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How does “Allowed Currency” work with PayPal? 
 
Angus
Jr. Member
 
Total Posts:  16
Joined:  2008-02-06
 

Hello,
I am thinking about to be accept payment in Australian Dollars mainly - as the company is an Australian based business. But if I want to target international customer, I believe accept US dollars would be a good idea too. From my understanding, Maganto already have currency conversion rate within the system and paypal have their own as well. So if I accept the payment via Paypal, which one will they use?

OR if I simply set Maganto accept Australian dollars only - I believe paypal can still do the currency conversion for people live in overseas and accept their payment, am I right?

Thanks

 
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sumwatt
Jr. Member
 
Total Posts:  5
Joined:  2008-02-07
 

If you set a single currency on Magento, it should only pass the AUD currency. The entire conversion process then takes place at PayPal and AUD is deposited into your PayPal account. 

If you accept multiple currencies at PayPal and Magento can send either currency, you need to be *very* careful here. I don’t know how Magento calculates currency rates (if it does) but you need to be aware than the most often quoted currency rate is the *bank* rate and not the retail rate. If Magento calculates at a bank rate and does the conversion your chosen currency, the buyer will be billed in Magento’s USD rate. When you go to withdraw funds from PayPal you will generally get a retail rate which may be a bit higher than Magento’s rate. There are a couple of tricks to help control those costs in a multi-currency situation:

->Lower value exchanges are generally charged a higher exchange rate. These fees are broken down for you by PayPal and include minor overhead for risk. Higher value conversions tend to have a lower rate. If you look at Bank rate quotes, they are always quoted at $100,000.00 USD. The trick is that if you are accepting multiple currencies, it is cheaper to leave a balance in the foreign currency (USD in this case) and let it build up and do a single exchange rather than many small exchanges.

-> It’s probably a wise idea to look at long-term currency trends. Right now the USD is weak. If it has hit the “bottom” and is expected to rise, it’s better to hold a balance in USD and only do your withdrawls as the value of the USD increases. If the USD falls against the AUD, then you start losing money. Now PayPal isn’t a forex service so you can’t do multiple swaps and play it as if it were a forex market. However if there is enough momentum in the foreign currency going up, you can make some additional gains by taking advantage of the rising value of the foreign currency by converting it at a point where it is higher than when you received it contrasted against your domestic currency. Please note that such a strategy carries significant risk and requires both planning and knowledge. If you ever hear of companies making great profits on changes in currency values - this is where it happens, holding various currencies can give you quite a bit of leverage - and can be a significant risk. I would talk to an accountant on this advice prior to making any decision.

Truth be told, it would probably be easier to process everything in AUD if you are risk averse to changes in currency prices. It’s far simpler. The only downside is that, on occasion, you may get an anger customer who doesn’t realize that the conversion costs card issuers charge can sometimes be a bit asinine. I would put a disclaimer noting that you are charging in AUD and the issuing bank may leverage fees for the currency conversion.

 
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