Does Shopify Charge for Currency Conversion?

Shopify does charge for currency conversion, directly impacting your store's transactions. If you've ever felt unsure about how currency conversion works on Shopify, you're not alone. Navigating through fees and nuances associated with these charges can be overwhelming. Let's clear the air and guide you through this process, detailing the implications of these charges on your operations.

Curious to learn more about how currency conversion impacts your Shopify store? Read on to discover key insights that can help you make informed decisions and maximize your profits.

Currency Conversion Fees by Shopify

The Shopify currency conversion fees are fixed at 1.5% for converting charges from USD to the local currency. This fee covers the conversion costs when transactions are made in a different currency than the card's currency. It ensures accurate billing in the local currency, without hidden markups.

• Currency conversion rate: This denotes the market rate at which one currency is exchanged for another, devoid of any markup. For instance, a conversion rate of USD/EUR 0.8788 implies that $1 USD equals €0.87 EUR.
   
• Currency conversion fee: Shopify charges this fee (in your payout currency) for converting currencies during payment capture. While these fees and credit card fees are not reimbursed upon refund issuance, no additional conversion fees are incurred for refunds or chargebacks. The fee percentage depends on your store's primary country:
   
  • 1.5% in the US
  • 2% in all other countries and regions with Shopify Payments.

Once the currency conversion fee is calculated, it is incorporated into the price paid by your customer to assist in covering your expenses.

Managing Currency Conversion Costs

When managing currency conversion costs in Shopify, businesses need to navigate the 1.5% currency exchange fee and associated charges strategically. Consider the impact of currency exchange rate fluctuations on conversion rates.

To manage currency conversion costs effectively, merchants can consider integrating currency converter apps. These apps automatically updates exchange rates, ensuring your store always displays the most accurate prices.

Shopify also allows manual conversion rate adjustments, which can be beneficial if automatic exchange rates are unfavorable.

Activate Manual Conversion Rates

You can establish manual conversion rates for individual or multiple markets without local currencies enabled from your Markets page. Create separate markets for each country or region where you want to set a manual conversion rate.

However, remember that you can't apply manual conversion rates to your primary market.

The steps are:

1. From your Shopify admin, go to Settings > Markets.
2. Select the market where you wish to include a manual exchange rate.
3. Navigate to 'Products and pricing'.
4. Choose 'Manage exchange rate'.
5. Within the dialog, opt for 'Manual'.
6. Input the desired exchange rate.
7. Save your changes.

You'll be charged a conversion fee for currency conversion. To factor in this fee with your manual rate, simply multiply your rate by the conversion fee for your store's country. For instance, if converting from USD to EUR with a 1.5% fee, the equation would be: 0.90867 x 1.015 = 0.9223.

You can adjust prices along with manual exchange rates. For instance, if your product is priced at $20.00 in USD, and you have price rounding set to the nearest dollar for all markets, you can manage pricing for the Canadian market in several ways:

• Set a manual exchange rate of 1.3 to stabilize CAD price, then apply a 20% price adjustment. The price is calculated as 20.00 x 1.3 x 1.2 = 32.00 CAD.
• Set a manual exchange rate of 1 and apply a 50% adjustment to control CAD price solely through adjustment. The price is calculated as 20.00 x 1 x 1.5 = 30.00 CAD.
• Opt for automatic exchange rates and apply a 50% adjustment to CAD prices. Calculation: $20.00 x (current exchange rate) x 1.5. Prices vary based on current rates with the 50% adjustment.

When changing a market's base currency or switching from manual to automatic conversion rates, the manual rate is deactivated but not removed. If the original market currency is reinstated or manual conversion rates are reactivated, the manual conversion rate becomes active again.
 

Implications of Currency Conversion on Shopify

Analyzing currency conversion implications on Shopify highlights significant impacts on transaction costs and financial planning for businesses. When dealing with international customers, currency conversion can have several implications:

1. Increased Transaction Costs: Shopify's 1.5% currency conversion fee adds to processing fees, affecting the final amount received.
    
2. Varied Payment Methods: Offering multiple payment methods to accommodate different currencies can lead to additional processing fees.
    
3. Price Discrepancies: Fluctuating exchange rates and fixed conversion fees result in price differences between the original currency order and the converted amount in the presentment currency.

These considerations are crucial for businesses using Shopify Payments processing to cater to a global market, manage currency conversion fees, and maintain competitive pricing strategies.
 

Conclusion: Does Shopify Charge for Currency Conversion?

Yes, Shopify does charge for currency conversion, a critical detail for merchants engaging in international e-commerce. With a fixed fee of 1.5% in the US and 2% in other regions, understanding these charges is essential for financial planning and international pricing strategies.

By effectively managing these costs through strategies like manual conversion rates or pricing adjustments, merchants can lessen the impact on profitability. This knowledge empowers Shopify store owners to navigate the complexities of global commerce, ensuring competitive pricing and transparency for international customers.