PayPal vs. Canadian banks for international money transfers
You might get a better exchange rate from a bank, but PayPal instant transfers can't be beat for speed.
Not sure whether to use PayPal or your bank to send an international money transfer? We take a look at fees, exchange rates and transfer speed to see how PayPal compares to typical Canadian banks.
The information on this page is current as of June 2, 2022.
What options do Canadian banks offer for sending money internationally?
For many years, the primary means of sending money abroad from Canadian banks was by wire transfer. To compete with online money transfer companies like PayPal, most Canadian banks started offering separate international money transfer services that are faster, cheaper and more convenient than wire transfers.
Wire transfers are still considered one of the safest ways to send money internationally. But bank international money transfers are usually quicker and less expensive.
When comparing Canadian banks to PayPal, we’ll take into account both bank wire transfers and bank international money transfer services.
Which offers lower fees?
It’s free to transfer money from your PayPal account or bank account to someone in Canada. It costs $2.99 to transfer from your PayPal account or bank account to someone living in the US or most European countries. For all other countries, the fee is $4.99.
If you pay by card instead, you’ll be charged an additional 2.9% of the transfer amount plus a small fixed fee (often under $0.50 CAD) based on the receiving currency. This makes it expensive to send large amounts if you need to pay by debit or credit. Instant Transfers cost an extra 1% (up to a maximum of $10.00).
Sending a bank wire transfer from a Canadian bank will likely set you back between $15 and $50+. You could lose even more to intermediary bank fees. Intermediary banks are financial institutions through which money must pass to reach recipients’ accounts.
Bank international money transfers are much cheaper, often costing less than $10. In fact, CIBC Global Money Transfer offers fee-free transfers to 130+ countries. RBC international money transfers charges $6 to send $1,000 or less and $10 to send more than $1,000.
The downside is that you need to have an account with any bank from which you want to send funds, and these accounts will likely come with a monthly fee.
Which offers better exchange rates?
The midmarket rate is the “true” exchange rate between 2 currencies, or the real value of one currency when exchanged for another currency. The exchange rate you get from money transfer services like PayPal or a bank is the midmarket rate minus a small fee worth a percentage of the midmarket rate. This fee is sometimes referred to as a markup on the exchange rate.
A lower exchange rate means more of your money is pocketed by the transfer service and your recipient gets less money. A higher exchange rate means the transfer service pockets less of your money and more goes to your recipient.
We found that PayPal’s exchange rates are often under the midmarket rate by 4%-5% or more. For perspective, a 2%-3% margin on the exchange rate means you could lose hundreds of dollars when sending $10,000 or more.
Here’s how PayPal’s exchange rate could work if you’re sending CAD to euros (EUR):
- If the midmarket rate is 1 CAD = 0.73974 EUR
- PayPal’s exchange rate might be 1 CAD = 0.7090 EUR (4.16% markup)
We checked the exchange rates offered by a number of major Canadian banks and found that the margins charged for popular currencies tended to range from less than 1% to over 3%.
Here’s how bank exchange rates could work if you’re sending CAD to euros (EUR):
- If the mid-market rate is 1 CAD = 0.73974 EUR
- The bank’s exchange rate might be 1 CAD = 0.72995 EUR (1.32% markup)
Which is faster?
Standard transfers are free and take between 1 and 3 business days. Instant Transfers come with an additional 1% fee (up to a maximum of $10.00) but arrive within minutes.
Bank wire transfers are pretty slow, usually taking between 3-5 business days. Bank international wire transfers are usually quicker, taking 1-3 business days. It’s possible to find next-day transfers, but you’ll have a hard time finding a bank that offers same-day transfers to destinations outside of Canada.
PayPal vs. Canadian banks: Sending $1,000 to the United States
Here’s how fees, exchange rates and transfer speeds break down if you send $1,000 from Canada to the United States via PayPal, bank international money transfer and bank wire transfer. We’ll assume funds are sent to a bank account, payment is made by bank transfer and the fee is deducted from the sending amount (not paid on top of it).
|PayPal||Bank international money transfer||Bank wire transfer|
|Exchange rate||1 CAD = 0.7567 USD||1 CAD = 0.7572 USD*||1 CAD = 0.7572 USD*|
|Transfer speed||1-3 business days||1-3 business days||3-5 business days|
|Total received||$756.70 USD||$753.41 USD||$719.34 USD|
*Average exchange rate is based on data obtained from several major Canadian banks on June 2, 2022.
In this example, PayPal comes out on top with zero transfer fees and more money in your recipient’s pocket, although its exchange rate is a little weaker than the average Canadian bank rate.
PayPal could be more expensive if you use a different payment method (thereby incurring a fee) and send a much larger amount. This is because most bank fees stay the same regardless of the amount you send, whereas PayPal’s fees increase with the transfer amount.
|PayPal||Typical Canadian bank*|
|Availability||Send to 200+ countries in 25 currencies||Send almost anywhere in the world|
|Fees||If you pay from your PayPal or bank account balance:|
If you pay by debit or credit, add 2.9% + fixed fee (often under $0.50 CAD)
|Exchange rate margin||Typically around 4%-5% or more||Typically less than 1% to over 3%|
|Receiving methods||Direct deposit to bank account|
|Learn more about wire transfers|
*This information is meant to be representative of Canadian banks. Check with your bank to find out exactly what fees and features are available to you.
Check out our review of Xoom to learn more about how PayPal has positioned itself to stay competitive in the international money transfer services market.
Compare alternative international money transfer services
Canadian banks typically offer stronger exchange rates than PayPal, but PayPal offers a wider range of payment options. PayPal also offers instant transfers, which you likely won’t get from Canadian banks for international transfers. If you’re looking to save money, a money transfer specialist should be your best option.
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