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Should You Let PayPal Convert Currency to SGD When Buying Stuff Online?

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Joanne Poh

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We’ve all been faced with this tough decision—you’re about to purchase that video game or that lacy underwear online, and the checkout process requires you to enter your credit card details into PayPal.

PayPal asks if you would like to pay in USD or SGD. If you wish to pay in SGD, they will convert the currency from USD to SGD for you. On the other hand, if you choose to pay in USD, you’ll be at the mercy of your bank’s conversion fees.

So which should you choose?

 

What is PayPal’s currency conversion rate?

PayPal is pretty sneaky about how much money it’s really costing you to use their conversion rate. Their official line is that it is free to buy stuff, whether in Singapore or overseas.

The only catch is that when you buy stuff overseas, the currency conversion applies.

What PayPal doesn’t tell you is that they charge a 2.5% processing fee in addition to the exchange rate if you choose to pay for a foreign currency purchase in Singapore currency.

You’ll need to compare that with the amount your bank is going to charge you to determine which is the most economical way to pay.

 

How much does your bank charge you?

If you choose to pay for your items in USD or any other foreign currency, the bank that issued your credit card will perform the currency conversion for you instead.

Obviously, this is not going to be free. Figuring how much each bank charges is a little trickier.

You’re usually charged a combination of fees when you make an overseas purchase. These fees can include cross-border transaction fees, foreign exchange fees and a Visa or MasterCard fee. Visa usually charges 1% while MasterCard can charge between 0.2% and 1%.

To make things even more confusing, the fees vary between different banks.

But generally, you can expect the total cost of using Visa and MasterCard credit cards in foreign currency transactions to be about 2.2% to 2.5% altogether.

(The actual foreign exchange fee is much lower, and can range from 0.5% to 1.5%.)

Amex, on the other hand, charges a flat fee of 2.5%.

 

The verdict?

As you can see, there isn’t a great deal of difference between the cost of paying using PayPal’s currency conversion and letting your bank do it for you.

But there’s a good reason NOT to let PayPal do the currency conversion for you. There’s nothing stopping your bank from charging you certain fees anyway, such as the Visa or MasterCard transaction fee and cross border transaction fees.

Since you’re going to have to pay for a portion of the fees, it makes no sense to pay for PayPal’s 2.5% fee on top of all that.

So, always choose to pay in foreign currency and let your bank do the conversion for you.

Do you usually opt to let PayPal convert currency to SGD? Tell us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.

  • Kevin Lee

    Never use paypal conversion rates as I have tried both and using my Citibank Mastercard is always much cheaper.

  • Sherly

    Thank you for the tips. I just completed a payment using DBS Visa card and it’s much cheaper than Paypal rate.

  • Rafe Yee

    I stumble across this blog, and I find it useful too !
    Any idea which bank provides the most stable rate for currency conversion ?