PayPal Fees Guide - What You Pay as a New Zealander

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. ​

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). 

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. 

​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. 

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.

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​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. 

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