eBay

gotwhatchuneed · ‎12-23-2012

I am hoping someone can help me out. Quite often I deposit a set amount of money say 100 dollars and then make purchases until i reach that limit.

My problem is that quite often Ebay displays the Canadian dollar as stronger than the U.S. dollar and then Paypal is the opposite displaying the U.S. dollar as stronger. It causes me a problem every once in awhile when these 2 numbers don't match up. I go to check out only to find i have over spent so some unlucky seller or 2 is gonna get an E-cheque as payment.

So is there a better way to track purchases and get the Paypal exchange rate before I actually check out? You would think since Ebay owns Paypal the exchange rates would always be identical but they aren't lol , they never are the same.

femmefan1946 · ‎12-23-2012

The exchange rate changes constantly, with the ones the public sees being changed a couple of times a day.

I have a nephew who is a currency trader in The City (London) and his whole job is tracking those changes, which actually happen several times a minute.

So, your best bet is to give yourself a cushion of about 10% to allow for the changes. If you have $100 in your account, in other words, don't spend over $90.

pierrelebel · ‎12-23-2012

"You would think since Ebay owns Paypal the exchange rates would always be identical but they aren't"

That is correct. The conversion rates are different.

Two factors:

1) eBay's approximate conversion (shown in the listings) is based on wholesale rate and does not include the currency conversion fee charged by credit card or online payment processors like PayPal (2.5%)

2) conversion rates fluctuate from one day to the next, one minute to the next. However neither PayPal nor eBay, nor your bank nor the Post Office change the rate every minute. So there could be substantial differences if the currencies fluctuate a lot on a given day.

grannio204 · ‎12-23-2012

... Ebay displays the Canadian dollar as stronger than the U.S. dollar and then Paypal is the opposite displaying the U.S. dollar as stronger.

I can't understand this either. I know how often exchange rates change throughout the day, but they don't often go from the Canadian dollar being worth more, then less than the US dollar on the same day. It seems PayPal values the US dollar more than the Canadian dollar all the time, regardless of the exchange rate.

There has been as much as 6 cents difference, but PayPal still thinks the US dollar is worth more. It doesn't change from positive to negative that quickly.

pierrelebel · ‎12-24-2012

"I can't understand this either"

The question often arises when the Cdn$ and US$ trade around parity with each other.

For example, if the wholesale conversion rate is US$1.00 = Cdn$ 1.10 (meaning the US$ is 10% stronger than the Cdn$), when viewing a US$100 listing on eBay.ca you would see an approximate conversion value of Cdn$110. So far, so good

Now, if you purchase the item for US$100, you will pay Cdn$ 113 (not $110) since the payment will include a currency conversion fee. It does not matter if you pay through PayPal or with your credit card or purchase a US$ money order at Canada Post, the payment will have a conversion fee (2%-3%) added to the wholesale conversion value.

It is also possible that the Canadian currency has weakened between the time you saw the approximate converted value on eBay and the time of eventual payment (a few days later). Possibly an extra 1% or even 2% may have have been added to the payment. The same possibility exists in reverse where the fluctuation will work in your favour.

While the above example is relatively easy to understand because you deal with a US$ much stronger than the Cdn$, it gets a bit more foggy when their values are closely related.

For example, if the Cdn$ is worth a bit more than the US$ (US$1.00 = Cdn$ 0.99), that US$100 listing when viewed on eBay.ca will offer an approximate value of Cdn$ 99.

However, at time of payment, you will pay Cdn$102 which will include a foreign exchange conversion fee (2%-3% depending on the method of payment).

This is how you see eBay offering a conversion rate slightly below parity while the payment will be slightly above parity.

The same is true for sellers.

If they sell an item for US$100, worth Cdn$99, they will receive Cdn$ 96 only after the conversion fee is deducted from their receipt.

Financial institutions and others handling foreign exchange conversion make money both ways - when they sell a currency and when they buy a currency. Both buyers and sellers pay the fee - usually hidden within the conversion value.

For example, let's assume the US$ and Cdn$ trade at par (US$1.00 = Cdn$1.00).

Go to your local bank branch and ask the teller to purchase US$1,000. The bank will charge you Cdn$ 1,025. As soon as you receive the US$1,000 (so no currency fluctuation takes place) go back to the same teller and ask to convert that US$1,000 into Cdn$. The bank will give you Cdn$ 975. You end up losing $50 for the exercise (you paid Cdn$ 1,025 you received Cdn$ 975).

The bank makes money when selling you the foreign currency and once again when buying the foreign currency.

If you do the same exercise at the Post Office (buying a money order in US$ and immediately cashing it), it will cost you $60 as Canada Post works on 3% conversion fee each way.

What many find confusing is that when you see US$100 = Cdn$ 99 it actually means that the Canadian dollar is worth more than the US$.

Confusing maybe but factual ! 🙂