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Why Paypal Exchange Rate is Low

PayPal is a reliable option for transferring international currency and its exchange rate is also low. Know why Paypal exchange rate is low.

While converting one currency into desired currency, PayPal uses currency converter  and retail exchange rate is used for exchange of currency. This rate of currency exchange can be referred to wholesale currency-exchange rate as this is done with the help of a third party financial establishment.

PayPal is used for sending and receiving payment purposes. Every currency trading has its own “currency exchange” charge. The currency exchange charge will depend on the value of the converting currency. PayPal also charges other cross border fees; these charges are included in total transaction amount.

Now PayPal gives support for transaction of different foundation throughout the world, and this enables users to do internet marketing. Users now can globally buy and sell things. The exchange rate of PayPal is based on interbank exchange rate. Although this is not possible everywhere, as the interbank rates are not always accessible through retail outlets. Interbank fluctuations are responsible for frequently change in retail rates.

Indian terms of PayPal usage

According to the RBI policy, which became effective from 26th Sept. 2011, an Indian is not allowed to purchase services or goods from the PayPal account unless their account is linked to the Credit Card. Therefore, for Indian PayPal account users only option left is to transfer their PayPal balance to their respective Indian bank account. However, PayPal does not charge any fees for auto withdrawn, but it charges 3.9% + $0.30 USD fees on the total amount received for cross border payments.

PayPal Currency Conversion Method

There are two main ways of conversion of money. First is to convert through a PayPal account, and another is to convert directly your money by using a credit card. The exchange rate is charged at the time of conversion of currency. PayPal has little risk factor so it is preferable to get the currency converted via PayPal. PayPal gets wholesale cost quoted from its own bank, or the third party and it add 2.5% spread to the above and then it calculates the retail foreign-exchange rate that has to be applied to the transactions made by customers. This 2.5% spread on transactions is competitive as transactions through MasterCard or visa charges 1% above mentioned spread fee and bank, in extra charges apply of, 1 to 3%. Visa and MasterCard works well with low value transactions, but foreign and high transactions are always safe in the hands of PayPal.

PayPal uses a retail exchange rate while doing any currency conversion for the transaction. The retail exchange rate is the foreign currency wholesale cost, which is determined by a financial organization, and a currency conversion fee is added to it. The currency conversion fees differ for the different currencies, and that can be seen in the PayPal fees section.

Largest international banks can use the interbank rates as they purchase the US currency in quantities like $1,000,000 or more. However, at other consumer shops or airports the different currency exchange rates are quoted.

Other facts about PayPal currency conversion:

  • The exchange rate will be calculated for transferring funds from one balance to another in an account.
  • In the case of refunds the current exchange rate at the time of the original payment is performed.

In conclusion, PayPal has been charging 2.5% on the transactions for currency exchange. This is the reason why we see the lower exchange rates at PayPal as compared to the current market rates. Since, PayPal is a reliable option for transferring the international currency we need to accept its terms and conditions.

Categories: Business oriented
Prashant Sharma: <a title="About" href="http://www.techpluto.com/about-us/">Prashant Sharma</a> is a Delhi based Entrepreneur who spent most of his college days polishing his marketing skills and went for his first business venture at 19. Having tasted failure in his entrepreneurial debut, he turned a Tech-enthusiast, specializing in web technologies later. Join him on <a href="https://plus.google.com/110037121732872055442/?rel=author">Google Plus</a>