PayPal fees could be a pain, especially if you are a freelancer or if you have an online business on eBay. You lose part of your hard-earned money. However, PayPal is a business, and it needs to profit to survive. That does not mean, however, that you will have to be burdened by huge fees forever. There are some ways to avoid or at least reduce these fees. It would not be as easy as refunding your money, but it is still possible.
- 1 Types of Fees
- 2 When do fees apply?
- 3 What transaction is free of charge?
- 4 What are the risks of using the family and friends option?
- 5 What is ‘Buyer Protection’ and why is it important?
- 6 Conclusion
Types of Fees
PayPal fees vary based on several factors. Among these factors would be the type of PayPal account you have, the purpose of the transactions you make (whether it is personal or business), and the currency you use.
For the PayPal Business Account, you have several merchant fees or monthly cost associated that could be incurred. These fees are part of the Standard and Pro plans. The PayPal Personal Account, on the other hand, is the one most sought by side hustlers who wish to receive payments from their work.
1. Let customers shoulder the fees
Asking customers to cover the fees imposed by PayPal would be one way to avoid deduction on the amount that you should be receiving. However, be sure to clarify this with your customer. It is best that they acknowledge shouldering the fees to avoid future complaints. PayPal usually takes up $2 – $3, so set the additional charge within that range.
You should reconsider removing your linked bank accounts because you can save $1.50 on every transaction if you opt to transfer funds to it. However, take note that banks have clearing days, so confirm the clearing days of your local bank so you can plan when to withdraw funds.
3. Use the friend or family option
Whenever you receive money from your clients, you will be charged a fee of $0.30. However, there will be no fees if money is sent using the friend or family option and if done locally. Thus, this option would be an effective way to avoid fees.
Meanwhile, if you want to use the friend or family option, make sure to change the way you send your invoices to your clients. Instead of sending a PayPal invoice, create and send invoices using another program.
4. Consider lower merchant fees
Reducing merchant fees is possible. An online business in eBay, for example, should have transactions of at least $3000 to qualify for this option. PayPal merchant fees can cut into your profits, so if you want to use this, you must fill out an application form first and then wait for the approval.
5. Add PayPal fees as a business expense in your tax declarations
For an online business, these fees are inevitable expenses, and it is valid to include it in your tax returns. Just make sure to document the fees properly so that you can keep track of it and not miss out on anything important when filing your tax.
When do fees apply?
PayPal would charge fees on the following:
- Receiving money from customers for any purchase
- Receiving and sending money through PayPal internationally
- Sending personal payments using debit cards or credit cards
- Transferring money from your PayPal account to your debit card or prepaid card.
Fees would differ among countries, so make sure you are aware of the different percentages charged. Check how much PayPal would charge in your country. Here are a few:
- Canada – 2.9% of the transaction amount + $0.30 CAD
- United States – 3.7% of the transaction amount + $0.30 USD
- Other countries – 3.9% of the transaction amount + fixed rate per country
What transaction is free of charge?
Sending and receiving money locally to and from friends and family would be free. However, an international transfer would still require some fees regardless of your connection to the receiver or sender. This type of transaction is also a good option to consider when sending and receiving payments locally. It will just depend on your agreement with your employer.
What are the risks of using the family and friends option?
Free is what we target, and we can indeed get that through transactions under the friends and family option. However, when things go wrong, PayPal will not be able to secure your money under their Buyer Protection program.
What is ‘Buyer Protection’ and why is it important?
Buyer protection program protects online shoppers if something wrong happens with their purchases. This program covers you as a buyer if:
- You did not get any item
- The item is different from what you should receive
- You did not receive the right quantity of goods
- The article has a defect or a damage
- The goods are incomplete or have missing parts
- The items are different from what the advertisement or product description says. (authentic, looks different, and there is a misrepresentation of goods)
If you experience any of the above, you must file complaints at PayPal within 180 days from purchase date. PayPal will credit refunds into your account if your case meets the requirement and is verified.
It is necessary to take a granular look at things, like your personal finance as well as your general month-to-month tracking.
That said, we hope that this article has provided an insight or two regarding the ins and outs of PayPal fees. Just in case you have other ways to avoid these unwanted fees, feel free to share them in the comments section below.