PayPal Fees Guide - What You Pay as a New Zealander

Updated 10 January 2019
TLDR Summary of PayPal Fees​
  • Despite its own fees page, PayPal isn't overtly transparent with what it charges. 3.4%% is the minimum fee you'll pay, but the platform also employs poor-value exchange rates when converting money between currencies. 
  • Are you Shopping Online or Sending Money Overseas? READ THIS FIRST - You can avoid ALL of PayPal's fees and bad exchange rates by following our simple money saving tip here.
  • If you are a business, PayPal offers hassle-free merchant services and website integration. However, transaction charges and money transfer fees can add up. 
Our Guide to New Zealand's most popular merchant and everything you need to know for your small business e-commerce.
PayPal may offer easy single click payments for both sending and receiving money, but it takes it cut in the process. The fees PayPal charges vary greatly depending on the nature of the transaction. Some of the fees aren't transparent; the purpose of this guide is to outline the ways PayPal makes money and how much this costs you overall.

Guide to this page
PayPal Fees outline and examples: PayPal Business Integration ​Popular questions answered within this guide:
  1. How much of my profit will be eaten in PayPal fees?
  2. How long does it take for my PayPal balance to transfer to my bank account?
  3. Will I be charged by PayPal to send money to my friends and family, and how much?
  4. How does overseas selling work, and what are the fees?
  5. Should I price my goods or services in NZD or USD, or something else?
  6. Can I avoid PayPal fees but still use their service?
  7. How I do use PayPal to get quicker payments?
  8. Can I spend PayPal balances online, and if so, where are they accepted?​

Revealed: The Fees that PayPal Charges on Every Transaction

Whatever your PayPal account transactions may be, PayPal is sure to charge a fee every time you use the platform. We've outlined the most common reasons you would use PayPal - sending money locally, sending money overseas and receiving payments for online purchases. 

PayPal Fees - Sending Money to Friends/Family in New Zealand

With two simply clicks, PayPal lets an account holder send money to any other PayPal account holder in New Zealand or around the world. There are two ways to do it, each with differing levels of fees.

Option 1 - Use Your PayPal Balance - Free
If you have a PayPal balance in excess of the amount of dollars you want to send, making personal payments to friends and family is free for you and the recipient (i.e. your friend/family member) in New Zealand when you use your PayPal balance. If you need to partially fund (i.e. top up) the balance via credit or debit card, then fees will be charged. 

Option 2 -  Use a Credit or Debit Card - 3.4% + $0.45 NZD per transaction
If you are sending or receiving a personal payments using a credit or debit card, PayPal charges 3.4% + $0.45 NZD per transaction. 

Fees: Paying for goods or services
Please note that if you are "paying for goods or services", and choose this option, there are NO transaction charges or fees paid by the buyer - the seller (recipient of funds) is deducted the standard PayPal fees. ​

PayPal Fees - Receiving Money from New Zealand Transactions

The are three fees that arise with any local payment into a PayPal account, as we outline below:
  1. Transaction fee (i.e. customer pays you via your website)
  2. Bank Transfer fee (i.e. when you withdraw the funds from your PayPal account into you New Zealand bank account)
  3. New Zealand Bank Deposit fee (what your bank charges you to receive the PayPal money in your account)

1. Transaction fee 
  • PayPal charges a standard 3.4% + $0.45 NZD per transaction.  
  • If you are a business that would receive more than $5,000 NZD per month via PayPal, the percentage fee per transaction reduces accordingly:
  • Up to $5,000 - NZD3.4% plus $0.45 NZD
  • $5,000.01 – $15,000 NZD - 2.9% plus $0.45 NZD
  • $15,000.01 - $150,000 NZD - 2.7% plus $0.45
  • $150,000.00 NZD and over - 2.4% plus $0.45 NZD

2. Bank Transfer fee
  • NZ$1.00 for amounts below NZ$150
  • Free for amounts above NZ$150

3. New Zealand Bank Deposit fee
  • As at March 2016, no New Zealand bank was charging for inbound PayPal deposits, nor had plans to do so.
  • Delivery time ranged from same-day to up to 7 days.
  • Of the PayPal account holders we spoke to, over 75% received funds in one to two business following a withdraw request. 

Examples of Fees:
1. Item sold for NZ$100 
Transaction fee: 3.4% + $0.45 = NZ$3.40 + NZ$0.45 = $3.85. Balance remaining in PayPal account = NZ$96.15
Bank Transfer fee: NZD$1.00 as because NZ$96.15 falls below the NZ$150 threshold for free transfers.  

