Cheapest and Safest Way to Pay on Alibaba in 2021

Cheapest and Safest Way to Pay on Alibaba in 2021

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Like many e-commerce guys, I frequently use Alibaba to find factories around the globe to manufacture goods and have been trying to find the cheapest and safest way to pay on Alibaba. I tested and tried almost all the available Alibaba payment methods. With my orders now climbing to the 10’s of thousands of dollars, this has become steadily more important.

Alibaba has a few different payment methods. I want to ensure that the safest payment method is used both for the protection of my money and for the protection of my rights as a buyer, and all for the cheapest cost to me. We’re trying to run a business here!

The most common Alibaba payment methods:

  • PayPal
  • Wire bank transfer (Telegraphic Transfer – T/T)
  • Debit/credit card payments
  • Western Union

Alibaba Secure Payment with Paypal

PayPal is the safest of the four Alibaba payment methods, and also is one of the most common payment methods. It affords some payment protection with the ability to open a payment dispute if there is a problem and receive a complete refund (Read more about secure payment with PayPal here). Paypal is a very safe payment gateway, which protects you against payment fraud.

PayPal logo

It doesn’t however, provide any buyer protection for example if the goods you receive are substandard in quality or arrive three months late with half of it missing. The transaction fees are also quite high. It costs the seller in this case the Alibaba suppliers a nifty 5%, which you the buyer, will usually end up covering. If Paypal is your preferred Alibaba payment method, make sure that the seller has a PayPal account and ask for a payment link.

Bank Transfer

Money Transfer

Bank transfers also referred to as a Bank Wire Transfer or Telegraphic Transfer is a very common and standard payment method. In simple terms, the money is sent directly from your bank account to the supplier’s bank account. It can be done by physically visiting your bank branch and completing the bank transfer or if available via online banking (depending on your bank you might need the international payments option active). If used with Alibaba Trade Assurance (more about this payment process later in the article) it can offer a very secure payment method.

Debit/Credit Card payments

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Credit/Debit Cards compared to other payment methods are the easiest, most convenient, and one of the most common payment methods. It’s as simple as entering your payment details into the Alibaba payment system. It can also be used together with Alibaba Secure Payment (trade assurance), making it a safe payment solution. The only drawback of this Alibaba payment method is that banks and credit card companies charge high processing fees and offer bad exchange rates. You might also have limits on the maximum transaction amount.

Western Union payments

Western union logo

Western Union can be used to make an Alibaba payment. Currently, it is only available for buyers from the US and it has a very low maximum transaction amount of 2500USD. It supports only payments made in USD. This payment option has many limitations and I have personally not tested it. To find out more about other payment options you can visit Alibaba’s help page here or contact Alibaba customer support. Payments done via Western Union are also eligible for Trade Assurance cover.

Alibaba Trade Assurance – The Safest Way To Pay on Alibaba

To improve the safety of the buyer/seller exchange, Alibaba has created an escrow service called Alibaba Trade Assurance. Which does what it says on the tin, and is a truly secure payment service. Alibaba acts as a third party and holds the funds until the goods are delivered. This allows us as the receiving party, to open a dispute should we be unhappy with the service.

How to pay on Alibaba

I always ensure that my manufactures accept payment by Trade Assurance, as it is the safest way to do business on Alibaba and is the most secure payment system. I’ve made around 70 orders using Alibaba Trade Assurance and have never run into a problem, I’m not saying that it can’t happen though. In my opinion, this is one of the best Alibaba payment methods.

smallogo

Alibaba secure payment is the best way to avoid payment frauds – a trade assurance supplier is easy to verify – they should have the logo on their Alibaba account.

Ok so that’s the safest way, now what’s the Cheapest Way to Pay on Alibaba?


PayPal is great and a secure payment method, but is best when making small orders such as samples and prototypes where the protection is worth the fee. However, PayPal payment option can’t be used in conjunction with Trade Assurance and has a higher transaction fee, bummer.

But Debit/credit cards and wire bank transfer can be used with Alibaba Trade Assurance.

Previously I’ve used a business debit card to make purchases and eaten the 2.5% fee (now risen to 2.95%). Kindly your bank will also provide a less than desirable exchange rate if for example, you’re in the UK with a GBP account, like me. The payment is swift arriving in 2-4 days and fine for smaller volume orders however when ordering $1000’s worth of product, the fees and exchange rate become more worrisome and result in a higher transaction fee.

Thus, to pay suppliers we are left with the bank wire transfers. Traditionally considered a riskier and cheaper way to pay on Alibaba suppliers however, if used in conjunction with Trade Assurance, the funds will be sent to an intermediator bank account owned by Alibaba, not the manufacturer’s unrecognizable and anxiety enducing Chinese address. The funds will only be released to the manufacturer when we have received the goods and are happy.

