Moneygram vs. PayPal vs. Xoom: An Overview

PayPal, MoneyGram and Xoom are three leading money transfer services. The companies charge various fees based on originating country and receiving country; size of the transfer; whether the recipient account is bank account, debit or credit card or other transfer account; and whether the transfer is between family or in payment for goods. PayPal appears to be the least expensive. Also, among the three, it provides the most variety in transaction types.

Key Takeaways

  • PayPal, MoneyGram and Xoom can be used to send money to recipients in the United States.
  • PayPal does not charge a fee if both sender and recipient have a PayPal account and the funds do not come from a debit card, credit card or PayPal credit.
  • MoneyGram charges $1.99 if no debit or credit card is used.
  • Xoom charges $5.99 for transactions up to $999, and $9.99 for transactions over that amount.

Transfers: PayPal vs. MoneyGram vs. Xoom

PayPal does not charge a fee, either to the sender or recipient, when funds are sent within the United States. Both sender and recipient must have PayPal accounts. The funds must come from a PayPal Cash, PayPal Cash Plus or bank account linked to the PayPal account. If the funds are coming from a credit card, debit card or PayPal Credit, it charges 2.9% of the transaction plus 30 cents. PayPal also does not charge a fee for shoppers, whether online or in stores. It is like using a bank account to pay for goods and services.

MoneyGram appears to be more expensive. Users can estimate fees on the company's website. The company charges a flat $1.99 fee on transfers when the funds come from an online bank account. This fee applies whether the customer is sending $1 or the maximum $10,000. If the funds come from a debit or credit card, MoneyGram charges $1.99 on transfer amounts up to $200. On sums greater than $200, MoneyGram charges $1.99 plus 1% of the transaction amount. Additional fees apply if the recipient picks up funds in person at a MoneyGram location.

Xoom, which is owned by PayPal, charges $5.99 on transactions up to $999, and $9.99 on transactions of $1,000 or greater. Funding sources include PayPal, bank account, debit card or credit card (though additional fees may be charged by your card's issuer). Transactions of $10,000 or greater require 2-3 business days to process. Users can also estimate fees at Xoom's website.

When sending money abroad, the service provider typically earns money on the foreign currency spread in addition to the stated fees being charged.

PayPal Merchant Fees

PayPal offers a host of payment processing services for merchants. Its standard transaction fee is 2.9% plus 30 cents when online merchants receive funds from another U.S.-based PayPal account. If the PayPal account is located outside the U.S., the fee is 4.4% plus a fixed fee based on the currency. For in-store sales, the standard transaction fee is 2.7% inside the U.S., and 4.2% outside the U.S.

For transactions below $10, merchants pay 5% when the funds come from a U.S. PayPal account, and 6.5% from accounts outside the U.S. An additional fixed fee based on the currency would apply. PayPal offers other merchant services such as subscription billing and mobile card readers for accepting debit and credit card payments.

International Transfer: PayPal vs. MoneyGram vs. Xoom

PayPal charges a 5% transaction fee when U.S. account holders send money to other PayPal account holders located outside the U.S. A minimum fee of $0.99 applies, and the maximum fee is $4.99. If the funding source is a credit card, debit card or PayPal credit, the account holder pays an additional 2.9% of the transaction amount, plus a fixed fee based on the currency.

MoneyGram operates in more than 200 countries and territories. It has digital capabilities in 64 countries and about 350,000 physical locations that are either company-owned or operated by a business agent. When it comes to global money transfers, the company earns revenue in two ways: on the transaction fee, and also on the foreign currency spread. A customer sending $990 to a bank account in Mexico would pay "no fee" if the funds originate from an online bank, and $2.99 if the funds originate from a debit or credit card. If the funds are being sent for cash pick-up, the fees are $3.99 and $13.89 respectively. As of April 2020, MoneyGram is quoting an exchange rate of 22.8422 pesos to the dollar.

Xoom, which also makes money on foreign currency transactions, offers a slightly better exchange rate of 23.1511 pesos to the dollar as of April 2020. However, its fee structure is higher. On a $990 transfer, it would charge users $4.99 if the money comes from a PayPal balance, "no fee" if the funds comes from a bank account, and $24.99 if paying with a credit card or debit card.