What Currency Is PayPal and How Does It Work?

PayPal serves as a widely used online payment platform, connecting individuals and businesses across the globe. Given its international reach, the platform inherently deals with numerous currencies. Understanding how PayPal manages these different currencies is important for anyone conducting transactions. This article explains how PayPal handles currency, from your account’s primary settings to the specifics of currency exchange.

Understanding PayPal’s Default Currency

PayPal does not operate with a proprietary currency; instead, user accounts are linked to a specific default currency. This default currency is typically determined by the country where your PayPal account is registered during initial setup. For users in the United States, for instance, the default currency is generally the U.S. Dollar (USD).

Your default currency plays a role in standard transactions. When you receive funds without a specified currency, or send money from your primary balance, these transactions typically occur in your default currency. Users can generally view their default currency settings within the “Wallet” or “Money” section of their PayPal account. In some cases, users may also have the ability to change their primary currency.

Managing Multiple Currencies on PayPal

Beyond your default currency, PayPal allows you to manage and hold balances in various international currencies simultaneously within a single account. This functionality is useful for individuals and businesses engaging in cross-border transactions. If you receive a payment in a currency different from your default, PayPal automatically opens a new currency balance for that currency within your account.

When sending payments, you can select a currency different from your default, allowing you to send funds in the recipient’s local currency. This is done during the payment initiation process. PayPal also enables users to convert currency balances from one currency to another directly within their account. This conversion feature is typically found in the “Wallet” section, where you can initiate a conversion to another supported currency.

PayPal’s Currency Exchange Process

Currency conversion on PayPal occurs when a transaction involves different currencies and a direct exchange is necessary. This happens if you send money in a currency you do not hold sufficient funds in, or when you receive money in a foreign currency and wish to withdraw it to a local bank account. Making a purchase in a foreign currency where your account balance is in a different currency will also trigger a conversion.

PayPal applies its own exchange rate for these conversions, which includes a spread or fee added to the wholesale interbank rate. This markup typically ranges from 3% to 4% above the base exchange rate. Before confirming any transaction requiring a currency conversion, PayPal transparently displays the exact conversion rate and the final converted amount.

If you receive a payment in a foreign currency that requires conversion to your default currency, the recipient typically incurs the conversion fee. If you send funds in a currency different from your funding source, the sender generally pays the conversion fee. For purchases made with a linked card, users may have the option to choose between PayPal’s conversion rate or their card issuer’s rate.