A wire transfer can be completed by going into your bank or by using online banking. I bank with NatWest, who charges a hefty bank transfer fee for international payments and provides another suboptimal exchange rate.

In the below tables I compared the available payment options and their costs. For transfers done from USD accounts there are no currency exchange fees, only international bank transfer fees. I also compared the price of a $1000 transfer done from a UK GBP account. Please note that I didn’t take in to account the intermediary bank fees. From my experience they range anywhere from $20 to $50. Depending on the order value. Some sellers ask to add this amount to the purchase value, others don’t. Additionally PayPal payments might occur extra costs. Sellers sometimes add $10 – $20 to the total price for costs associat

Compare Alibaba Payment Costs

In the below tables I compared the available Alibaba payment methods and their costs. For transfers done from USD accounts, there are no currency exchange fees, only international bank transfer fees. I also compared the price of a $1000 wire transfer done from a UK GBP account. Please note that I didn’t take into account the intermediary bank processing fee.

From my experience, they range anywhere from $20 to $50. Depending on the order value. Some sellers ask to add this amount to the purchase value, others don’t. Additionally, PayPal payments might occur extra costs, and increase the transaction fees. Sellers sometimes add $10 – $20 to the total price for costs associated with Paypal payments on their side. Another variable is the currency exchange rate. To get the latest market currency exchange rates visit the TransferWise calculator here.

Average cost to send $1000 from your USD account to an Alibaba supplier USD account

Bank Transfer
* transfer fees $20 up to $80, we used an average of 40$

$1040.00

Debit Visa and Mastercard
* fees 2.95%, Amex fees 3.5%

$1,029.50

Western Union
* only available for US customer 1.8%

$1,018.00

Paypal
* possible additional costs - depends on the seller

$1,030.20

Transferwise
* international transfer fee $1.05

$1,001.05

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Average cost to send $1000 from your UK GBP account to an Alibaba supplier USD account

Bank Transfer
* transfer fees £10 up to £20 + currency exchange markup

£755.00

Visa and Mastercard
* fees 2.95%, Amex fees 3.5% + currency exchange markup

£778.00

Online transfer - EU only
* min. $15 dollar fee + currency exchange

£750

Paypal
* possible additional costs - depends on the seller

£770.00

Transferwise
* fees + real market exchange rate

£730.69

Related: The ULTIMATE TransferWise Review | How Does it Work | TransferWise vs PayPal vs Revolut

This drove me to look for alternatives


I now use TransferWise, as an alternative to a traditional bank transfer. It is a free to use online payment service who have banks in multiple countries to eliminate international exchange fees (it’s more clever than that but keeping it billy-basic). They are simply the cheapest way I’ve found, to send money internationally and have very low transaction fees for online transfers.

I like their website, it allows you to see how much it will cost to send a payment with no hidden charges. It also gives a comparison to the UK banks prices which is constantly updated.

On a recent $3000ish payment to China, I paid £17 in fees. NatWest would have charged me close to £100 after the exchange rate and fees were applied.

Here’s an example of how it works, if I was going to send $8000, it would cost me £25.46 in fees with a great exchange rate.

TW Ex1

Now compare the price to the banks, the savings are clear.

TW Ex2

If I used HSBC for example, I would be $207.90 further out of pocket!!

These savings really do make a difference, enough to compel me to write an article about it. I didn’t realise these amazing payment services existed – I thought that we had to wait for cryptocurrencies to bring the international payment and bank transfers prices down.

TransferWise can be used as a traditional bank account. You get your bank account details and can have multiple currency accounts. They use a novel concept that I’d encourage you to read about on their website to enable their cheaper pricing. Who would have thought it would be my countryside, bed & breakfast owning father that would discover them and tell me about it – good work! So far, used with trade assurance suppliers this is one of the safest and cheapest Alibaba payment methods.

Parting thoughts – How to Pay on Alibaba using Transferwise

So to summarise my thoughts on the matter: to avoid payment fraud use Alibaba Trade Assurance as a prefered Alibaba payment system. It works like a trade insurance and makes it easy and safe to pay suppliers and to cover you for any issues with the goods. Upon receipt of the escrow bank account, use TransferWise online transfer to cost effectively send the money across, voila. Cheap and safe complete payment solution, with a minimum service fee.

This article is angled towards the Amazon FBA and eCommerce audience looking to pay on Alibaba however, TransferWise can be used for anything and everything, international or not. They are my new favorite money saving ally and a great alternative to tranditional bank accounts.

Related: How to Start an Amazon FBA Business 6 Step Guide

I hope this has inspired you to do a bit of research around payment options, how to pay on Alibaba and save some hard-earned capital – I know it was a revelation for me.

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Take care,

Dom Sign off

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