Does PayPal Charge a Fee? Know-How to Reduce Fees on PayPal
When you accept payments through PayPal, you can expect them to take a cut, but is there a way of reducing those fees? Find out in this article!
PayPal has revolutionized the way many businesses of all sizes get paid worldwide. It’s one of those staple payment processors that are pretty great when it works in your favor.
But, the common complaint when using PayPal is the fees.
It’s free to set up and run your PayPal account which is great. Still, I don’t blame you for wincing a little when you see the percentage cut from your earnings.
Here’s what you need to know about PayPal fees, how to find the latest information and how to keep more of the money you earn.
Here’s What We’ll Cover:
Quick Guide to PayPal Fees
PayPal does not charge any fees to open or run a business or personal account with them.
Most personal transactions are called "friend and family" payments. If you are using PayPal for business then this doesn't apply to you.
As a business owner, they charge a % fee on the payments you receive. The type of transaction alters the % they charge you for payment processing. They charge you for withdrawals. You have an additional charge if your business receives lots of international payments in many currencies too.
It isn't as scary and confusing as it seems!
Here is a breakdown of the kinds of fees you can expect to pay as a PayPal account holder in the United States:
- PayPal Fees to Receive Money
- Domestic online transaction - 2.9% + fixed fee of 0.30 USD
- International online transaction - extra 1.5% fee
- PayPal Fees to Withdraw Money
- Local linked bank account - no fee (if there is no currency conversion)
- Instant withdrawal to bank account - 1% fee on the total amount you are transferring
- Withdrawal to linked debit card - 1% fee on the total amount you are transferring
- PayPal Currency Conversion Fee
- Currency exchange fees are complex to predict. You have the transaction exchange rate and then an extra fee for the conversion itself. It can vary between 3-4% depending on who you are paying.
- PayPal Credit Card Processing Fees
- PayPal Here (PoS/card reader) - 2.7% fee
- PayPal Here international transaction - extra 1.5% fee
- Online credit or debit card transaction - 2.9% + fixed fee of 0.30 USD
- International online credit card transaction - extra 1.5% fee
- American Express Payments - 3.5% fee (this % fee is consistent whether it is an overseas American Express payment or a domestic transaction).
Please bear in mind that PayPal fees change very often. PayPal seems to send an email every month to "update you about their user agreement". Do check the PayPal fees page and the Merchant fees page for the most up-to-date information.
Can You Reduce PayPal Fees?
It’s fair to say that PayPal fees are the thorn in our sides as business owners. We love and need PayPal (which is why we have them as an accredited payment processor with us). It is still a pain to kiss 2.9% of your earnings goodbye after every transaction.
Is there anything you can do to reduce your PayPal expense? Here are our top tips:
1. Get Paid Less
You probably gasped just now. You want to be paid more, not less! I agree! By “less” I mean frequency. If you are paid in installments, make your installments larger for fewer processing fees. Instead of being paid monthly, experiment with deposit-50%-50% installment structures. See how it works out for your business and your bottom line.
2. Link Your Bank Account
A withdrawal fee for debit card withdrawal is a sure way to lose money for no reason. It takes a couple of days to link your PayPal account to a US-based account. But once it’s done, you can flow money in and out of that account with no penalties at all.
3. Factor in PayPal Fees When Pricing Your Goods and Services
Everyone is guilty of this. We set an attractive price for our work without fully taking stock of the % we are going to lose to tax, office expenses, and, yes, PayPal fees. Transaction fees are common to all online payment processors. Unless you plan to send invoices and get paid via bank transfer, it is worth reviewing your prices to account for processing fees. A 3% increase never hurt anyone!
PayPal is a wonderful, reliable payment processing service that works for so many business owners. It also hurts every time it takes a cut of your earnings. But once you know the fee structure, you can adapt your billing practices to pay as few fees as possible.