Whether you’re buying products for yourself on Alibaba, or you’re the proud owner of a successful drop shipping business, there’s little that comes close to competing with Alibaba.
The platform offers up millions of products for incredibly low prices that are bound to ensure a good ROI if marketed right. However, being based in China and with some users spending thousands or tens of thousands of dollars per transaction on Alibaba, it’s important to find a safe way to pay.
Here on Extras, we’re suggesting that you consider Transferwise as your preferred payment option because of its great security, consumer protection rights and its low-cost transaction fees.
A Little About Alibaba and Payments
As you might already know, especially if you’re a seasoned Alibaba shopper, the main payment methods on the platform are debit or credit card, PayPal and wire transfers. A vast majority of shoppers do go the PayPal route simply down to the platform’s protections and dispute process.
Though, keep in mind that PayPal doesn’t offer a proper buyer protection service through Alibaba, which means if your order is incorrect or all of the products you purchased are poor quality — you have nowhere to turn.
Tack on the fact that there’s a 5 per cent charge for each transaction, and you might get tired of PayPal pretty quickly.
Up until recently, there weren’t too many payment protections on Alibaba, though the company has now implemented Trade Assurance. This is a type of escrow or fee-holding solution for buyers looking to make use of a fund protection service.
Essentially through Trade Assurance, your funds aren’t transferred to the seller until you’ve received your goods and are happy with the quality and quantity you’ve ordered.
At Extras, we highly recommend that you make use of the Trade Assurance process if you’re running a business and need those added protections to reduce losses should something go wrong with your order.
The Cheapest Option to Pay
As we mentioned above, the safest way to checkout on Alibaba looks to be PayPal or Trade Assurance — they can’t be used in conjunction with one another.
If you’re looking for the cheapest way to purchase a lot of goods on Alibaba, then your options are quite limited, however, there are still some lower-fee options to choose from.
For those with low-fee debit and credit cards, we’re happy to say you can use these cards in conjunction with Trade Assurance. That said, your lower fees will be carried through to Alibaba for your business purchases, and you’ll be protected to boot. All with a lower fee.
The current credit card and debit card fee tier is currently at 2.95 per cent per transition, though this was previously 2.5 per cent. For Australians, you’ll also need to double check the exchange rate and your bank’s fee for this. In most cases, it is quite low, and thanks to most bank’s good relationship with Chinese trade partners, the fee is waived entirely.
As expected, credit card and debit card payments are ultra-fast on Alibaba and you will see the transaction complete within around 3 days in most cases.
However, if your bank does have fees for these types of orders, it might not be worth buying thousands of dollars worth of items for your business if there’s a premium for using a credit card.
The Faster Choice
With those two rather expensive methods out of the way, what we are focusing on now is wire transfer.
A somewhat old school way of making payments, the wire transfer method on Alibaba is the cheapest, and can be used with the recommended Trade Assurance option too. That said, you’re getting those added protections for almost no fees at all — and you can rest assured that your funds are held until you can properly assess your order.
For m ost customers, your bank’s wire transfer option can be chosen in the online banking section of your bank and you’ll be able to find the option for adding the payment address and amount of funds you’ll want to transfer.
The Cheapest Choice
With all of those options above out of the way, we’ll now take a look at Transferwise.
As you may have noticed, all PayPal, credit and debit card and wire transfer payments are rather expensive and especially costly if you’re ordering a tonne of product.
On Extras, we firmly stand by Transferwise as the best online payment method for your Alibaba purchases. Not only is the service almost entirely free, it’s also safe and comes with no global exchange fees for almost all purchases.
To add, the Transferwise website is intuitive and secure, so if you’re new to using external payment methods, you’re not going to be lost here.
In short, an order of around $3,000 will only incur fees of about $20, much less than the typical $100 to $150 in fees you would have been paying with a credit card or PayPal.
Take a look below at how Transferwise outlines the exchange rate and projected fees for their service and other banks:
As you can clearly see, there are some exuberant fees charged by other banking services when making transfers from Australia, the UK and the US to China — and Transferwise waives almost all of these.
With all of the above out of the way, it’s good to know that there are a few different payment methods you’re able to use to purchase on Alibaba. However, depending on your size of purchase and safety requirements, some are a lot better than others.
For high-speed payments for low-cost orders, we would still stand by using PayPal as it’s one of the more simple options. There aren’t too many times we’d suggest using a wire transfer unless you’re looking to urgently move a tonne of cash to your merchant.
As for credit and debit cards, we’d stand by using these methods for one-off payments and not for routine business-focused payments.
In all, Transferwise is Extras’ winner for buying on Alibaba in that it is the most affordable option, comes with buyer protections and also saves you a tonne of money when you’re making a lot of large, routine orders.