TransferWise’s year-long analysis found a significant spike in PayPal’s exchange rate markups in March, when social distancing measures were first being enforced.
(Note: PayPal's exchange rate markups are represented by the yellow line.)
For context, these markups are premiums that banks and other money transfer providers impose on the ‘real’ exchange rate, in order to profit off consumers making overseas purchases.
According to a PayPal spokesperson, PayPal has not changed its currency conversion rate this year.
"Daily transaction exchange rates are reliant on the currency market, which has experienced significant fluctuations in recent months. PayPal does not control these fluctuations, and nothing in its fee structure has changed in 2020 for Australia or New Zealand," the spokesperson said.
This reported rise in fees comes as the number of online shoppers in Australia jumped almost twofold compared to the start of the year, soaring from 38% to 60%, according to TransferWise data.
At the peak of this shopping frenzy in March, Paypal’s markups hit a high 5.6% for conversions from the Aussie Dollar (AUD) to other major currencies, including the New Zealand Dollar (NZD), Euro (EUR), British Pound (GBP), US Dollar (USD), Singaporean Dollar (SGD) and Chinese Yuan (CNY).
New Zealand also recorded an exchange rate spike with PayPal in March - an increase to 5.55% for conversions from the NZD to AUD, GBP, EUR and USD.
Meanwhile, the exchange rates charged by Australian banks stayed mostly the same, although NAB went against the grain by reducing its markup in March.
Money tips for shopping internationally online
TransferWise Australia’s Country Manager, Tim Cameron said the findings show the importance of “shopping savvy”.
“Australians should be asking themselves if they’re doing everything they can to get the most bang for their buck,” he said.
Here’s a couple of tips to help you get your money’s worth while shopping online:
Tip #1: Watch out for bank fees
Be aware if you’re making purchases with your credit or debit card, you may be charged a foreign transaction fee, which is usually a percentage of the Australian dollar amount and can be as high as 3.65%. Some banks like ING and CitiBank have bank accounts that don’t charge this fee.
Tip #2: Beware of AUD price estimates
Some international sites will show prices in Australian dollars, but often these are just estimates based on the exchange rate. They will not be the AUD amount you will pay, as the transaction is then actually processed in the foreign currency and then converted to AUD by your bank. There should be information at the checkout informing you about whether estimates are used.
Tip# 3: Consider a multi-currency travel card
Even though you can’t physically travel right now, prepaid travel cards are available that let you load up the card with foreign currencies and use it to make online purchases. The benefit of this is that you lock in the exchange rate upfront so you’ll know exactly how much things are costing you when you are shopping on international sites, and often these cards don’t charge foreign transaction fees.
To compare debit and credit cards offering competitive exchange rates and fees, head to Mozo’s travel money section.