We compare a digital payments giant against your typical bank transfer to see who offers the better deal.
PayPal and bank transfers are popular ways to get your money where it needs to go, but by comparing fees, rates and speeds, one could provide cost and time savings over the other.
PayPal vs bank transfers: How they work
Both PayPal and your major US bank can send your money next door or around the world online.
To transfer money through PayPal, you’ll need to create a free PayPal account. You then send a transfer to your recipient’s PayPal account, funding it with your PayPal balance, bank account, credit or debit card or PayPal Credit. After your recipient receives the money, they can either keep the funds in their PayPal account or withdraw the money to their bank account.
Bank wire transfers are a quick, efficient way to move your money from one bank account holder to another through existing banking networks. While in the past you had to visit a bank branch to initiate a money transfer, these days most banks allow you to initiate transfers online and by phone as well. However, delivery options are typically limited to bank account deposits, usually within a few days.
Who offers lower fees?
When you pay for an international transfer using your PayPal balance or a linked bank account, you’ll pay a fee of $2.99-$4.99.
When you pay with a credit or debit card or PayPal Credit, PayPal charges a fee of 2.9%, a flat fee depending on country and a fixed fee based on currency.
While most major US banks offer free bank-to-bank domestic transfers (or waive fees for specific account levels), they’re typically your most expensive option when sending money internationally.
Banks charge higher fees — anywhere from $25 to $85 or more, depending on the details of your transfer — and a bigger variety of fees: incoming, outgoing and other fees. On top of high fees, they offer weaker exchange rates than money transfer specialists. They also offer fewer options for your recipient, typically requiring they have a bank account in which to receive your cash.
While bank transfer fees vary, for most transfer amounts it’s unlikely they’ll be lower than the competitive prices offered by PayPal.
Who offers better exchange rates?
The exchange rates for both PayPal and bank transfers depend on the mid-market rate on the particular day. Here’s what we know about PayPal and bank transfer exchange rates.
To calculate the exchange rate it offers to customers, PayPal takes the mid-market rate it gets from its bank and adds a 2.5% margin. PayPal updates this rate twice a day.
For example, for a transfer in euros (EUR):
- If the mid-market rate is 1 USD = 0.96 EUR
- PayPal’s exchange rate might be 1 USD = 0.94 EUR
Nearly all banks skew the mid-market exchange rate for a profit, but you’ll typically pay higher margins than you’ll find with PayPal.
Using the example of a transfer to euros (EUR):
- If the mid-market rate is 1 USD = 0.96 EUR
- Your bank’s exchange rate might be 1 USD = 0.86 EUR
Here again, PayPal’s exchange rates are typically more competitive than those offered by your local bank.
Case study: Sending $1,000 to Germany
Mika wants to help out her sister in Berlin; she has had a new baby girl. While Mika’s comfortable with the idea of running down to her local bank branch, she also has a PayPal account and thought she’d explore whether it’s an option.
Here’s what Mika would pay for a bank transfer with PayPal and her local bank.
|PayPal||Major US bank|
|Exchange rate||1 USD = 0.94 EUR||1 USD = 0.86 EUR|
|Transfer fee||$20 ($1,000 x 0.02)||$40|
|Transfer speed||1–2 business days||2 business days|
|Transfer options||Bank transfer||Bank transfer|
|Total euros received||940 EUR||860 EUR|
Visiting her local bank, Mika learns that her bank offers a weaker exchange rate and a stiffer transaction fee than PayPal does. Not only will Mika save $20 on the transfer fee by going with PayPal, but her sister will also receive 80 more euros to spend on Mika’s new niece — and possibly a day sooner.
Money transfers with PayPal are speedy. If you’re transferring between PayPal accounts, funds are available immediately. If you withdraw money from your PayPal account into a bank account, you can expect the funds to get there within the next business day.
Most banks offer international money transfers that will arrive within two business days, but your transfer speed will depend on your specific bank and type of account.
Even though both PayPal and bank transfers can get your money where it needs to go pretty quickly, PayPal edges out the competition with instant transfer options between PayPal accounts.
Compare online money transfer services
Who offers more options?
|Payment methods||Minimum and maximum transfers||Delivery methods||Transfer speeds||Countries|
|PayPal||Bank transfer, credit or debit card, PayPal Credit||Varies by country (about $0.02); $10,000 per transaction||PayPal transfer, bank transfer||From minutes to next business day||190+ countries|
|Bank transfer||Online, in person, app (when available)||Varies by bank||Bank transfer||Typically within two business days||190+ countries|
Although much of the comparison between PayPal and bank transfers can vary depending on your bank account, PayPal tends to come out on top thanks to lower transfer fees, stronger rates and faster service.
Ultimately, you’ll want to compare your options to find the service that best fits your individual needs.