Understanding PayPal fees

PayPal has become synonymous with online payment — you’ve probably used it this week! Whether you're buying goods from an e-commerce store (like a SendOwl merchant), sending money to a friend, or receiving payments for your services, PayPal is a convenient and widely used system for sending and receiving payments.

However, convenience often comes at a cost, and understanding the PayPal transaction fee associated with using PayPal is crucial for creators who want to leverage PayPal in their business plans. In this guide, we'll delve into the various fees that PayPal imposes and provide insights that will help you navigate the financial aspect of using this popular payment service to get the most out of the platform.

The basics of PayPal fees

PayPal is straightforward about a lot of things, but its PayPal business fees structure for sellers can be confusing. As a regular PayPal user, you’ll use their services for free unless you send payments with a credit card. As a merchant, you’ll see fees deducted from your deposits in every transaction.

Don’t worry — in this article, we’re going to go through all the PayPal fees you need to know about as a content creator, as well as some ways to minimize those fees!

Types of PayPal fees

For PayPal sellers, transaction rate can vary based on several factors — including the type of transaction, whether it's domestic or international, and the payment method, for example credit card processing cost more. Here's a breakdown of the main fees PayPal charges sellers, all of which can be found on the PayPal Merchant Fees page and in this helpful fee table. 

Commercial transaction and payment processing fees

These are the fees charged to merchants for each sale, also known as PayPal Merchant Fees. The fees are a combination of a percentage of the transaction amount plus a fixed fee. PayPal as the payment processor charges a percentage ranges from 1.90% to 3.49%, and the fixed fee per transaction varies depending on the country's currency. For standard transactions, the rate is typically 2.99% plus a fixed fee of $0.49 per transaction.

Instant withdrawals or transfers

When sellers choose to withdraw their funds instantly to a bank account or card, PayPal charges a fee of 1% of the transfer amount, up to a maximum of $10 per transaction.

Balance transfer fee

For balance transfers up to $750 per month to other PayPal accounts, authorized banks, or credit card accounts, the transfers are free if the account is already linked to a PayPal account. Standard transfer rates plus a fixed fee apply otherwise.

Virtual terminal fees

PayPal charges a monthly fee of $30 for using its virtual terminal feature, which is part of the PayPal Payments Pro account. This feature allows sellers to manually enter credit card payments1.

PayPal card reader fees

For in-person transactions using Zettle, PayPal’s point-of-sale system, the fees are 2.29% plus $0.09 per transaction. The first card reader costs $29, and each additional reader costs $79.

Chargeback and refund fees

PayPal charges a $20 fee for chargebacks. However, the original transaction fees are not included in a refund when one is issued. .

international transaction fees

For international payments, PayPal charges a fee of 4.4% of the transaction amount plus a fixed fee based on the currency of the payment received. This is in addition to any currency conversion fees that may apply. (Hint: you'll also want to factor in the transaction exchange rate when selling international)

Currency conversion fee

When a currency conversion is required, PayPal charges a fee, which varies, as the rates themselves fluctuate regularly. The exact rate is not fixed and changes in line with market conditions.

Alternative payment methods (APMs)

For transactions using alternative payment methods, PayPal charges a fee of 2.59% plus a fixed fee of $0.49. For invoicing through APM, the fee is 2.99% plus a flat fee of $0.49.

Card verification transactions

This feature is used to verify that a cardholder’s account is in good standing without processing a purchase transaction and costs $0.30 per submission.

American Express Card usage fee

For American Express payments, PayPal charges 3.5% per transaction!

Ways to reduce PayPal processing fees

Fees are very annoying, but with some forethought, you might be able to avoid some of PayPal’s merchant fees.

Choose the right PayPal account type

Depending on your needs, consider whether a personal PayPal account or a PayPal business account is more suitable. Business accounts offer additional features but may involve higher fees for certain transactions.

If you get a business account, ask for special merchant rates

Check to see what merchant rates your business might qualify for. You might be eligible for special, volume-based discounts or other promotions.

Get paid less frequently, but in larger chunks

If you bill your customers and receive payments from them less often, you’ll incur fewer fees, because PayPal charges you per transaction. This method works if you’re providing services — charge your buyer once rather than multiple times.

Change withdrawal methods

Instant transfers on money withdrawals will cost you, so see if you can move money to a linked bank account first, or consider a PayPal debit card instead.

Write off PayPal fees as a business expense on your taxes

Business expenses, like credit card processing fees, PayPal transaction fees chargeback fees, PayPal seller fees, etc. are tax-deductible for small businesses. Don’t forget about PayPal fees when tax time comes.

Include PayPal fees in your prices

You can bake the added cost of your fee into the price of your goods to offset the expense on your end.

Enable micropayments

Merchants with an average transaction size of $10 or below may be able to apply to receive micropayment pricing that lowers the PayPal transaction fees for those processed through your PayPal account. The Micropayments Plan is 4.99% and $0.09 per transaction.

Sell in local currencies only

To avoid international PayPal transaction fees, consider asking your customer to pay you in the local currency to save you and your customer the currency conversion fee. If you frequently deal with multiple currencies, consider using PayPal's multiple-currency features or third-party currency management tools to minimize conversion fees.

Use a PayPal fee calculator to know exactly what you will be paying for

We recommend using the Wise PayPall Fee Calculator so that you don’t run into any unforeseen costs while budgeting.

To PayPal or not to PayPal?

While PayPal offers convenience and flexibility for online transactions, understanding associated fees and how they can impact your finances is essential. By familiarizing yourself with PayPal's fee structure and implementing strategies to minimize costs, you can make informed decisions and maximize the value of your PayPal account. As a content creator, being proactive about managing PayPal fees can save you time and money in the long run, while also making your customers happy!

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