Skip to Content

Difference Between PayPal Rate and Bank Rate (With Table)

When you lend money or conduct any transaction, you have to pay interest, which is a small sum of money that you pay for the transaction. Similarly, PayPal and Bank charge a fee on any transaction where there is a cash outflow. Furthermore, they are fixed rates based on a range of transaction values. 

PayPal Rate vs Bank Rate

The main difference between PayPal Rate and Bank Rate is that PayPal rate is the cost responsible for international or domestic transactions made by a merchant account for each transaction. Whereas, Bank rates are the basic discount rates imposed on loans or advances taken by the account holders from the Central Bank.

PayPal rates play a crucial role in both international or domestic transactions of a merchant or account holder of PayPal. According to PayPal, the rate is calculated as a product of Transaction amount and interest rate (depends on the transaction value), adding to its cents which varies 30 to 40 cents. 

In contrast, bank rates are nothing but the interest rate, a charge imposed by the nation’s central bank on their lending money to domestic banks. Generally, short-term loans are subject to bank rates. Moreover, the Bank rate is as in the simple interest formula, such that it is calculated as the product of the Principal, rate of interest in % and time period. 

Comparison Table Between PayPal Rate and Bank Rate

Parameters of ComparisonPayPal RateBank Rate
Meaning PayPal rates are set by PayPal itself, as a cost incurred in domestic and international transactions. The bank rate is simply termed as ‘Discount’ on advances and loans imposed by the central bank. 
RangePayPal allocates an additional amount on each transaction, plus a fixed fee that ranges. The bank rate depends on the bank’s creditworthiness because it varies in many factors, say countries’ economies. 
TypesPayPal rates vary where it fixes according to the type of account a person holds- Customer & Merchant account.There are three types, where bank rates are charged- Primary credit, secondary credit, and seasonal credit. 
CalculationRate is calculated as- Transaction amount x interest rate (depends on the transaction value) + cents (varies 30 to 40 cents)Bank rate is calculated as-Principal x rate of interest/ 100 x time period
ExampleTransaction amount= 200$Interest= 4.4%Thus, 200×4.4/100 + 0.30= 9%, 209$ is the total fee you pay. Principal= 100$Interest Rate= 6% and number of years= 5 Therefore, 100×6/100 x 5= 30%/ 

What is PayPal Rate?

PayPal is an American multinational financial technology company that plays an important role in online transactions of an individual or business. In similar ways, PayPal also charges an amount while transferring money from one person to another. So, the charges placed on an international or domestic transaction are called PayPal rates or PayPal fees. 

Speaking of its rates, PayPal doesn’t charge for purchases and non-merchant accounts, however, it has rates for other sorts of services. Such as, nevertheless, both the recipient and sender have accounts in PayPal, PayPal rates are imposed on instant transfers. So, accordingly, PayPal charges from 1.9% to 5.3% on transaction amount, plus a fixed fee that ranges depending on the country.  

Meanwhile, a consumer can do a feeless domestic transaction, and yet, merchants can pay only for what they sell, regardless of any extra service charges. Furthermore, PayPal rates are so important for merchant accounts, such as it charges 3.00 INR for an online transaction within India, while outside India, it charges (4.40%+ fixed fees) depending on the country. On the contrary, the PayPal rate also has a few drawbacks, including the requirement of transaction fees by other banks, unannounced freezing of accounts, and overpriced international transaction fees. 

What is Bank Rate?

The short-term loans lent by the central bank of a nation to their domestic banks along with an extra fee charge are called bank rates. Moreover, bank rates play a crucial role in a country’s economy in such a way lower bank rates can bolster the economy by lowering the cost of funds for domestic banks, and higher bank rates can weaken the economy by hiking the cost of funds. 

Speaking of the economic crisis in recent years, India has a bank rate of approx. 4.25% according to the Reserve Bank of India. In the US, it is the Board of Governors of the Federal Reserve System that sets the discount and other required bank rates, while it is the RBI in India. In addition to everything, there are three types of bank rates a nation bank charges to domestics; Primary credit, secondary credit, and seasonal credit. 

On the whole, a bank rate works in a way where the domestic banks can request loans from the central bank in order to meet reserve requirements and maintain liquidity. So depending on the financial status and needs, the central bank will impose the bank rates. Besides, a country’s monetary policy determines how much money it can borrow.

Main Differences Between PayPal Rate and Bank Rate

  1. PayPal rate is taken into account when merchant accounts are making international or domestic transactions. On the other hand, Bank rates are discount rates imposed on loans or advances taken by the people from the Central Bank.
  2. Speaking of the ranges, PayPal generally sets from 1.9-5.3% on each transaction with fixed cents that depends on the ranges. Meanwhile, Bank rates vary in different banks as well as the principal amount. 
  3. PayPal rates were introduced by PayPal as a fee charged on seller’s transactions by Peter Thiel and Max Levchin in 1998. On the contrary, Bank rates were largely invented by the father of economics  Adam Smith, Frederic Bastiat, and Carl Menger. 
  4. There are two types of rates, where PayPal charges a fee for a merchant account on every transaction, but not for customer accounts. Nevertheless, the Bank rate normally charges the fees according to Primary, secondary, and seasonal credit.
  5. There are several factors affecting PayPal rates, including fees for each transaction, competition between banks, and so forth. While, for bank rates, these are the factor influences- demand & supply, government policies, inflation/deflation, foreign exchange rates, etc. 


PayPal and Bank rates are charged on any transaction, where cash outflow. Persons withdrawing money, especially sellers and small businesses or merchants, are generally charged a fee for participating in the transaction. Likewise, PayPal rates are known for charging a fixed range of fees on certain transactions incurred by merchant account holders with a fixed percentage of cents.

On the other hand, bank rates are imposed on a person, who is taking loans or advances from central or private banks. Bank rates are governed by the Central government and vary according to the deficit, foreign exchange rates, government policies, and supply & demand for money in the market. 


2D vs 3D x
2D vs 3D

Editorial Staff at Ask Any Difference is a team of experts in the field of "Difference Between" topics and led by Sandeep Bhandari, Piyush Yadav and Chara Yadav. Trusted by over 1.5 million readers worldwide.

PinterestLinkedIn, Facebook