This was a question I’ve been very curious to know ever since Paypal allowed direct withdrawals to local banks and via credit card. This week-end, my CC bills arrived so I’m able to compute the going exchange rates for both withdrawal methods.
I made two 500-dollar withdrawals direct to my HSBC credit card on January 24 and February 12, 2008. The bank exchange rates for those dates are Php41.16 and Php40.77, respectively. The exchange rate that appeared on my CC bill were Php40.42 and Php39.88, respectively. That’s an average of Php0.815 difference for the two transactions.
Note: When withdrawing Paypal funds to a credit card, it will not appear as Paypal Withdrawal in the merchant description as Paypal says it should. Instead, you will see your complete name with ID Code 4029357733 coming from country code LU (Luxemburg).
So, we can now compare both transactions via direct bank deposit or credit card:
Paypal to Bank Deposit: Php0.90 difference + Php200 (Bank Remittance Fee*)
Paypal to Credit Card: Php0.815 difference + $5 (Paypal Withdrawal Fee)
My guess is that the difference in the exchange rates between the bank and the credit card companies are mostly attributed to the fact that they are separate banking entities. Another test to the same bank and credit card company will prove this.
In essence, the only valid comparison between the two is the Paypal Fee and the Bank Remittance Fee which is almost the same amount also. Looks like there’s no significant difference between the two after all (unless you’re withdrawing thousands of dollars at a time).
*The bank remittance fee seems variable and depends on your bank. However, various feedback pegs the amount to Php200, at least for BDO, BPI, Chinabank and Metrobank.