As of 2017, more than 200 million people use PayPal. Founded in 1998, and now owned by eBay, PayPal serves as an online payment system. It allows its users to send and receive money, transfer funds, and it can even serve as an alternative to banking. These days you can even acquire a PayPal card. Similar to a debit card, it allows you to use funds from your PayPal account wherever you make purchases. So, what are PayPal Fees?
As with any traditional banking system, PayPal charges fees on certain transactions. When sending money to friends or family, when purchasing goods or services, you might pay a percentage of the money you spend.
What Are PayPal Fees?
PayPal, after all, isn’t a not-for-profit organization. Like most financial institutions, generating revenue is part of its objective. Unlike traditional banks or credit unions, however, PayPal doesn’t require a minimum deposit. Instead, they generate most of their revenue through fees charged for certain transactions, typically 2.9% + $0.30. Note that this price reflects fees on domestic transactions within the United States of America. Although it’s possible to transfer money or to make transactions internationally, those fees vary. To find out more about international fees, PayPal encourages you to read through their user agreement. There, you’ll find all the information you’ll need.
The addition of fees depends on different kinds of transactions. Exactly, what are PayPal fees, you might ask.
- Sending personal money. If you’re sending money to friends and family, then you’re not hit with a fee.
- Sending personal payment money. If, however, you’re sending money to friends or family to make payments—for example, to buy a car or repay a loan—expect to pay a PayPal fee.
- Purchasing goods/services. You also avoid fees when you pay for a good or a service.
- Selling goods/services. If you’re the seller receiving payment through PayPal, on the other hand, then you’ll pay the fee noted above.
If you want to withdraw money via check, you will also be charged a fee of $1.50.
How Managing PayPal Fees Can Help Your Business
According to some sources, as few as 7% and as many as 22% of Americans either don’t have bank accounts or don’t use their accounts. Many elect to use everything from check cashing services to pawn shops to online payments companies. Since PayPal boasts over 200 million users, some of whom might not otherwise have a bank account, you can tap into a pool of users that some online sites can’t access. Amazon, for example, doesn’t accept payments through PayPal. If you sell anything consumers can find on the web’s largest seller, this can give you an advantage if potential customers use or prefer to pay through PayPal.
Another perk to accepting PayPal payments is not a minor one. You should consider it in conjunction with the information in the preceding paragraph. Users don’t even need a PayPal account. As long as they have a credit card, a debit card, or a pre-loaded debit card, they can pay via PayPal without having to open an account or sign in. This feature might further expand your pool of potential users.
10 Ways to Successfully Manage PayPal Fees
1. Know the Fees
Importantly, PayPal’s fees are reasonable when you contrast them with many merchant accounts. You should take this into consideration when weighing whether or not to use PayPal.
2. Organize Your Budget
Although you can’t typically pass those fees along to the consumer, it is possible to anticipate them and roll them into other fees, such as payment processing fees, for example. If you choose to integrate the fees into other procedures, make certain to educate your customers. Don’t leave them wondering, asking What are PayPal fees?
3. Know What You Need
If you choose to accept PayPal payments, keep in mind that you don’t need a merchant account.
4. Use PayPal’s Features
Unless you or your business have developed specific procedures for invoicing, you can take advantage of PayPal’s records system. The system allows you to send invoices through your account. This could be a more efficient way of invoicing customers.
5. Plan Invoices
If you choose to invoice through PayPal, you might want to establish an extra step in your internal invoicing procedures to integrate your invoices with PayPal’s. This could help keep your accounts payable and accounts receivable departments in sync.
6. Know When You Don’t Pay
Transferring your PayPal balance to your bank account doesn’t require paying any fees. However, the transfer itself can take anywhere between 1 and 4 business days, depending on your bank. Keep this delay in mind by integrating it into your accounts receivable procedures.
7. Handle Shipping
PayPal’s customer service tends to err on the side of the consumer, not the business. If you’re selling tangible goods, make sure to ship it via Priority Mail—if you’re using USPS—or other means that offer free tracking.
8. Keep Tracking
Tracking is crucial as it provides solid evidence that the customer did, in fact, receive the product.
9. Shipping Insurance Is Also Recommended
Again, PayPal tends to side with the consumer. If, for example, a product was damaged due to carrier error, PayPal can refund the customer’s money. Insurance could circumvent that, saving you from unexpected losses.
Keep in mind, however, that the sender—in this case, you or your business—will be responsible for filing the claim. Since carriers require evidence, retain good relations with your customer to increase the likelihood that they’ll take photos on your behalf.
10. Expect More Fees
If your business is steady, PayPal’s fees might add up over time. Fortunately, fees related to your business are tax deductible. So, don’t forget to exploit that when it’s time to pay the tax man.
Without question, accepting payments through PayPal offers the possibility of expanding your user base. As we noted above, even consumers without PayPal accounts can pay through that service. Although the fees are low, they are tax deductible, which further incentivizes using PayPal as an additional payment option. Since the service tends to err on the side of the consumer, you should anticipate certain known losses, such as damaged or mis-shipped items. Also, try to refrain from explicitly passing PayPal’s fees onto your customers. If you approached this article with the question What are PayPal fees? we hope we’ve answered it.
Have you had good or bad experiences with PayPal? Do you know a trick to dealing with or exploiting their fee based system? What are PayPal fees you’ve encountered that we haven’t covered here? We’d like to hear from you—or anyone who has integrated PayPal into their business.