Balance remaining in PayPal account = NZ$95.15

Total PayPal Fees: NZ$4.85, or 4.85% of the transaction value

2. Item sold for NZ$25 
Transaction fee: 3.4% + $0.45 = NZ$0.85 + NZ$0.45 = $1.30. Balance remaining in PayPal account = NZ$23.70
Bank Transfer fee: NZD$1.00 as because NZ$23.70 falls below the NZ$150 threshold for free transfers.  

Balance remaining in PayPal account = NZ$22.70
Total PayPal Fees: NZ$2.30, or 9.2% of the transaction value

Conclusion and Recommendations:
  • ​PayPal fees, as a percentage of the sale value, fall significantly the greater value of the transaction.
  • We believe fees of around 4-5% are acceptable for a solution with no ongoing monthly/annual fees or setup costs. 
  • To minimize fees, it is best to wait for your PayPal balance to reach NZ$150 before withdrawing any balances to avoid the NZ$1.00 fee.
  • Your fees will not change if your customer pays with a foreign currency card (i.e. uses an Australian or American credit card, as the value of the good/service is priced in New Zealand Dollars). 

PayPal Fees - Receiving Money from International Business Transactions

The are four fees that arise with any overseas payment into a PayPal account, as we outline below:
  1. Transaction fee (i.e. customer pays you via your website)
  2. Foreign exchange fee (i.e. currency conversion from foreign currency to New Zealand Dollars)
  3. Bank Transfer fee (i.e. when you withdraw the funds from your PayPal account into you New Zealand bank account)
  4. New Zealand Bank Deposit fee (what your bank charges you to receive the PayPal money in your account)

1. Transaction fee 
PayPal charges a standard 3.9% per transaction, plus a "fixed fee based on the currency received". We make the assumption that New Zealand-based PayPal account holders will want to use the platform to "sell on website, through invoice or email payments overseas" and thus this fee base applies. The "fixed fee based on the currency received" refers to the Foreign Exchange fee outlined below. 

2. Foreign Exchange fee
PayPal charges 2.5% on the transaction value for any item priced and sold in a foreign currency. Per PayPal; "If your transaction involves a currency conversion, it will be completed at a retail foreign exchange rate quoted to PayPal by an international financial institution....this exchange rate includes a 2.5% fee above the wholesale exchange rate at which PayPal obtains foreign currency, and the fee is retained by PayPal. The specific exchange rate that applies to your multiple currency transaction will be displayed at the time of the transaction". 

What does this mean?
  • Basically PayPal uses a market forex rate for converting your transaction currency (i.e. Australian or US Dollars) to New Zealand Dollars, and then adds a fee of 2.5% of the transaction value for doing this. So, whatever you sell, you'll lose 2.5% on foreign exchange fees. 

3. Bank Transfer fee
$1.00 for amounts below NZ$150
Free for amounts above NZ$150

4. New Zealand Bank Deposit fee
  • As at March 2016, no New Zealand bank was charging for inbound PayPal deposits, nor had plans to do so.
  • Delivery time ranged from same-day to up to 7 days.
  • Of the PayPal account holders we spoke to, over 75% received funds in one to two business days following a withdraw request. 

Example:
1. Item sold for AU$299.50, transacted back to New Zealand Dollars.
Transaction fee: 3.9% = AU$11.98 (this actually computes to 4.00% (two decimal places, and we have PayPal for comment). Balance remaining = AU$287.52 

Foreign Exchange fee: 2.5% of AU$ = AU$7.18 (closest estimate)  - PayPal claims to use the "most current exchange rate data", applying a 2.5% fee on top of their "rate data". 

Bank Transfer fee: $0.00, as the balance is above the NZ$150 threshold for free transfers.  

Total PayPal Fees = AU$11.98 + AU$7.18 =AU$19.16 and as a % Fee = AU$19.16 / AU$299.50 = 6.4%

However, PayPal mixes in the Foreign Exchange fee when you transfer the funds to your bank. As the receipt above illustrates, the balance remaining in the PayPal account is to be paid into a New Zealand bank account. The total is NZ$302.62

