Save Money By Changing This Paypal Currency Setting

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When you travel to another country it is common to be asked when paying with a credit card if you want to be charged in the local currency or in US dollars. While it may seem counter-intuitive at first, the correct answer is virtually always to be charged in local currency as otherwise you are very, very likely to lose out on a less than favorable exchange rate. Of course you also want to be sure to pay with a credit card that does not charge a foreign transaction fee so you aren’t hit with a roughly 3% fee by your bank every time you use your card abroad to pay in local currency.

 

I knew that #traveltruth, but I had never dealt with this issue from my home when using Paypal online to pay for services from another country. I’m sure some of you have already experienced this phenomenon, but if you haven’t yet, be aware that you have to be on guard when using Paypal to pay for services billed in a different currency or you may end up wasting money on unfavorable exchange rates because of a Paypal default setting.

To give an example, I recently had a £600 bill to pay via PayPal and when I went to pay it I was surprised that it was displaying the price in USD.

PayPal Conversion Fee.jpg

Not only that, but I was surprised that the converted total was as high as it was, as I figured that it would convert to less than $800 USD. Turns out that the default setting in PayPal seems to be convert the transaction to the currency of the credit card you have on file, at least for Visa and MasterCard cards.

You can change the setting to bill you in the currency listed in the seller’s invoice by following several steps, but it isn’t an intuitive process so I’ll outline how I got it done.

To change the conversion settings, log into your PayPal account and then click on “Payments” on the top bar. Next, select “Manage Pre-approved Payments”. From that screen you can select a tiny “Set Available Funding Sources” link as shown below.

Paypal Funding sources.jpg

On the Manage Funding Sources screen you can click the hyperlink “Conversion Options” by the Visa and MasterCard cards to change their conversion settings.

Paypal Conversion Option.jpg

You can then click off of the default setting on top and instead have Paypal bill your card in the currency listed on the seller’s invoice as indicated by the second option.

PayPal Conversion Options.jpg

Once I changed this setting I then was able to view and pay the bill in pounds with that specific credit card.

PayPal Exchange Fee Currency.jpg

Now let’s talk again about why I wanted to do that in the first place. Paypal was converting £600 into $802.03, but when I instead paid in pounds and let my bank do the conversion for me I instead paid just $775.32.

Paypal exchange fees.jpg

That is roughly $27 saved by paying in ‘local currency’ and trusting my bank’s conversion rate over the payment system at hand. Have you ever dealt with this issue? Do you have any other money saving tips when dealing with different currencies?

Editorial Note: The opinions expressed here are mine and not provided, reviewed, by any bank, card issuer, or other company unless otherwise stated.

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  1. This is a huge helpful tip! I’m an American living in Canada and Paypal won’t let me have 2 accounts in 2 different currencies. My default account is in U.S. dollars and in order to send money via my Canadian bank account, I’d have to convert my U.S. paypal account to an Canadian paypal account. Due to the conversion fees paypal charges, I try to avoid using it as much as possible.

    However, there are times that I do have to send money for excursions when we travel to foreign countries, so this will save us a few bucks.

    Thanks!

  2. Thanks for this great tip.

    The same thing applies when paying outside of the country. More and more merchants are offering to bill your card in dollars instead of local currency. Sounds like a nice service, right? Wrong! What you’ll find is that you pay more in the conversion rate than if you just let your bank do it. I always refuse. I even saw an overseas bank ATM make the same offer. Decline, decline, decline!

  3. Amazon does this as well if you are purchasing on another country site, eg Amazon UK. They also do it if you purchase on the US site stuff a foreign credit card. Best to turn the currency converter off and have it charge in the currency of the credit card country

  4. Alternatively, just pay with an Amex card as they don’t allow merchants, including Paypal, to run these conversion scams with their cards.

  5. Yes, this is called “dynamic currency conversion” (DCC). It’s an outright scam designed to separate uninformed consumers from their money. Many hotel receptionists and store clerks don’t understand the way it works, so don’t rely on their advice. Always pay in local currency (and, if a merchant charges you in US Dollars without authorization, you can dispute the charge with your credit card company. For Visa, specify chargeback reason code 76; for Mastercard 4846.

    Some merchant credit card terminals try to mislead the customer. For example, the display may read “USD $187.12”? You have to reject this, and sometimes perform additional steps, to be billed in local currency.

  6. Thanks for the heads up. It’s a definite scam. I don’t usually need to go through Paypal when dealing with foreign payments, but will be on the lookout in the future. I’m interested to read the way they word the two payment options – making it soooo much nicer to do the ripoff way! An accurate wording would be:

    * Use PayPal’s conversion process to pay a lot more because we think you’re too dumb to figure out currency conversions and we want to make money.
    * Use your card issuer’s method and you’ll pay a lot less because we can’t rip you off.

