paypal exchange rate used as hidden fee (scam)

[Bejoner]

As title states, essentially i found out that paypal uses bad exchange rates as hidden fees.

I wanted to buy something halfsies with a friend, them in US, me in EU, seller in US.

The total price was $193. My friend decided to send $100 rounded, paid $4.99 for sending to friends/family. I received €86.61, at an exchange rate of 1.1546 (€ to $, same below for consistency).

When i went to pay the seller, the exchange rate had "mysteriously" dropped to 1.0508, charging me €183.66 for the $193 total.

This is a 10.4% difference - so a chunk of the money that my friend paid simply disappeared into the "exchange rate", without mention of any fees.

Add in the $4.99 fee my friend paid and the $11 the seller pays on receiving the money (they're a smaller seller, communication about such things is easy), the total money paypal took on a $193 payment was $36 or 18.6%. Even disregarding the seller's fee for taking money, it's still a 12.9% markup for the privilege of using paypal, as currency conversion using their (apparently fake) numbers is mandatory.

How is it legal for paypal to charge 10%+ extra on top of the actual sum without mentioning any fees anywhere? I imagine if paypal accurately displayed how much money they take from transactions as fee, competition would be harsher on the company.

[kernowlass]

@Bejoner 

Currency conversion fees are clearly listed in your paypal wallet to check before you send funds.

[Bejoner]

When i send a payment or check the currency conversion in my wallet, it lists a conversion rate and nothing else. No fee is listed.

Some fees can be understandable (eg. credit cards and the like charge 3-4%) but sinceince it isn't actually displayed anywhere (you just need to send & receive, then do the math on the two rates you got right after one another) and it's a double digit % gain for paypal, it certainly seems like a scam; the fees are high and explicitly hidden.

[inda1177]

Thank you for speaking up your experience. I had similar issues from a 2-3 times sending money for donation using PayPal, and it end up with I paid so much more than what I donate.. I was shocked when I saw my credit card bill was bigger than what I could afford. A bit traumatic using PayPal now.

[TheLML]

It's even worse than that.

DCC (Dynamic Currency Conversion) is used when you pay by card in a different currency all the time. You can pick whether you want to pay in your currency or the local currency. You should always pick the local currency, as the payment processor uses this to give you a worse exchange rate and make money off of it. Just as PayPal does, too.

With PayPal, however, their exchange rate is always selected by default. You can select to pay in the target currency and let your bank/card issuer do the conversion.

This is MasterCard's guidance on DCC:
If the cardholder does not explicitly choose to have the transaction completed in their
billing currency, it must be processed in the local currency. DCC must not be selected in the
cardholder’s absence.

Visa's guidance on DCC:

Require the cardholders to indicate whether they accept or decline using the DCC service.

PayPal clearly fails to adhere to this, always preselecting their rate and having you click to then choose your bank/issuer to do the conversion.
But it gets worse. If you change the amount that you want to send, PayPal will ask you which card/bank account you want to use all over again and then defaults back to their exchange rate. In the past, they even changed it back when you switched from one card to another after selecting that you want your bank's exchange rate. At least right now this seems to not be the case.

But then, when you pay through a shop and select PayPal and their website opens in a separate window, you may get scammed even harder. During that checkout process, it will gladly ignore your change to use your bank's exchange rate at times. This has happened to me more than once already. Even restarting the process doesn't fix it. Here is a short video showing how I cannot select to pay in USD and it always defaults back to EUR and their exchange rate. Even when changing the card:

[removed]

A lovely dark pattern is also the exclamation mark when you select the non-PayPal exchange rate. Making the user think that it's something bad, because it's red.

I've already filed a complaint with my local consumer advice centre (Verbraucherzentrale).
Additionally I've raised the issue with MasterCard (as my cards are from MasterCard).

[shlul]

Exactly! It's a fraud
AND they changed the ux lately such that it's even harder to change the conversion rate

I will file a complaint in my local government as well and use any legal way to fight it on behalf of all users. 

[Temp20240327E]

the most atrocious thing is the inability to opt out in all scenarios.

I have my auto billing setup to use a specific card but if for some reason the fraud 2FA is triggered I don't have the opportunity to authorise the payment PayPal will automatically take a backup card and apply the conversion which I have zero chance to opt out of.

[Mic_Lessard]

I was shocked today by the rather significant amount of money I was losing when a company reimbursed me in CAD converted to USD to my Paypal, and then trying to transfer that USD to my bank which is in CAD.  It is not a plain conversion, there is indeed a pretty big hidden fee, though no fee is shown. 

Actual case :

192.90 CAD was reimbursed to my Paypal at 134.98 USD ; though the true amount paid was 141 USD yesterday.

That 134.98 USD, when I try to transfer it to my CAD bank account, is further reduced to 174 CAD.

So I am losing, out of the blue, 18.62 CAD (-9.65%) because two "special" conversions were done by Paypal.

Conclusion : I will not transfer to my bank account and will leave it on Paypal to be used for USD transactions.  This is rather discouraging for international trade between Paypal accounts.

[Tutubunnie]

This is total scam! It also happened to me that they didn’t show the hidden fee. I was about to send money to my own account (from one country to another) and without knowing that they charged me more than 5% (the way they wrote made me into believe I’ll receive a specific amount, but turnt out to be much lower). It’d be just fine (though a bit too expensive) if I can receive my own money in a week or so (my transaction was Jul 22) bcos I was in need of money in that bank account soon. But when I logged into my receiving account, they said that for some reasons I don’t remember they will hold my money “a bit” longer (they didn’t say that in the beginning) and I’ll receive the money not any earlier than Aug 5 (my expectation was 3-4 days as they had promised earlier). I’ll be in that country again before that date and could bring cash by myself so why would I need their service then? So I refund my own money and ended up losing so much money just for nothing - no real complete service received! It just showed that on the screen that they would return the full amount, that’s why I clicked on “refund”. But imagine! My bank deducted me 14210 TWD and I only received 1408 back. I lost 5.64% just for nothing! Shame on you, PayPal! You’re too greedy! That’s why eBay stopped working with you. Last time I bought something on EBay for 5189 TWD, and then they refunded me 5108 TWD, only 1.56%. Again, shame on you PayPal!