How to Pay a China Supplier in 2026: T/T, L/C, Wise & PayPal Compared

How to Pay a China Supplier in 2026: T/T, L/C, Wise & PayPal Compared

First-time buyers usually ask me two questions in the same breath: "How do I know the factory is real?" and then, quieter — "And once I know, how do I actually pay them without getting burned?"

The second question gets far less attention than it deserves. Every year I watch buyers lose real money not on a scam order, but on the payment method itself — wiring funds through the wrong channel, handing over a 100% deposit on a shaky new supplier, or sitting on money that's frozen mid-batch because their Letter of Credit was drafted like a shopping list. This is the practical payment guide I give my own clients, written from the sourcing side here in Shanghai.

Here are the four ways people actually pay Chinese factories in 2026, what each one really costs, and which one fits which situation.

Your Payment Options at a Glance

  • T/T (bank wire transfer): the default for nearly every order. Cheap to send, wide acceptance, but zero built-in buyer protection.
  • Letter of Credit (L/C): bank-backed, safe for big amounts, but slow, paperwork-heavy, and unforgiving to draft.
  • Wise & fintech FX tools: the smart-money option for smaller orders, often halving your effective transfer cost.
  • PayPal: tempting for convenience, but the most expensive and the least friendly to either side on B2B freight terms.

T/T Wire Transfer — The Default, and Why You Should Still Use It

T/T remains the payment method for the vast majority of China trade, because it's simple and every supplier accepts it. In practice, my clients wire a 30–50% deposit to confirm the order, with the balance due before shipment (for smaller orders) or upon presentation of shipping documents (for larger ones).

The cost reality is where people drift off. Your bank quotes a headline "transfer fee," and that's only the beginning. A typical bank wire from the US or Europe to China stacks up quietly:

  • Outgoing transfer fee: $20–$50
  • Bank's FX spread: this is the real tax — often 1–3% of the amount hidden inside the exchange rate, not shown on any receipt line
  • Correspondent / intermediary bank charges: $15–$30 that gets silently deducted from the amount the factory actually receives
  • Receiving bank fee at the China end: a further $10–$30

Add that up and an "inexpensive" wire can quietly cost you 1–2.5% of the whole payment once the FX spread is counted. On a $20,000 order, that's $200–$500 you never saw itemized. T/T is fine — I use it every week — but it is not cheap. It's merely familiar.

Letter of Credit — Right Tool for Five-Figure Orders, Not for the Faint of Heart

When an order climbs past roughly $50,000–$100,000, a confirmed Letter of Credit earns its keep. Here's how it protects you: your bank issues an L/C guaranteeing payment only when the factory presents the exact documents named in it — commercial invoice, packing list, bill of lading, inspection certificate, origin certificate. The goods are already on the water before your money is released. If the factory ships air, or wrong goods, or no goods at all, the documents won't match, and the bank refuses to pay.

That protection is real. But it has a price beyond the 0.25–1.5% bank fee:

  • Speed: an L/C takes days to open and amend. Factories also price it in — expect them to ask for a slightly higher unit price or hold your delivery slot less firmly.
  • Line discipline: the terms must be drafted precisely. A misspelled company name, a vague product description, or a missing signature is a "discrepancy" — and a discrepancy lets the bank sit on payment for weeks while the factory stews and the shipment waits.
  • Not a quality guarantee: the L/C proves documents exist, not that the goods are good. That's what your pre-shipment inspection is for.

My honest read: if you're shipping less than $50,000 worth of straightforward goods from a supplier you've vetted, an L/C is usually more friction than it's worth. It shines on big, custom, or recurring orders where a million in motion needs a bank behind it.

Wise and Fintech FX Tools — the Quiet Cost-Cutter

Here's the tip that saves my clients real money every month. For orders under about $20,000, a fintech transfer service like Wise is typically 0.4–0.6% all-in — versus the effective 1–3% a traditional bank wire ends up costing through fees plus FX spread. Same money arrives at the factory, but roughly half to a quarter of the frictional cost stays in your pocket.

The discipline still applies:

  • Pay to a company bank account. A verified business account in the factory's registered name, matching the supplier's business license. Not a personal account, not a "cousin's" account, not a manager's WeChat account.
  • Confirm the account directly. On your first order, confirm the receiving bank details on a live call or an independently sourced channel — never only by replying to the same email thread where the invoice came from.
  • Use it for deposits and balances under your risk threshold. Fast and cheap does not mean protected; this is still a straight transfer with no escrow.

PayPal — I'd Rather You Didn't

PayPal feels safer because it's familiar, so I have to say this plainly: it is the worst of the four for China B2B. The fees run 3–5%, which on a $5,000 order is $150–$250 straight to the processor. And the protection you think you're buying isn't there for business freight terms — PayPal's buyer-protection logic, built for online retail, gets murky when the "transaction" ends up being a wire on your WeChat chat log days later.

Meanwhile, the factory side is charged again and is often slow to accept PayPal for exactly that reason — which means you wait, or you pay a surcharge. When a supplier does insist on PayPal for a trade-sized payment, I treat it as a yellow flag worth investigation, not a convenience.

The one genuinely safe escrow-style option in the same family is Alibaba Trade Assurance — it holds an order-linked protection, routes payment through Alibaba's guarantee, and covers US-bound shipments within its protection period. If you found the supplier on Alibaba and the order fits under the coverage limits, buying through Trade Assurance beats an unprotected PayPal payment every time.

The Fraud Layer That Applies to Every Method

No matter which channel you pick, the biggest danger isn't the channel — it's the email account takeover. This is the #1 way China sourcing money gets stolen in real life. Scenario: you're three days from wiring the deposit, and you receive an email from "your supplier" with a new bank account, urgent, "our old account is being audited."

The account is the hacker's own. The email came from a compromised mailbox on either side. A few buyers lose the full deposit before anyone notices.

Your defense is boring and it works: verify any change of bank details out-of-band. Video call the salesperson. Call the number on the supplier's original business license, not the one in the email. If the new account and the old account differ, do not fund it until you've spoken to a human being you've spoken to before. I've killed two such attacks for clients this year simply by making them call the office before wiring.

The Rule

Match the payment to the risk: use a fintech wire (Wise-style) for amounts you can afford to lose and suppliers you've vetted, use 30–50% deposits by wire with a verified company account as the routine default, step up to a Letter of Credit once an order passes roughly $50,000, and reach for Alibaba Trade Assurance when you want escrow-style cover without the L/C paperwork. Never pay a personal account, never pay 100% up front to a new supplier, and always verify a changed bank account by a voice call. The factory's price matters — but the channel you send the money through, and the discipline you hold around it, quietly decides how much of your money actually turns into good goods.

I'm Gavin, a Shanghai-based sourcing agent. If you're staring at a supplier quote and a first payment and you want a straight answer on how much to send and how to send it safely, tell me the product, the amount, and how new the supplier is — I'll tell you exactly what I'd do with that same payment, in writing, before you commit a dollar.