Which is cheaper - Paypal or Visa?

Just now I was paying for some video editing software I bought off ebay from an Australian seller and as I reached the paypal checkout page and saw the option to choose how the foreign currency amount would be converted I got to wondering (and Googling) as to which would be cheaper - Paypal or my credit card?

For overseas card payments you're offered the option of either letting paypal do the foreign currency conversion (which is the default) or letting your credit card do the conversion.

Thinking that I was bound to be being taken advantage of with the Paypal default I thought I'd do a bit of research into the two options, and was pleasantly surprised.

I bought the Ulead Video Studio 10 software for AUS $17.90 including Airmail shipping to the UK.

Firstly I found from my bank's credit card terms and conditions (helpful copy I found online) that they "will change the amount to sterling at the exchange rate used by the payment system and will charge 2.95% of the value of each foreign-currency transaction".

Then I Googled across a very useful Visa Exchange Rate calculator that lets you choose your credit card currency (GBP), the purchase currency (AUS $), enter your bank fee (2.95%), and in return are provided with a handy little print-out-and-put-in-your-wallet exchange rate table as a ready reckoner for when you're overseas.

Today Visa's exchange rate for AUS$ to GBP is 2.16 to 1, which means that with the bank fee my purchase will cost £8.53.

In comparison Paypal offered to charge me £8.37 using their own AUS/GBP exchange rate of AUS $2.13665 to £1.

So even though Visa was giving me a better exchange rate this was more than wiped out by the credit card overseas handling fee.

I thus paid with Paypal and saved myself 15p which I will be investing wisely !

By the by, the video editing software is so that I can try over the Christmas break to put together for our website some videos of our Brittany Gite. Next up I need to buy a firewire card ... so I'm back off to ebay for that purchase ....