Moneygram vs. PayPal vs. Xoom: Who Has the Lowest Fees?

PayPal, MoneyGram, and Xoom are three leading money transfer services that enable the transfer of funds between parties. The companies charge different fees for users depending on factors such as the originating country and the receiving country, the size of the transfer, the receiving account of the funds (bank account, other transfer account or debit/credit card) and whether the transfer is between family or in payment for goods. Considering a broad number of different services, PayPal appears to be the cheapest. It is also the service provider of the three that enables the most variety in types of transactions.

If a person wants to send funds to another person within the U.S., whether to another PayPal account or bank account, the transfer is free for PayPal users sending the funds and free for those accepting the funds. Both MoneyGram and Xoom charge some sort of fee when non-business entities send each other funds. PayPal is also an attractive choice for shoppers, as there is no fee to use PayPal; it is like using a bank account to pay for goods and services online. PayPal can also be used in stores.

MoneyGram is more expensive to use for transfers between individuals in the U.S., with a flat $5 charge to send amounts between $1 to $49 and a flat rate of $11.50 charged on amounts between $50 and $499. MoneyGram's fee drops to 2% on amounts of $500 and above, with a maximum amount of $10,000 per transfer.

Xoom differs from PayPal and MoneyGram in that the service cannot be used for fund transfers between individuals within the U.S. Instead, Xoom is for the exclusive transfer of funds from senders in the U.S. to recipients in other countries, such as Mexico and the Philippines.

PayPal's fee structure for merchant transactions is different from its personal account transfers. PayPal charges between 2.5 and 3.2% plus a flat rate of 30 cents on a transfer of $100 in standard fees for merchants selling goods and services online, including eBay sellers and private businesses that use PayPal as a payment option. When the amounts increase, the percentage fee charged does not deviate substantially, going up from 2.5 to 3.2%.

For micropayments, which may be transferred when an online small business owner sells items for prices less than $10, the fee charged to merchants to accept funds from customers is closer to 5%.

Neither MoneyGram nor Xoom's services are specific to merchant fees, and neither transfer company serves as a potential payment option for online shoppers and sellers.

Money can be transferred for free internationally if both parties have PayPal accounts. This makes PayPal a competitive force in the world of bank transfers when sending U.S. currency internationally. When foreign currency is accepted into another country, PayPal's fees become more comparable to that of a traditional bank.

The number of countries that can receive funds from the U.S. through MoneyGram is extensive, though compared to the flat rates offered by Xoom, it is more expensive. Sending $2,000 to a Mexican bank costs between $20 and $41 depending on the pickup agent. The same amount sent to China incurs a fee of $16.

Xoom applies special rates to transfers of less than $3,000 for the 40 countries it serves. Vietnam and Argentina may accept transfers for a fee of $2.99, while transfers to Mexico, Canada, Ireland, the Philippines, Greece, Australia, Austria, Belgium, Bolivia, Brazil, Columbia, Italy and more incur a fee of $4.99. The same amount can be sent to China and Hong Kong for $8.88. There are more specific fee structures for Bangladesh, Chile, Costa Rica, El Salvador, India, and Pakistan, some of which are based on the currency exchange rate.