Small businesses need the ability to accept credit and debit cards. They also need methods for sending or receiving money.
As a business owner, you want to avoid excessive payment processor fees. Does a PayPal account make sense for your enterprise?
What is PayPal?
Founded in 1998 in Palo Alto, California, PayPal is an online payments system that operates in most countries. Both individuals and businesses that use its services pay relatively low fees.
However, those fees are not low compared to the pricing of traditional merchant accounts. PayPal first came to prominence in 2002 when it became the eBay payment facilitator.
PayPal subsidiaries include:
- Braintree
- Honey
- MORE
- Venmo
- Xoom Corporation
- Zettle
In 2020, PayPal’s revenues totaled $21.45 billion.
Are you looking for the fastest safe way to process payments?
How Does PayPal Work?
PayPal is a convenient and straightforward way of transferring money. It is fixed-fee based, based on a percentage of the total payment amount.
People use it by linking a debit or credit card to their PayPal account to make purchases online. People can also use it to send money or receive money securely.
There is no fee for transferring a Paypal account balance to a linked bank account.
What is Paypal Credit?
Formerly known as Bill Me Later, PayPal Credit is a revolving credit card account providing a reusable line of credit. This option allows users to pay for their purchases at the time of sale or make payments.
What are Paypal Business Accounts?
A PayPal business account offers services that are not available with standard PayPal accounts. The company does not charge to set up a business account, but there are additional fees.
Sending money to friends is free with standard, non-business accounts. Businesses should conduct transfers only through a PayPal business account and not use the friends and family feature. Such actions can cause account termination.
What Fees Does PayPal Charge?
PayPal fees depend on the type of transaction, the transaction amount, and whether it is a commercial or personal transaction. Domestic transactions have a different fee structure than international transactions.
PayPal does not charge fees to open an account.
Examples of PayPal fees include:
- Payment processor
- Merchant fees
- Per transaction
- Instant transfer fees
How Can Businesses Use PayPal?
There are several ways businesses can use PayPal.
These include:
- PayPal to PayPal transfers
- Accepting credit cards through PayPal
- Accepting an ACH to PayPal account
When are Paypal Charges Waived?
You can avoid transaction fees by transferring money from your PayPal balance, also known as a PayPal Cash account. PayPal waives the fee when users transfer funds this way.
How to Calculate PayPal Fees
There’s no question that PayPal fees are often confusing. That is why it is wise to use a PayPal fee calculator, which is available online.
How Much is the PayPal Fee for $100?
Currently, PayPal payment processing fees range from 1.9% to 3.5% per transaction, depending on the PayPal product. There is also a fixed additional fee, ranging from 5 to 49 cents.
That means a $100 transaction will set you back between $2.00 and $3.99.
What are the Limits to a PayPal Transaction Amount?
PayPal has per transaction limits. These include:
- $5,000 USD per transaction
- $5,000 USD per day
- $5,000 USD per week
- $15,000 per month
Keep in mind that many banks have their own per transaction limit. This may prove limiting to a small business sending payments.
What Does PayPal Charge for International Payments?
When selling goods or sending money internationally, expect to pay a fixed fee. The amount you will pay depends on the type of payment method.
If sending money directly to another PayPal account funded by your PayPal balance, expect to pay 5% of the transaction. The minimum fee is 99 cents, while the maximum is $4.99.
If funding the transfer by a credit or debit card or PayPal Credit, you will pay a $2.99 funding fee along with a currency-based fixed fee.
What are PayPal’s Payment Processing Fees?
When using PayPal for commercial rather than personal transactions, the following rates apply:
| Invoicing | 3.49% + fixed fee |
| PayPal Checkout | 3.49% + fixed fee |
| PayPal Guest Checkout | 3.49% + fixed fee |
| PayPal Guest Checkout – American Express Payments | 3.50% |
| QR code Transactions – 10.01 USD and above | 1.90% + fixed fee |
| QR code Transactions – 10.00 USD and below | 2.40% + fixed fee |
| Pay with Venmo | 3.49% + fixed fee |
| Send/Receive Money for Goods and Services | 2.89% + fixed fee |
| Standard Credit and Debit Card Payments | 2.99% + fixed fee |
| All Other Commercial Transactions | 3.49% + fixed fee |
| All Other Commercial Transactions – American Express Payments | 3.49% |
Some of these fixed fees refer specifically to foreign currency conversions.
