If you’re a freelancer invoicing US clients in US dollars, PayPal is almost never the right answer. I’ve used both for over a decade as a digital nomad, and Wise wins by a significant margin on every invoice. If you can swap a client from PayPal to Wise, you can save hundreds of dollars a year.
Here’s what that costs you on a real invoice.
The actual difference on a $1,000 invoice
Let's look at an example using my personal situation. Here's what happens if I invoice a US client for $1,000 and I want to convert it to euro today so I can buy groceries.
The mid-market USD to EUR exchange rate is currently 0.8550, so in a perfect world, I'd receive €855.00. Of course, that's not going to happen but that's the number we want to get as close to as possible.
PayPal
PayPal is the worst way to get paid. All this info is from PayPal's Irish fees page. The numbers will be slightly different depending on where you are in the world, but not so different that the takeaway changes.
Here's how a $1,000 invoice breaks down:
- The client sends $1,000 as invoiced.
- PayPal takes 3.4% + $0.30 as its standard commercial rate plus an extra 1.99% international surchage for a combined 5.39% + $0.30 fee. On a $1,000, that's $54.20.
- $945.80 hits my account and is convereted to EUR at PayPal's rate: The mid-market rate minus a 3% fee. In this case, the exchange rate becomes 0.82935 so the total euro I receive is €784.39.
In total, getting paid by PayPal would cost ~€70.61 combared to the mid-market rate. It's the equivalent of a whopping 8.26% transaction fee.
Wise
Let's look at Wise. Again, all this information is coming from the official pricing pages — and it's backed by my experience using thes service too.
Here's how that same $1,000 invoice breaks down.
- The client sends $1,000 as invoiced.
- I receive $1,000 into my USD account.
- I convert the $1,000 to EUR at the mid-market rate less $5.48 in fees, so the total I receive is €850.34.
That's a saving of €65.95 compared to PayPal and a loss of only €4.66 versus the mid-market rate.
The one caveat with Wise: There's a €50 one-off setup fee. But as you can see, a single $1,000 invoice makes it worth the switch from PayPal.
PayPal’s margin lives in the FX conversion
PayPal is bad for fees, but its really bad for FX conversions. If you think of PayPal as 3.3% + $0.30, it's expensive but not wildly out of whack with bank fees or card processing fees. I'm not happy paying $3.30 out of a $100 invoice, but I understand it.
Tack on a 1.99% international fee and a negative-3% spread on the mid-market rate, however, and it's practically predatory. That's more than $5 in every $100 you earn going on an avoidable expense. But of course, this is how PayPal makes its money.
| Annual US revenue | Wise total cost | PayPal total cost | Lost to PayPal |
|---|---|---|---|
| $12,000 | $65.76 | $990.60 | $924.84 |
| $48,000 | $263.04 | $3,962.40 | $3,699.36 |
| $100,000 | $548.00 | $8,255.00 | $7,707.00 |
Wise’s whole pitch is that they don’t do this. The exchange rate you get is the rate Bloomberg quotes, plus a small transparent fee. It's an entirely different approach. They make money of long term customers and big businesses using the platform because its good, not ripping off people unaware of the alternatives.
Just look at the table above. If you earn $48,000 a year, PayPal could cost you closes to $3,700 more per year than Wise. That's more than $200 per month back in your pocket just by switching.
When PayPal might still win
SEO and balance suggests I should make the case for when PayPal still makes sense. I'm doing it—but with reservations. I suggest moving all your billing to Wise.
If a US client insists on using PayPal and really won't budge, you can choose to fire them or take the hit. I've told clients in the past that I would pay the $20 wire fee if they sent a wire payment and they've done it, so you should push back. They have a bank account, they can pay you by bank transfer into your Wise account. If not, then consider your option.
PayPal also has features like buyer protection and easy checkout integration. If you sell digital products on the side, it might make sense to use. But again, I feel there are better options like Stripe.
In every other conceivable situation, Wise wins.
How to save money by switching from PayPal to Wise
Open a Wise account if you don’t have one—it’s free. Set up your USD bank account number. Add your account details to your invoice (here's how to do it with Fieldfare) and send it to your US cleints. Most are happy to pay with ACH. It's fast, cheap, and easy for them.
If you have to keep PayPal for a few clients, track what it's costing you. The Fieldfare dashboard shows you exactly how much each payment provider cost on every invoice, including the FX margin. Watch it for a month or two and then decide whether you need to talk to your client again.