Comparisons
  • To make sense of the numbers above, and to gain some perspective, we asked two New Zealand banks, Kiwibank and Wesptac, how much AU$299.50 (in "cash") equates to in New Zealand dollars. The answers were almost identical - $308.73 (Kiwibank) and $308.64 (Wesptac) using their online foreign exchange tool. This compares favourably to PayPal's NZ$302.62 balance, considering credit card fees have been included. 
  • We conclude that for convenience, while 6.4% may seem high, the complete convenience of PayPal overshadows the higher-than-expected transaction margins. 
Conclusion and Recommendations:
  • ​PayPal fees, as a percentage of the sale value, fall significantly the greater value of the transaction.
  • We believe fees greater than 6% are slightly steep for foreign exchange transactions, and for lower value transactions, fees will be higher. However, PayPal operates with no ongoing monthly/annual fees or setup costs. 
  • To minimize fees, it is best to wait for your PayPal balance to reach NZ$150 before withdrawing any balances to avoid the NZ$1.00 fee.
  • Furthermore, to eliminate foreign exchange fees, you could purchase items in the same currency as the foreign balance(s) in your PayPal account. i.e. Purchase items in AUD using your AUD balance. 
  • Please note there is no additional fee if your customer pays with a foreign currency card (i.e. uses an Australian or American credit card) as this is part of the PayPal fee. 

PayPal Fees - Sending Money to Friends/Family Internationally

​With two simply clicks, PayPal lets an account holder send money to any other PayPal account holder around the world.  

There are options options for making a transaction:
  1. Payment for "Goods and Services" (free, see "Fees: Paying for goods or services" below. 
  2. Sending money to "Family and Friends". 

Each has a differing levels of fees:
  • 1% of total transfer - available if you use your PayPal balance and/or a bank account.
  • 3.9% + "0.45" of the notional currency being sent, i.e USD0.45, EUR0.45, AUD0.45 (if you pay using your credit or debit card). Your fee will be charged in the currency you are sending, and usually averages around 4%

Forex rate used - 0.6364
The exchange rate is reasonable - the current day rate from ANZ was 0.6464 representing proximity to a major New Zealand bank's own rate, also comparable to Westpac and Kiwibank.

Fees: Paying for goods or services
Please note that if you are "paying for goods or services" there are NO transaction charges or fees paid by the buyer, even if the money is sent in a foreign currency - the seller (recipient of funds) is deducted the standard PayPal fees. 

Conclusion and Recommendations:
  • ​Sending money overseas via PayPal incurs fees for the sender, and the recipient (approx 3.4% of the received balance) so a payment of $100 can see about 7.5% evaporate in fees. 
  • We recommend using your PayPal balance or bank balance to make any overseas foreign currency transactions to avoid fee spikes. 

PayPal: Integrating it with your Business

Despite the fees, PayPal offers a relatively seamless integration and hassle-free transactions for online payments. We've outlined the "best" of these features below. 

PayPal offers easy seamless merchant services

  1. ​PayPal vs "another provider" (such as DPS, WorldPay, Stripe etc) varies on a number of factors Currency (do you need single currency, or multiple currency?), Integration (are you looking for a custom billing system with online payments, or simply wanting to be paid via Xero invoices or on your website?) and Volume (are you expecting a turnover of millions, or one-off transactions?). 
  2. Need to refund a payment? PayPal makes is ONE CLICK easy - compare that to the costs and time spent making bank transfers locally and overseas!
  3. As a rule, the higher the value of the transaction, the lower the "percentage of PayPal fee as total purchase" charged.
​

Merchant Integration - Making Getting Paid via PayPal EASIER

​PayPal is increasingly being integrated into popular eCommerce platforms, accounting software packages and even pay using cardless technology.

We've outlined some helpful tools to make more sales and get paid faster.

Accounting Software
  • Xero - Xero makes it seamless to receive payment with a clever "Pay Online Now" link attached to every electronic invoice you send your customers! Further to that, your Xero dashboard displays a live feed. 
  • MYOB - MYOB makes it less easy in comparison, with no live feed and a manual process to reconcile. 

​eCommerce Platforms
  • Shopify - PayPal is 1 of over 70 options available to Shopify store owners, making it easy and fast to receive payment. 
  • Weebly eCommerce and Wix eCommerce, popular DIY website builders, integrate to PayPal 
  • Etsy - PayPal is accepted as a payment method

In Your Store with Contactless Payment (coming soon to New Zealand!)
  • PayPal Here - After successful roll-outs in England and Australia, PayPal's contactless payment device is destined to make it to New Zealand shortly. 
​

Stores and Service Providers Now Accepting PayPal

  • Beyond transferring PayPal money to your bank account, PayPal has recently added a number of trusted New Zealand retail and service providers that accept payment via PayPal.
  • Brands include Singapore Airlines, Spotify, Country Road, Bendon and Quicksilver.
  • You can check out the full PayPal retailer list which is peridiocally updated as new.