Wise vs PayPal vs Wire: Cheapest Way to Pay Overseas Contractors

The $2,000 test case

You owe a contractor in the Philippines $2,000 USD. They want pesos. Here's what each method actually costs.

Method 1: Wise

• You send: $2,000 USD
• Wise fee: ~$13 (0.6%)
• FX: mid-market rate (actual market rate, not marked up)
• Contractor receives: ~$1,987 worth of pesos
• Speed: often arrives in minutes; some Philippine routes take a few hours
• Total cost: ~$13 (0.65%)

Method 2: PayPal (international business payment)

• You send: $2,000 USD
• PayPal cross-border fee: ~4% + fixed ($84ish)
• FX: marked up 3–4% above mid-market
• Contractor receives: ~$1,840 worth of pesos (if they convert to pesos in PayPal)
• Speed: instant transfer, delayed withdrawal
• Total cost: ~$160 (8%)

Method 3: Bank wire (SWIFT)

• You send: $2,000 USD
• Your bank's outgoing wire fee: ~$35
• Receiving bank's intake fee: ~$15–$25 (comes out of the received amount)
• Intermediary bank fee (sometimes): ~$15
• FX markup: 1.5–3% (varies by bank)
• Contractor receives: ~$1,875 worth of pesos
• Speed: 1–5 business days
• Total cost: ~$125 (6.25%)

The verdict

Why PayPal is so expensive

PayPal stacks three charges:

1. Cross-border sending fee (often 4% for business-to-personal international)
2. Currency conversion markup (3–4% above mid-market)
3. If the contractor withdraws to local bank, another small fee

PayPal gets away with this because it's convenient and contractors already have accounts. The cost is real but hidden.

Why bank wires are expensive (and slow)

SWIFT — the inter-bank messaging protocol for international wires — involves 2–4 banks in the chain, each of which may take a fee. Your bank tells you the fee is $35; your contractor gets hit with another $15–$25 on the receiving side, and sometimes an intermediary correspondent bank takes another $15. The final amount received is often $40–$80 less than you thought you sent.

Add a 2–3% FX markup that your bank doesn't disclose on the statement, and you've lost another $50 on a $2,000 transfer.

When wires still make sense

• Very large payments ($50k+) where the fixed fees become trivial
• Countries where Wise doesn't operate
• Contractor insists on wire (rare)
• You're already moving money through treasury/accounting systems that only support wires

When PayPal still makes sense

• Small payments where the fixed fees are minimal
• Contractor doesn't have a bank account and only uses PayPal
• You want the payment instant (Wise is fast but not always instant)
• You need buyer-seller dispute protection (rare in contractor context)

Country coverage comparison

Platform	Send countries	Receive countries
Wise	40+	80+
PayPal	200+	200+
Bank wire	Anywhere SWIFT goes	Anywhere SWIFT goes
Payoneer	200+	200+
Deel / Remote	200+	150+

Other options worth knowing

Payoneer

Popular with freelancers on Upwork/Fiverr. Low sender fees. Contractor fees depend on how they withdraw (bank vs Payoneer card). Mid-tier on cost; strong on coverage.

Deel / Remote

Contractor management platforms that also handle payment. Free contractor tier at Deel (you pay transaction fees only). Worth it if you want automated W-8BEN collection and invoicing workflows.

Crypto / Stablecoins (USDC, USDT)

Technically cheap on transfer fees. Hassle: contractor has to have a wallet, off-ramp to local currency themselves. Tax treatment is more complex for both parties. Not recommended for most cases.

What US tax reporting changes by method

None of these payment methods change what you owe the IRS. For non-US contractors with W-8BEN and work performed outside the US, no 1099 or 1042-S regardless of payment method.

But note: PayPal business and credit card payments are excluded from 1099-NEC reporting because they're reported by the payment processor on 1099-K. So if you pay a US contractor via PayPal, you don't issue a 1099-NEC — PayPal issues a 1099-K. Don't double-issue.

Setup recommendation

1. Open a Wise business account (free)
2. Fund it via ACH from your business checking
3. Add each contractor as a recipient (one-time)
4. Pay invoices in minutes after that

For US-based payments to US contractors, stick with ACH from your business checking. Wise and similar services are for cross-border specifically.