PayPal and Bank fees for currency conversion. Am I paying twice?

I bank with Commonwealth and use MasterCard via PayPal for online purchases. When it’s an international seller, PayPal charges a conversion fee. Even though the amount is now in AUD, Commbank charges 3% for an international transaction. So that’s two fees, which seems like double dipping to me.

Well, no - they are different types of fee, and a transaction can attract both fees.

These articles might make it clearer:

The best ways to pay when shopping on overseas websites -

If you’re shopping on an overseas site, the foreign exchange rate is just one thing to think about when considering the cost. Different payment options may have fees you need to take into account. We look at the various options plus the traps to watch out for.


Paypal and Combank each have their respective hands out. Some history is that once upon a time the banks had the equivalent of a monopoly on foreign currency denominated transactions and added their (commonly) 3% fee atop any markup they may also have had on the xrate.

Enter Paypal and other payment services that did the currency conversion and pocketed a markup and often the 3% leaving the ‘noble altruistic banks’ without their profit. In a stroke of genius the banks then levied 3% for either or both a currency conversion and having the transaction processed offshore even if in $AUD.

FWIW Paypal has a very poor exchange rate even against Australian banks that are generally poor themselves. Paypal provides services for merchants but at a relatively high cost to the business and consumer when all is said and done.

This blog post explains how to bypass the Paypal rip and use your bank’s xrate. Note that even if one has a fee-free card Paypal still takes its cut(s) although the card issuer may rebate it, depending on the details of the transaction.

Some businesses have started to use Paypal as their processing service, a different agreement than their Paypal payment service if they have one. As payment services have proliferated so has the cost and opaqueness of how profit gets added to or skimmed from each transaction.


I’ve noticed similar with Bankwest - subsidiary of CBA, although the small fee is a holding fee and the charge doesn’t go through.

Always select the foreign country currency or deselect the Paypal conversion option. That way your bank’s card will perform the conversion. If you have one of the transaction fee free credit cards, you’ll find that zero fees and the conversion rate is very close to the inter-bank rate. I’ve verified that many times by comparing transactions against the rate shown on

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Paypal almost makes the banks’ fees look altruistic. Worth a read if you use it.

Pretty good business model…if you’re the business.