Other payment processors may charge less, especially for high-volume businesses. You can carry Paypal charges as a business expense on your tax return.
What are the Fees for Currency Conversion?
PayPal does not charge a flat fee for currency conversion. PayPal charges 3.5% to convert to US or Canadian dollars. Currency conversion for all other countries is 4%.
While the currency conversion service charge is 4.5%, PayPal reserves the right to charge higher currency conversion fees with notification at the time of the transaction.
PayPal uses a retail exchange rate, which is the wholesale cost of the foreign currency as denominated by an outside financial institution.
What is the PayPal fee for Eligible Charities?
Want to send money to a good cause? Paypal’s transaction rate for eligible charities is a discounted 2.2%, plus $.30 per domestic transaction.
Only qualified 501(c)(3) organizations receive this discounted rate. Organizations that do not hold 501(c)3 status pay the same fixed fee for standard transactions.
What is the PayPal Fee in the UK?
PayPal merchant fees in the UK vary according to the type of transaction.
| A card-funded payment from a user of our Terms for Payments without a PayPal account will incur a 1.20% Paypal transaction fee. Other types of transactions are charged the following: | |
| QR Code Transactions – 10.01 GBP and above | 1.50% |
| QR code Transactions – 10.00 GBP and below | 2.00% |
| All Other Commercial Transactions | 2.90% |
Each type of transaction is also subject to fixed fees based on the sender’s market or region.
How do I Avoid Late PayPal Fees in Australia?
In July 2021, PayPal launched its no-fee Buy Now Pay Later (BNPL) program in Australia. Consumers pay no interest, late fees, or sign-up fees. The minimum value of an eligible purchase is just $30.
PayPal notes its business model does not rely on late fee revenues, adding it believes many people who miss payments do so by mistake and not on purpose. The removal of late fees provides its Australian customers with a secure BNPL service with no risk of late payment penalization.
Can You Perform Manual Transactions with PayPal?
You can perform manual transactions from a virtual terminal. It is also possible to accept PayPal transactions through mobile devices via PayPal Here, which has no monthly fees.
The swiped rate for PayPal Here is a flat fee of 2.75% of all swiped credit and debit card transactions.
The keyed rate is 3.5% per transaction plus a fixed fee.
Does Paypal Charge Other Fees?
Additional fees may apply based on the service.
For instance, the use of a virtual terminal to receive payments incurs a PayPal transaction rate of 3.09%, along with a per-transaction fee of $0.49. There is also a $30 monthly fee.
How to Avoid PayPal Fees
A small business cannot avoid most PayPal fees. However, when making personal transactions, there are ways to avoid fees.
Do not use a credit or debit card when sending money. Instead, send payments via a linked bank account.
By transferring PayPal funds directly to your checking account rather than a credit or debit card, you avoid fees. A bank transfer will take a few days. An instant transfer gets the money into your account right away, but you pay that extra fee of 1% of the transferred amount, with a maximum fee of $10 per transaction.
Note that it is only possible to avoid fees on domestic transactions. PayPal considers a domestic transaction as “occurring when both the sender and receiver are registered with or identified by PayPal as residents of the same market.”
International payments will trigger a fee.
How Easy Pay Direct Can Help
At Easy Pay Direct, we focus on high-risk merchants, but we offer our merchant account and payment gateway services to lower-risk merchants as well.
There are advantages to PayPal. It is arguably the payment service most familiar to consumers, and there is no question it is easy for businesses and customers to use.
That is a moot point for high-risk merchants, as PayPal does not accept them. That is also the case with many of PayPal’s best-known payment competitors, such as Stripe and Square.
PayPal has no monthly fees, but its rates are much higher than most merchant accounts, even for eligible businesses.
At Easy Pay Direct, we’re the easy way to accept credit cards online.
For more information, please contact us at 800.805.4949 or get started here.