    I think the very nature of their wording is a deceptive business practice that makes me think a lot less of PayPal.

  7. Summer,

    Thanks for that helpful tip! I stopped using PayPal for such foreign transactions because I couldn’t figure out how to change this annoying default setting.

  8. DCC is the biggest legalized scam. I am so disappointed that Visa and MasterCard allow/ encourage this.

    Boils my blood every time it happens (e.g., a lot with restaurants or doctors in Hong Kong). Often your choice of local currency will be ignored, either willfully or it seems pre-set (and staff either really have no clue or just claim to be oblivious).
    Thanks for this article.

    I am switching most of my overseas spending to Amex because they don’t have DCC. I understand their exchange rates are slightly worse than Visa/ MC (if you happen to actually get their exchange rate, not the DCC rip off) but I just cannot support the DCC scam. Only if more customers desert Visa/ MC, then hopefully will they learn that ripping off customers (or more precisely, enabling merchants to rip off customers) is a bad strategy.

  9. Hi. I believe this applies if I’m being invoiced in Euros… BUT does anyone know how to get this to work if I’m getting paid in Euros and need to convert it to US $? It seems I’m getting charged about a 3% conversion rate from Paypal. Thanks!

  10. I am wondering – my Amex card (I am a canadian, paying an american bill (USD) but I have a canadian amex card) Automatically wants to pay the listed USD amount, ok. So I am not getting charged the sad 1.23 CAD to the US dollar.

    However, I am seeing my card charges a 2.5% fee of the converted amount.

    So if my bill is 122.50 USD, paypal wants to charge me 158.87 CAD with my VISA card.

    Just called Amex, And they are WORSE, they are giving a conversion of 1 USD to 1.25 CAD PLUS 2.5% of the converted amount ontop of that. (so even if they did not charge a fee, Paypal’s conversion rate is still better than AMEX.)

    So no, it is not a scam in all cases. I will have paypal convert my invoices.

    I think it pays to fact check because it could go either way, depending on your card. Thanks for the info!

  11. I recently checked between what my bank would charge and what paypal was charging for me to pay, as an American in USD, for £60 GBP and there was a $2.90 difference in what Paypal was charging me in conversion compared to what my bank would charge.

    They clearly intend to take advantage of consumers laxity on currency conversion to net a higher conversion rate to make a bit more cash than what the bank will convert for in most cases. I wouldn’t say its a scam but just a matter of convenience(since otherwise, you’d have to try to find out by yourself what your bank will cost you to convert).

    It doesn’t hurt for consumers to know this option exists though. A smart spender should know their options and not just take whatever is most convenient.

  12. Hi, would you please be able to update this article with the current screens and I can’t seem to be able to find this setting on Paypal anymore? Thanks

    • I could not find it either at first. but you have to go into settings (the cogwheel symbol). then go to “payments”. then “manage pre-approved payments”. then this is where it gets difficult to find but scroll down and you will see something that says “can’t find what you are looking for? Try the managed pre-approved payments page”. click on that link to “pre-approved managed payments page”. then you will come to the screen that has your accounts and you will see “set available funding resources”. press on that and then follow the instructions from the article

  13. just don’t forget to do that every time you add a new card to your paypal account.

    as Fara commented, you have to go through the settings at the moment (it looks like they keep trying to make this feature impossible to find).

  14. Thank you, I was about to use my paypal account to pay a euro transaction, but noticed a $45.00 price difference when paying in US dollars. I read your article right on time and switched the settings… that’s important info and you saved us consumers from “sneaky business”

  15. I have a bank account and a credit card linked to paypal.

    Do I need to uncheck my bank account and just leave the credit card checked in the “Manage Funding Sources”?

  16. At least Amazon checkout provides you with clear options to pay in either home or local currency. Paypal making us go through this rather hidden process is very sneaky to say the least. I do recall these options being made available at checkout a long time ago if I remember correctly.

  17. I’ve known about this for ages, but PPal continually seem to change it back to what they want….their method of conversion. So during an online transaction always check it is still correct, if possible.

    As well, they continually make it harder and harder to find this setting when logged in, for all the obvious reasons. And if you contact them about this, you’ll only get back a form email with totally unrelated information telling you how to change a host of other card parameters…..except what you want. If it has changed location again, dig around and find it in the most unusual spots!

    Very deceptive and think of all the money they are making on this.

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