How PayPal’s Paper-Check Payments Will Affect Lives in India? [FAQ]

(Update: Issue is resolved now. PayPal resumed electronic withdrawals again. I doubt, if they were suspended ever!)

This morning, like most of Indian PayPal Users, I woke up to read an email by PayPal saying,

…From July 29, 2010 onwards, you will only be able to request for a cheque withdrawal of funds from your PayPal account…

Few lines down the lane the said electronic withdrawal option will be disabled for Indian users. Normally, PayPal charges $5 as fees for withdrawal by check but in this case, that fees will be refunded.

Their official newsletter, like other official newsletter leaves many questions unanswered and below are my own answers to some questions I received from fellow bloggers and publishers.

Which currency PayPal use while issuing a check – USD or INR?

I haven’t used PayPal’s check-withdrawal method but except Google AdSense, all paper-checks I received till date are in USD.

So I am sure that PayPal checks will be in USD. PayPal representative confirmed that will send check in local currencies i.e. INR.

How many days will it take to clear PayPal Checks?

After requesting a PayPal check-withdrawal, PayPal takes 4-6 working days before actually issuing you a check. Added to it are postal delays. My Google AdSense checks arrive in 5-7 days from Singapore.  But PayPal check will take more time as they are coming from US.

Finally, if you have account in same bank through which PayPal issued your check, check will get cleared on the same day or on next working day by latest. If your bank is different, it can add upto 5-7 days interbank clearance delay.

So total time can vary from 15-30 days, where as PayPal officially estimate upto 45 days time.

Do Indian banks charge for depositing foreign currency checks?

(UPDATE: PayPal sends checks in local currency i.e. INR, so this question of currency conversion doesn’t arise in PayPal’s case. Still following info is still valid for other USD checks deposited in Indian banks.)

Yes. Most banks do. Processing fees (or service/other tax) can vary from bank to bank. Also, it may depend on transaction volume. Moreover, it may or may not reflect in your account statement as it can be added directly to the currency conversion charges only.

Example: To further clarify this, let us assume you are depositing a check of 100USD in Indian bank and you read currency conversion rate is 1 USD = 47.00 INR. Now, Bank-A might give you flat currency conversion rate of 45 and deposit 4500 INR in your account. Another bank, Bank-B, might give you better currency conversion rate of 46 but will charge 100 INR as transaction fees and 10.3% service tax on it. This way Bank-B will deposit first 4600 INR in your account and then will deduct 103 INR as fees, leaving 4497 INR in your account. 😉

This must be a temporary issue as PayPal is not charging $5 as check-withdrawal feed. Right?

Only god, Government of India (specially RBI – Reserve Bank of India) and PayPal officials know if this is temporary issue or not.

PayPal is not charging $5 because as any good corporate house, it’s not wise to charge your customer for an option when you are not giving them alternative. Plus, even if PayPal decides to bear $5 fees, they will be already earning much more than that from each publishers as their per transaction fees!

How should I plan my withdrawal?

Unfortunately, in this case we do not have many choices to plan.

On an average, it takes 15-30 days for any USD-paper check, issued from US, to deposit in your Indian local bank account.

Its time to recall “saving” lessons taught by our parents! 😉

What are PayPal alternatives?

There are same old and not-so-pretty alternative available – MoneyBooker, Xoom, etc.

Out of all of them, I used Xoom only in past. It was much faster and better than PayPal then but I am not sure if Xoom is still working.

If you have used any alternative in past, please let us know. 🙂