Despite their name, PayPal isn’t always your pal. If you’ve ever purchased something from a foreign online store, you may have found the converted price ended up being a little higher than you expected. Not a whole lot higher, but for me, PayPal seemed to increase the price by around 2%+. The reason is PayPal’s conversion rates are not very good.

It’s also confusing that some sites can show prices in your local currency. However, they don’t actually accept it and bill in their foreign currency, relying on the payment processor to convert. So you may see something showing as $99.99 USD on the site, but when you get the charge from PayPal, it’s $102.32.

I always disregarded the difference and accepted it as a small fee for the use of PayPal instead of giving my credit card number to a foreign online store. I suspect they justify this practice because they lock in the rate for 72 hours. However, this is a pretty much worthless “benefit” because your bank will convert immediately when the charge hits. So unless the currency is extremely volatile, this does nearly nothing. Fortunately, there is a way to use your bank’s conversion rate and it’s really simple. Just do the following:

1. When the initial PayPal window appears, click the “See currency options” link.

2. On the next page, click the box for the foreign currency. Then, click the big blue Pay button at the bottom.

That’s all there is to it.

Now, when you receive your receipt email, it will be in the foreign currency, so you’ll have to check your bank activity to see the converted amount.

Of course, your bank may tack on a conversion fee (mine doesn’t) and I supposed their rate could be higher (mine never is), so YMMV. Try it on your next purchase and see the results. Sure, this practice potentially only saves you a couple bucks for every $100 you spend, but over time, it can add up!

On a side note, this practice seems a bit shady and misleading to the customer. I wouldn’t be surprised if you see a class action suit someday…

Subscriptions

So what about subscriptions, which are automatically paid? Well, if you dig, you’ll find that there is a setting to use your bank’s conversion rate, though it only seems to appear for credit cards, not checking accounts.

1. First, log onto PayPal.com

2. Click the cog wheel in the upper-right to go to settings.

3. Click PAYMENTS at the top

4. Click the Manage Automatic Payments button

5. Click on one of your Automatic Payment vendors listed on the left

6. Next to Payment method, click on the listed payment method.

7. Under the selected payment method, click on See Conversion options

8. Choose to Convert with your Credit Card and then the Agree button. (Note that I only see this option for credit cards.)

Unfortunately, you need to do this for each item, one at a time and I don’t see a default setting. On a related note, I was surprised to find a bunch of entries here that I didn’t even know about.