What You Should Know About Paypal Fees
May 18, 2020 | Merchants | Josh
If you are considering choosing Paypal as your payment processor, you should understand what Paypal fees you may be charged. The bottom line: every transaction is not created equal. Here is a breakdown of the most common Paypal fees that businesses end up having to pay so you can make an informed choice on what payment processor company is best for your business.
If your company is high risk based on the goods or services you offer, it affects the processing fees and your standing in regards to the PayPal User Agreement. Despite its popularity, PayPal may not be the best payment processing solution for every business.
The graphic below shows the breakdown of fees charged from PayPal for a standard transaction.
How Much Does PayPal Charge?
PayPal combines different fees and add their own on top. For companies in the USA, their fee is 2.9% + $0.30 per transaction. Everyone involved in the transaction receives a percentage of the sale, which is the “interchange“. The parties that complete the interchange are the issuing bank, the credit card association, the merchant bank, and the payment processor.
The Different Fees That PayPal Charges
When a transaction processes through PayPal, the following fees occur:
- Interchange Fee: A percent of the sale amount determined by the issuing bank plus a fixed transaction fee.
- Assessment Fee: The card network associated with the cardholder (Visa, Mastercard, etc.)
- Markup Fee: All other entities involved in the transaction through the network receive a portion of the sale.
How To Avoid PayPal Fees
Fees can be avoided as easily as they are charged. There are several ways to avoid PayPal fees as a business.
01. Setup A Business Account
By setting up a business account through PayPal you will have reduced fees. It also allows you to access PayPal Working Capital, which is a business loan with a fixed and affordable fee.
02. Request To Be Paid As “Friend or Family”
If you are a contractor, you can request for the customer to pay you by selecting the “Friends and Family” option. Although this is a good option to avoid receiving PayPal fees, be aware that there is no payment protection for payments made through the “Friends and Family” option.
03. Apply For Lower Fees
Yes, it’s that simple sometimes. You can apply for a reduced rate as long as you earn more than $3,000 per month. Even if they only approve a .2% drop in your rate, that amount will add up quickly.
04. Deduct PayPal Fees From Your Tax Returns
Make sure to file your taxes properly if you own a business that runs online payments.
05. Use a PayPal Alternative
PayPal may not be the best solution for your business. Not to worry, there are other options. PayKings being the trusted choice when it comes to high risk merchant accounts.
Alternatives to Using Paypal
Although PayPal may cover your business at the beginning of your venture, it is not uncommon for an account to be frozen after a period of time due to several factors. Some points to consider when choosing your payment processor are that PayPal’s Seller Protection policies do not cover digital goods, there can be significant chargeback fees, and it may be difficult to reach PayPal’s customer service department.
Consider an alternative to PayPal by contacting PayKings. We specialize in working with companies in need of a high risk payment processor and can get your company pre-approved today for a high risk merchant account rate as low as 2.49%.
May 18, 2020 | Merchants | Josh