How not to lose out when transferring a USD balance from PayPal to a UK bank account

How not to lose out when transferring a USD balance from PayPal to a UK bank account

If you’ve got a UK or Australian business, or a business based anywhere outside of the US, and you work with American clients, there’s a good chance you’ve received money via PayPal.

In most cases, you’ve probably been hit by a PayPal fee when receiving the funds – usually around 5%.

These fees aren’t fun – but can be written off as a necessary evil when dealing with clients around the globe. However, for most people there’s another shock in store when you convert money between your USD balance and your native country’s balance (e.g. your AUD or GBP balance).

PayPal doesn’t advertise it, but their exchange rates are much worse than the banks’ standard currency exchange rates, usually by a few percentage points.

By the time you’ve paid the fee for receiving the funds, plus the poor exchange rate, you’ve probably already lost a hefty chunk of the money your client has paid you. Multiply this over a year, and you’re losing out on significant amounts of your hard-earned cash.

Enter, TransferWise.

TransferWise has long been one of the cheapest ways to transfer money between currencies, and in 2017 it got a whole lot more useful with the launch of its Borderless bank accounts.

In a matter of seconds, you can set up virtual bank accounts for your business in British Pounds, Euros, US Dollars, and Australian Dollars.

Don’t be put off by the word ‘virtual’ – you’ll get a full set of bank details with these accounts, allowing companies to pay directly into them, bypassing PayPal entirely. These are the details you’ll get for each type of account:

  • UK (GBP) bank account – Account Number and Sort Code.
  • Euro bank account – SWIFT/BIC and IBAN details.
  • US (USD) bank account – Routing (ABA) and Account Number.
  • Australian (AUD) bank account – BSB Code and Account Number.

Instead of asking your US clients to pay you via PayPal, just give them your US routing and account number, and they can pay you as if you were based in the United States.

Once the money hits your TransferWise account, you can then transfer it straight to your linked Business or Personal Bank Account in the UK (or Australia, or wherever else in the world), paying just 0.6% of the converted amount, + $1.25 USD.

So, if you’ve been paid $1000 USD, you’d pay a $7.20 USD fee, leaving $992.80 to be transferred. TransferWise then transfers the money at the real exchange rate (also known as the ‘mid-market’ or ‘interbank’ rate), which is the rate you’ll see if you search on Google.

At today’s exchange rate (3rd May 2018) you’d receive a total of £730.51. This is significantly more than you’d receive if you exchanged the money from within PayPal!

But I need to use PayPal!

Some affiliate schemes, advertising networks or companies won’t pay directly into a bank account, and only offer PayPal or other online payment platforms as an option.

Thankfully, with a little bit of work, you can transfer the money directly from your PayPal account to your Transferwise Borderless Bank Account without paying a single penny / cent!

Whereas previously you’d have had to convert your PayPal balance to your native currency within PayPal before sending it to your bank account – and be hit with their terrible exchange rate whilst doing so – you can now avoid those fees by sending the money straight to your US TransferWise account.

You can then send it onto your UK / Australian account at much, much reduced fees.

UPDATE MARCH 2019 – PayPal are seemingly trying to make it as difficult as possible for you to transfer money from PayPal to your borderless bank account, but it’s still possible if you get to speak to the right person. Keep reading…!

  1. Sign up for a TransferWise account, if you don’t already have one
  2. Create a ‘Borderless Account’ from within TransferWise, and then set up a USD account. Your account will have a full set of bank account details, just like a real bank account. It’ll provide you with an Account Number, Wire Routing Number and ACH Routing number.
  3. Add your TransferWise US Virtual bank account to your PayPal account (see below).
  4. Send your USD balance from PayPal to your TransferWise US Virtual Account. As PayPal allows you to send money to your own bank accounts for free, there’ll be no fee for doing this.
  5. Once you receive the money in your TransferWise account, send it on to your UK bank account, with the money automatically converted from USD to GBP along the way

The magic happens because PayPal lets you link your bank accounts with your PayPal account, and transfer money between these accounts without paying a fee, as long as there’s no currency conversion taking place.

As the TransferWise virtual account is in your name, or your company’s name, you’re able to add it as a bank account within PayPal. Thus, you can send US dollars from your PayPal account to your US TransferWise account without paying a cent. You can then transfer the money from TransferWise to your UK bank account, only having to pay TransferWise’s tiny fee.

It’s an extra step, but it’ll save you a lot of money.

Linking your TransferWise account to PayPal

Via their web interface, PayPay will only let you add a bank account that’s based in your PayPal account’s country.

So if you’ve got a UK PayPal account, you can only add a UK bank account, as you only get presented with the option of entering a Sort Code and Account Number.

However, if you call up their customer service line, and explain that you want to add a US bank account, they will be able to do it.

You will simply need to provide them with the ‘ACH Routing Number’ and ‘Account number’, and likely the account name.

However, this is where things get tricky. While in early 2018 I managed to add my PayPal account without a problem, it seems I was one of the lucky ones.

At first, it seemed that not all of PayPal’s customer service team are aware that they can link a US bank account to a UK PayPal account. Some would flat out refuse, claiming it’s not possible to do, yet other team members will happily do it without a problem.

We have spoken to a few people who had to call up 2 or 3 times to get the account added, but once they got through to someone who knew what they were doing, it was set up in a matter of minutes and ready for them to transfer funds.

Others who called said that the customer service advisor was hit with an error message when they tried to do it, but that the advisor was able to override it and eventually add the account.

However, since this article was published, a number of our readers have tried to get their TransferWise account added, only to be told by PayPal that they don’t support virtual accounts, and that they will only accept a ‘real’ US bank account.

Their system happily lets them add virtual accounts – I’ve been regularly making transfers from PayPal straight into my TransferWise account for well over a year and have never had a transfer rejected. I can only presume that PayPal isn’t happy to be losing out on its currency conversion fees and losing business to TransferWise, so has been doubling down on efforts to stop this happening.

However, some readers are still managing to get through to the right person and get their account added – so please, persevere! By all means, politely end the call with your current advisor and call back a few minutes later if needs be. It’s an extra step to take, but worth it for the hundreds (or thousands) of pounds in fees you’ll save over the years.

Get started with a TransferWise account here

How much can I save?

For converting USD into GBP, TransferWise’s fees are a tiny! As of March 2019, transferring $1000 USD from a TransferWise Borderless Account to a GBP bank account will cost you just $4.55 USD.

Enter the amount you need to convert and transfer into the calculator below, and get an idea of how much it’ll cost you. As of March 2019, it looks like the calculator below is still using TransferWise’s OLD rates, which are higher – so you’ll actually end up paying even less than the figures below suggest. To calculate the up to date rates, click here.

Chances are, you’ll end up with a lot more £££ than if you converted the money using PayPal!

Once you’re ready, you can get started with TransferWise here.

Let us know how you get on in the Comments below!

I’ve spoken to plenty of bloggers who have successfully linked their PayPal account and TransferWise account, and I’ve done it myself, so it’s clearly possible. You just need to speak to the right advisor.

Hopefully as more people request this, PayPal will back down and make it easier to do. Who knows – PayPal may even let you add US bank accounts to your UK account via their web interface in the future!