Hello, let me start by introducing myself. My name is Karen Li, and I lead U.S. operations for PingPong, which provides bank-beating cross-border payments to more than 40,0000 e-commerce sellers around the globe. Please don’t hesitate to get in touch if you have any questions about the information in this post. My email’s at the end of the article. Hope you find valuable information here to help you increase your Amazon sales profits. Let’s dig in!
Have you ever exchanged currency at an airport while traveling – only to realize you lost a lot of money in the deal and paid unnecessary fees? You weren’t thinking of how much it would cost you. You just needed the convenience, maybe a little fast cash to grab a cup of coffee.
If you’re an Amazon global seller, your sales are taking place in foreign currencies. When you want to bring your money home, you need a way to exchange your profits from foreign marketplaces into US dollars. That always involves paying fees. Unfortunately, you could be paying top rates if you’re using Amazon Currency Converter. The currency converter built into Amazon works conveniently to exchange your money into dollars, but it also costs an arm and a leg when compared to more competitive rates – just like exchanging money at the airport.
What Global Amazon Sellers Need to Know About Currency Conversion
How do you win at currency conversion if you’re an Amazon global e-commerce seller? First, you have to understand the fees you’re currently paying. If you’re using Amazon Currency Converter, start by knowing that you are paying a fee. It’s just that the fee is added to the exchange rate, so you don’t “see” it. According to the Amazon Seller Central page on currency fees, “All fees and charges related to your use of Amazon Currency Converter for Sellers are included in the exchange rate.”
Getting to Know Amazon Currency Converter
The fees aren’t small either. You’re likely paying an estimated 3.5% each time you exchange on Amazon Currency Converter.* If you’re transferring 10,000 a month, that adds up to $4,200 in fees over a year. In three years, your exchange fees will add up to $12,600 – that’s like half a new Camry or two weeks at the Four Seasons Maui.
*The estimated rate is based on actual Amazon Currency Converter transactions between 07/09/2016 – 07/23/2016
Even though Amazon’s rates are comparatively high, it doesn’t mean you’ll get a better deal from a traditional bank. Here’s where it gets tricky: Amazon is quick to point out that the lower rates you’ll be able to find are “generally wholesale or inter-bank rates.” But that’s only part of the story. Yes, bank rates may be high (as high or comparable to Amazon Currency Converter), but banks aren’t your only option.
The bottom line is you gotta shop around to get the best exchange rate. Once you negotiate a better rate, you’ll be bringing home more profits. Let’s take a closer look now at the exchange fees you need to be aware of, so you can understand and compare costs.
Foreign Exchange Fees in Amazon Global Marketplaces
There are a number of ways to avoid the fees built into Amazon’s global marketplaces. Some companies will charge you a fee for withdrawing funds, plus another fee for foreign currency exchange. That means you’re paying double fees. Additionally, some companies will charge a general “transaction” fee. While some form of fee is to be expected, it’s important to understand all of the fees that could come into play with your account.
Currency exchange charges can be boiled down to two types:
- Transaction Fee: This fee is charged anytime there is a transaction in your account. Many companies will charge you anytime there is any type of activity, whether funds are entering (credit) or leaving (debit) your account. This type of currency exchange fee is frequently called a withdrawal fee or transfer fee. These fees are usually made clear.
- Foreign Exchange Fee: Foreign exchange fees, or FX fees, are fees charged for exchanging currencies. This is where it gets much trickier. Often companies claim they don’t charge any “fees” – when what they’re really doing is giving you a poor exchange rate.
How Currency Rates Are Calculated
In currency markets, every transaction is defined by a mid-market rate, which is the mid-point between the bid and the ask prices of the two currencies to an exchange rate, and is also the consensus price of a currency between all the buyers and sellers of the marketplace.
Many payment providers will be able to exchange currencies at a rate very close to this mid-market rate plus a nominal fee to the bank or exchange where they are purchasing the currency. The payment providers will then add their own fee, and call it a foreign exchange fee. You can calculate your embedded or “hidden” foreign exchange fees by analyzing the foreign exchange rate that is given to you by your payment providers, then comparing it to the mid-market rate.
You’ve Gotta Shop Around For the Best Rate
The only way to get around high exchange rates on Amazon marketplaces is to find the best rate, just like you would when traveling to a foreign country. A reputable company should be tyoransparent about their exchange fees and be willing to help you compare costs on cross-border payments and VAT payments.
About PingPong
PingPong was founded in 2015 with the mission of helping global e-commerce sellers keep more profits by beating the rates traditional banks offer. Today, more than 42,000 e-commerce merchants around the world trust PingPong to help them save on cross-border payments, VAT & supplier payments, and more.
We hope this article helped, but we know unraveling currency exchange rates isn’t easy. Karen will be happy to help you uncover all those hidden fees eating into your profits for free. Click here to ask Karen a question or request complimentary help figuring out your currency exchange fees.
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