Beware of PayPal + request for advice

[Oleg Goldshmidt]

Uri Even-Chen <uri at speedy.net> writes:

> I have a problem with PayPal

Uri,

First off, frankly, most of us are on this list to duscuss technical
Linux issues. This is not a PayPal users' or a general "doing business
over internet" help forum. However, let me treat it as if it were a
technical linux question and 1) point out that one is supposed to RTFM
before posting questions here, and 2) attempt to explain a thing or
two anyway.

I don't use PayPal and I am not affiliated with them in any way and I
have no interest in being their apologist. However, a very high
profile business is accused here of charging hidden - and excessive -
fees, and it is conceivable that some members will take this
accusation seriously if it is not challenged.

> - they advertise that you can withdraw
> money to Israeli bank accounts for free.

If they do I am sure their wording is careful not to contradict their
own documentation (see below).

> But the catch is - they deposit to Israeli banks in Shekels, and
> they charge about 3.66% exchange rate fee (undocumented).

Undocumented, huh?

It took me about 60 seconds to go to their User Agreement, find out
that the second section is called "Fees", and find all the relevant
information. I have not compared their fees with those you would pay
for an international interbank money transfer (those are steep), but
PayPal certainly seem to be forthcoming regarding what they charge.

https://cms.paypal.com/il/cgi-bin/?&cmd=_render-content&content_ID=ua/UserAgreement_full&locale.x=en_US

points to

https://cms.paypal.com/il/cgi-bin/?&cmd=_render-content&content_ID=ua/FeesPolicy_full&locale.x=en_US

Are you sure that 3.66% is just the exchange rate surcharge? Can it be
the total transaction fee? What exchange rate are you using as "100%"? 
Could it be, e.g., our Central Bank's "representative exchange rate"
(she'ar yatzig) that is not used for any transactions by anyone but
landlords who still quote apartment rentals in USD?

PayPal say they charge 2.5% above the exchange rate *they* get the
currency at (for all currency conversions, this is not specific to
Israel, nor is the rule that you get the currency used by your bank
and not USD). This is probably designed to cover the currency
transaction fees on small amounts to the bank or brokerage they use
for FX. I expect the rate they get to be different than our
representative rate. I don't expect it to be worse by a whole per
cent, but quite possibly by a few tenths of a per cent, which is why I
am wondering whether the 3.66% is the total difference between the
amount you withdrew and the amount you received and not only the FX
surcharge.

Here are the other fees you might pay:

Unconditional ones:

* 0.5% cross-border personal transaction fee, based on the country of
  recipient;
* NIS1.20 fixed cross-border personal transaction fee, based on
  currency received;

May apply:

* NIS8 withdrawal fee for amounts less than NIS1000;
* possibly fees that the receiving bank charges.

The 2.5% exchange rate surcharge + 0.5% transaction fee charge work
out to about 3%, on any amount. If the rate PayPal use is worse than
the one you use by 0.64% that will give you ~3.6% difference on amounts
greater than NIS1000. The NIS1.20 flat fee is the other 0.06% of a NIS2000
transaction. If your transaction is NIS800 then PayPal may be using a
rate that is 0.5% *better* than what you think it is and you will still
get 3.66% less than what you expect, after the withdrawal fee and the
transaction fees and the exchange rate surcharge (do the maths).
  
Let's say you have a US bank account, transfer your dollars to it from
PayPal for free, and want to transfer it to your Israeli bank. Assume
the same exchange rate is used as with PayPal, but without the 2.5%
surcharge. However, on small sums you are likely to pay a few dozen
shekels minimal transaction fee for an international transfer. Whether
or not it would work out better than PayPal's scheme, I don't know.

In summary, PayPal told you everything up front about their fees, as
manifested by the User Agreement. If you think they charged you more
than advertised, there is a link to their complaints department
on their front page. This list is not the right address, sorry.

-- 
Oleg Goldshmidt | pub at goldshmidt.org