Should You Use PayPal or Wire Transfer to Pay Overseas Suppliers?

If you’re involved in purchasing wholesale product from overseas suppliers, you will need to provide payment one way or another. Unlike domestic transactions within the USA, checks and ACH are generally not possible with overseas accounts.

Wire transfers, also known as T/T (short for telegraphic transfers), are the generally accepted method of payment. Wire transfers services are provided by most banks, and are relatively routine. It requires the use of a SWIFT code that uniquely identifies the bank at which the supplier has an account at, along with details of the recipient such as the recipient bank account number and address.

Nowadays, however, PayPal has become a common payment option that overseas suppliers have begun to accept. What are the advantages of PayPal, and why is it becoming a popular option?

Advantages of PayPal over Wire Transfer

The first and most immediately noticeable difference between PayPal and wire transfers is the fee structure. Most banks will charge a flat fee for wire transfers – typically $40 or $45 for each wire transfer initiated. On the other hand, PayPal has no fee for the sender, and an approximately 4% fee for the recipient. As a result, PayPal will almost always be a more cost effective option for transactions that are relatively low value – specifically, around $1000 or lower.

Another advantage of PayPal is its speed. Because it is an internet-based transaction, there is no need to wait for any banks to process paperwork or wire transfer requests. As soon as the “send money” button is pressed, the recipient will receive a notification email and can confirm that the funds have been received in their account. This is especially helpful if you need to send money after hours or on a weekend, since wire transfers are typically conducted on weekdays only. If you have an urgent order, this advantage could be a significant factor.

When sending money, PayPal funds can be supplied from a bank account or a credit card. By using a credit card, you can take advantage of the benefits of using a credit card for purchasing products. The primary benefits are: the ability to accrue and pay off a balance over time, the ability to earn credit card points and rewards, and receive the fraud and dispute protection from the credit card company. Generally, your bank will not provide any of these benefits, and therefore the ability to use a credit card for a PayPal transaction can be quite beneficial.

If you are tight on cash, the credit aspect of a PayPal payment funded via credit card can be quite helpful. A wire transfer will require funds in your bank account prior to the wire transfer being initiated, so you may need to wait to have the cash you need before you can even start the wire transfer.

That being said, always use credit responsibly – interest, finance charges and fees can add up quickly.

If things go south with your order (e.g. dispute or fraud), PayPal has a buyer protection program in place, where the buyer can submit a dispute. Alternatively, if the PayPal transaction was funded via credit card, you can also submit a dispute directly with the credit card company. Unfortunately, neither of these options are available when using a wire transfer method.

Disadvantages of using PayPal over Wire Transfer

As discussed above, the PayPal fee structure makes low value transactions cost effective, but high value transactions will get expensive very quickly. For example, sending $10,000 will likely have fees of around $400. Compared to a $40 wire transfer fee, this is a big difference. Since the PayPal fees are incurred by the receiver, you should directly ask the supplier what the fee for using PayPal would be. (Different suppliers may quote slightly different fee rates, but most will ask for approximately 4%).

Even if the PayPal fee is higher than the fixed-fee wire transfer fee, you might be justified in using PayPal over wire transfer for the reasons we mentioned above. In such cases, it would be best to calculate the fee difference, and ask whether or not those advantages are worth that difference.

For example, let’s say you’re trying to make a purchase of $2000 with a new supplier, and have not yet built up the trust to be fully comfortable. The supplier quotes a 4% PayPal service fee, so your effective fee is $80. Your bank’s wire transfer fee would be $40 for the one-time wire transfer, so you would be paying $40 more to use PayPal.

Is the $40 extra worth the benefits of using PayPal? Perhaps you don’t have the cash in your checking account immediately, and getting the order started ASAP in order to meet a customer’s deadline is worth more than $40 – in such cases, PayPal might be the smart option, even if you end up paying more in fees than a wire transfer.

The reality is that PayPal is not an officially recognized payment method in countries such as China. When Chinese suppliers get audited, authorities typically look for the total US dollars received vs total US dollars exported. If the values are not aligned, suppliers may get in trouble for overstating their export goods value (typically done to maximize their export rebate) or understating their exports. PayPal funds received have no way of being counted in a Chinese company’s official ledger.

This means that many PayPal transactions may be made with unofficial accounts owned by individual employees. While this might be less of a concern for smaller payments, do keep this in mind for larger transactions, as there is no way to verify who you are sending your funds to. Even though your purchase is protected by PayPal’s buyer protection program, there is a chance that you technically might be doing business with an individual employee, and not the company.

In some cases, Chinese suppliers may charge even more than 4% for using PayPal. The reason they might do this is to compensate for the lost export rebate that they would have otherwise received for an order paid for via wire transfer. This is because PayPal transactions are not officially recorded in a company’s accounting, and is not eligible for the export rebate. We have seen companies charge as much as 8% for using PayPal.


From a direct cost perspective, PayPal is generally a better choice for transactions that are less than $1000, while the fixed fee of a wire transfer is more advantageous for larger transactions. While at first glance the fee structure difference might make it seem like a simple decision, PayPal does offer quite a few additional advantages ranging from time, credit card use and buyer protection that might make it worth using for transactions larger than $1000.

Despite these advantages, keep in mind that PayPal is considered less of an “official” payment method. It usually makes sense to use PayPal for smaller sample orders when “testing out the waters” and eventually move on to wire transfers for larger, production volume transactions.