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

Using PayPal has its advantages, but transferring money between currencies can be costly. Learn how to reduce your costs when transferring a USD balance to a UK 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, Wise (formerly TransferWise).

Wise 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 Wise 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 0.5% of the converted amount + a fixed fee of $0.33 USD.

(If you’re sending GBP to an account outside of the UK, Wise will charge you an additional £4.01 GBP in fees as the money will be sent via SWIFT rather than CHAPS or Faster Payments.)

Wise will charge you around $5.31 to exchange 1000 USD to GBP

So, if you’ve been paid $1000 USD, you’d pay a $5.31 USD fee (4.98 USD at 0.5%, plus the 0.33 USD fixed fee), leaving $994.69 to be transferred.

Wise 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 (14th August 2023) you’d receive a total of £786.63. 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.

It used to be possible to send the money straight from PayPal to your USD Wise account, then convert it to GBP using the step above. As PayPal didn’t charge fees to send money in the same currency, you could get the money into your UK bank account without paying PayPal a penny.

Sadly, PayPal seemed to realise that people were using banks like Wise to get around paying their fees, and cracked down on this.

If you’ve got a UK PayPal account, you now need to pay a fee to send a dollar balance to another US bank account, meaning PayPal’s fees appear to be unavoidable.

We recommend lobbying your affiliate programme and encouraging them to support standard bank or wire transfers for payments. If you can provide them with USD bank account details, then sign up to Wise and save money using the steps above.

Get started with a TransferWise account here

How much can I save?

For converting USD into GBP, Wise’s fees are a tiny! As of August 2023, transferring $1000 USD from a Wise Borderless Account to a GBP bank account will cost you just $5.31 USD.

Use Wise’s calculator and find out exactly how much it’ll cost you – their calculator even shows the rates of a number of common banks, so you can see how much you’ll save vs using get an idea of how much it’ll cost you.

The Wise Calculator tells you how much you’ll pay, and even if there’s a cheaper option available

They’ll even tell you if there’s a cheaper option available.

However, 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 Wise here.

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

Sadly, the days of avoiding PayPal’s fees by adding your Wise USD bank account to your PayPal account and sending money without commission are long gone.

If you know of any other ways to avoid the fees, let us know in the comments below and we’ll update the article. Otherwise, try and get your clients or affiliate scheme to pay you directly into a Wise USD account.