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PayPal Fees Explained—What You’ll Pay and How to Save
PayPal may be one of the biggest payment processing solutions out there. That said, the different tiers of pricing can make it tricky to understand the fees you’ll pay as a seller.
In this guide, we bring you a straightforward look at PayPal business account fees and what the alternatives might look like.
A look at PayPal fees for sellers
PayPal fees are no surprise to seasoned business owners. There are no extra costs for your buyers and they don’t even need a personal account to make payment. As a seller though you’ll need to pay fees per transaction and for other actions you take as a merchant.
Here are the main PayPal business account fees, along with others you may encounter.
The most well-known PayPal fee is the transaction fee. This applies when you sell products and services in-store or online.
There are different rates for each type of transaction. You might also hear this fee described as a payment processing fee.
Currently, there are four different transaction fee rates that apply for sellers. They’re split by whether transactions happen inside or outside the US, then by whether it’s an online or offline sale.
For online sales in the United States, a fee of 2.9% of the transaction amount applies—plus a fixed fee based on the currency. For sales outside the US, the rate rises to 4.4% plus currency fees.
In-store sales in the US have a slightly lower transaction fee of 2.7% plus the currency fee. This rises to 4.2% for in-store sales outside the US
PROTIP: PayPal has a useful table of standard currency fees to help you calculate charges.
While there’s some variation to account for currency trends, most fees are close to 30 cents USD. For complicated transactions, a fee calculator can help you get an accurate result.
PayPal offers two ways to transfer earnings from your PayPal balance to a bank account.
There’s the standard account transfer from your PayPal account to a linked bank account or checking account. This has no withdrawal fee. Funds from your account balance are usually deposited the next business day.
They also offer a faster route for direct deposits using Instant Transfer.
Instant Transfers deposit your earnings to your linked bank account or debit card in minutes. To take advantage of Instant Transfers you’ll incur a fee of 1% of the amount transferred, up to a maximum fee of $10. If you’re regularly making small bank transfers this could easily add up.
PROTIP: To save money on PayPal fees, request Instant Transfers less often or use the standard method.
PayPal Payments Pro and Virtual Terminal fees
PayPal offers you the opportunity to sign up for PayPal Payments Pro. This is a payment gateway that allows you to accept payments through your website. Their Virtual Terminal solution turns your computer into a virtual credit card terminal. This means you can accept payments at retail locations.
Both solutions can be useful but fees vary based on location, so it’s important to know which fees apply.
The current fees for PayPal Payments Pro are 2.9% + $0.30 per transaction for US transactions. For international transactions, they’re 4.4% + a fixed fee. The fixed fee differs between locations, like the standard transaction fees above.
There’s a different fee structure for Virtual Terminal transactions. Domestic fees are set at 3.1% + $0.30. Cross-border transactions are 4.6% + $0.30.
Mobile card reader fees
For many retailers, it’s important to be able to process payments wherever you are. Mobile card readers make it easy to take credit card payments on the move or in remote locations.
PayPal offers a mobile app service for this. There are no startup costs, monthly fees or annual fees—there’s only transaction fees to consider.
For swiped and check-in transactions at checkout, you’ll pay a seller’s fee of 2.7% per transaction. This rises to 3.5% + $0.15 per transaction for keyed or scanned transactions.
Accepting international credit cards is no problem, but there’s an extra 1.5% cross-border fee. A 2.5% currency conversion fee also applies if the customer pays in a different currency.
At some point, you may need to process a chargeback request from a cardholder.
With PayPal, you’ll pay a chargeback fee based on the currency the payment was made in.
There’s a fixed fee for each currency, rather than depending on a same-day currency exchange rate. There’s a list of fees on the PayPal website, all of which are in the region of $20 per chargeback.
PROTIP: PayPal’s chargeback fee is hefty, so you’ll want to minimize the chances of a customer requesting a chargeback.
Customer refund requests happen more often than chargebacks.
In these cases, you won’t be charged a fee by PayPal to process the refund. Unfortunately, you won’t receive a refund on seller fees.
Many sales are straightforward and your PayPal fees should be easy to understand. For the following unique transactions, however, other fees come into play.
Pay close attention to any international sales. These come with an additional 3.0% charge for currency conversion. This is on top of the 1.5% increase on foreign transaction fees compared to domestic sales.
PROTIP: PayPal’s international sales fee can catch people off guard if they don’t usually process international payments.
PayPal users will also be charged for processing American Express® cards.
The American Express® Card usage fees are higher than other transaction fees at 3.5%. These nonstandard PayPal debit card and credit card fees don’t apply to other payment methods. Mastercard, PayPal prepaid Mastercard, Visa, PayPal credit or gift cards aren’t affected.
PayPal sellers may also encounter fees for uncaptured authorization and card verification transactions. Uncaptured authorization is where you authorize a card but no transaction takes place.
Card verification transactions check that a credit card is in good standing before a transaction happens. These fees are small, at 30 cents per transaction, but could add up if you process a high volume of sales.
How to save money on PayPal merchant fees
While PayPal’s fees are a necessary cost, there are ways to reduce their impact on your profit margin.
Here are a handful of ways to save money on your PayPal seller fees.
Apply for a nonprofit discount
If you run a nonprofit you could save money on your PayPal transaction fees.
For 501(c)(3) charities, PayPal offers a discounted transaction fee with no monthly costs. This takes your fee per transaction down to 2.2% + a fixed fee based on currency, a saving of 0.7% per transaction. For funds coming from outside the United States, this fee is 3.7%.
PROTIP: 501(c)(3) charities are eligible for a discounted transaction fee.
Switch to micropayment processing
For eligible businesses, PayPal’s micropayment processing fees may help you save money.
To be eligible, most of your transactions need to be below the $10 threshold. You’ll also need a PayPal Business account.
Under this system, transactions under $10 benefit from a more favorable fee structure. There’s a higher transaction fee of 5% domestic (or 6.5% international), but the fixed fee is much smaller.
The savings may be small, but if you process a high volume of low-value sales this can add up over time.
Look for an alternative way to process payments
PayPal has a large user base and it’s often one of the first payment processing solutions people try out. If your merchant fees are rising or you want a better solution to PayPal international fees, there are alternatives.
There are many service providers and financial institutions that offer payment processing solutions. These include point of sales systems and credit card terminals.
Talk to alternative payment processors to get a feel for what’s available and how it could meet your needs. You may need to share some personal information (phone number or email address) and business details to allow a representative to help.
PROTIP: PayPal is a good option for brand new businesses. If your business is more established, it may be time to upgrade to a more business-class solution.
Knowledge is power
PayPal remains a popular way to receive payments as a seller, for both in-store and online sales.
There will always be fees associated with payment processing. PayPal business account fees are one of the costs of doing business through the platform. Now that you’re familiar with the fees, it’s easier to factor these costs in and make sure your pricing strategy is profitable.
If your business is more established, it may be time to take a deeper look at PayPal’s payment processing fees.
If you’re considering a move away from PayPal, take a look at our guide on choosing the best credit card processing for small businesses.