d love to know what route you eventually choose for this setup.
Dear Jean,
Thank you for your prompt reply. I will definitely look into it and let you know.
Hey,
I use a US Paypal account, move the money then to a US bank account (Bank of America) and transfer it with transferwise into Euro. Opened the accounts when I was in the States without problem. So far works best for me and didn’t find a better solution yet.
Best,
Tom
That’s great Tom, the main issue for the rest of us is that it’s not easy to open a bank account in the US unless you’re actually living there.
Dear Tom,
Did you establish an LCC or a corporation to do so?
Or did you open it under your name?
Rodney
Hello, where can i find the exact page where can i withdraw my funds with my mastercard? by the way i live in lithuania.
Check this link https://www.paypal.com/selfhelp/article/FAQ921/2
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I have a USA PayPal and I am based in Turkey since PayPal closed operations here. It has been difficult on trying to cash out. Payoneer used to work with PayPal, but the were banned. I contacted Auction Essistance on ways to cash out, but they are unaware of any other than currency exchange, adding a USA bank or having someone cash out for me for a fee. Any help would be appreciated.
Hi, Any solution for withdrawing in Bahrain.
Sorry Malini I’m not familiar with the fiscal situation in Bahrain.
Hi Jean,
Are you any closer to finding a solution?
I have a UK based business with the same issue. I tried payoneer and was able to link the US allocated bank account to my PayPal account by calling up PayPal. This however hasn’t solved the problem.
I am trying to withdraw USD to a UK based USD account to save any transaction fees as I buy my products from HK who also want payment in USD but to a HK based $ account.
I initially opened a USD bank account with Santander that is based in the U.K. but PayPal transfer the $ to £ and then Santander switch it back to $ so two transaction fees if I do that.
This is also the case with payoneer even though on paper it is $ to $ transaction as a withdraw to account option. As a test before I realised this, I transferred $100 from PayPal to Payoneer loosing the 1% fee so $99. From there I withdrew $99 from Payoneer to my UK based USD account with Santander. I did try and cancel this transaction as soon as I realised but was unsuccessful. Balance from that transaction is $88.12! Almost 12 percent lost in one transaction!
Anything you can see that could resolve this issue?
You suggested opening a non-resident account with RBC. Would this be a business account or a personal account?
Thanks for any help!
I think it’s time the world had a fairer single currency!
Kind regards,
Andrew
Hi Andrew, unfortunately, I have made no further progress on this matter. Payoneer does not work for this purpose either. As for an RBC account, it would be a business account.
Hey Andrew I’m also stuck in the same boat as you but the difference is I don’t need to pay for goods in USD so I just lose out once.
I have a solution for you that may help You save some money it’s something I used in my other business when I was paying suppliers in foreign currencies. If you are interested let me know
Has anyone used the cash out services from Auction Essistance?
Hi Jean,
I am about to become an online earner in a few days. I already have a visa debit card linked to PayPal that I use for purchasing. When I begin earning money through PayPal, will there be an issue to withdraw using the visa debit, here in Jamaica? And also, since I’ll be leaving for Japan soon, what problems may occur?
Thanks,
Chungi.
Hey I live in the Caribbean..did you find a solution for this problem because I have a visa debit and cant receive funds?
Hi, No I haven’t. I guess I’ll just have to request a cheque from PayPal. Very disappointed though.
Hello Jean, I have a locally opened USD bank account (dollar account as we call it) and I am wondering if I can deposit all the earnings I make online. I receive funds through PayPal and Payoneer in USD, what I’d like to happen is I want to receive the money still in USD upon reaching my bank account since it’s a bank account that is on USD denomination. What are the other options I have to make this possible? Thank you.
Hello Jean, I m new to paypal, how does paypal considers someone as NON-USA, what if I open an account with USA address from India(my country). Then add a Payoneer Card to paypal account. Then withdraw money from Payoneer.
My intention is to sell at Ebay with Paypal.
Doesnt Paypal allow withdrawals to indian local bank accounts?
Would it be safe to use Auction Essistance to help me withdraw money out of my PayPal account?
That is the first time I hear about the term so I can’t really help you ok this.
I almost thought I had the solution for this with Transferwise’s new borderless account. I just need a bank statement with a US address on it to provide to PayPal and that’s where I got stuck as Transferwise doesn’t provide bank statements. Bummer!!
Hello sir…I have USA PayPal that is not link with credit card nor any bank account in USA and the PayPal account is almost 7 months old now..pls how can I withdram my cash in the PayPal account because am not in USA …
Hi Jean!
I live in Croatia (native currency is kuna) and have set up an foreign currency account, in euro, not in kuna, so that i could pay and receive in euros without conversion to kuna. My bank account can’t be associated to paypal, since Croatia, although a member of EU, is not part of eurozone, but i have a visa elecron card issued by bank which is associated paypal account.
Up till recently, I’ve been using paypal mostly to buy on ebay, so i never actually had to withdraw any money. Recently i started receiving payments from my Airbnb guests. When i wanted to withdraw money i saw that i can not withdraw euro (which is my primary paypal currency) to my card without paypal first converting it to my national currency kuna (at a ridiculous rate). Of course than the bank has to re-convert it back to euro, since it is a foreign currency account in euro.
I was furious, and all i want to is close paypal account and say good riddance to bad rubbish. But as i cooled down i wrote them an e-mail so i’ll see what they have to say if they even bother to answer. Also, I’m determined to get my money in full amount.
Since you have much more experience in such matter than i have i’m asking you for an advice. Is there a way to convince them to change settings on my account so i can withdraw money without unnecessary conversion to kuna since my account is in euro? From what i gathered EU members should have an option to link a bank account to paypal (not just credit card), especially if the parent bank is part of the eurozone (Erste-Steiermärkische is actually Austrian, not Croatian bank). Second option would be opening an account in eurozone i guess?
Sorry for the long post:)
Best wishes
Igor