PayPal is one of the biggest payment processing systems in the world. It is a brand that every merchant knows, and it is recognized worldwide.
A lot of entrepreneurs and high-ticket dropshippers use PayPal, and they just take the fees with a grain of salt. The thing is, PayPal charges transaction fees. As a seller, you have to take these fees into account. You have to add these fees on top of your prices instead of taking the financial hit.
Today, you will learn what fees PayPal charge for sending, receiving, and others. We will also touch on the subject of international payments to help you get a clearer picture of what PayPal charges.
Sending Money
If you are sending money over to your friends and family members, PayPal is not going to charge a fee. However, this only applies to transactions within the United States.
Also, there is no fee if the money you are sending is coming from either your PayPal account balance or your bank account, or a combination of both.
If you send money to friends and family within or outside the US with a credit or debit card, PayPal will charge you a fee. The cost of this fee is 2.9% + 0.30 USD of the amount of money that you are sending.
Other than this, all forms of sending money is free. Some people say that paying merchants has a fee, but this is not correct. If you are paying for goods and services, it is the merchant who shoulders the fee, not the buyer.
The only fee you will pay as a buyer is the overseas currency conversion fee if you pay a merchant who is not in the same country as you are.
Receiving Money
Receiving money with PayPal is a little complicated. The fee that you pay depends on the location of your buyer, your location, your type of account, and the currency you are charging.
Whether you are selling goods or services, there is a standard fee if the payment you are receiving is coming from a PayPal account. It does not matter where you are as a seller.
- Customer pays from the U.S. – 2.9% + fixed fee based in your currency
- Customer is not from the U.S. – 4.4% + fixed fee based in your currency
If you are accepting payment in your physical store, the fee is different if the buyer is paying via a PayPal account.
- Customer pays from the U.S. – 2.7%
- Customer is not from the U.S. – 4.2%
All these percentages are based on the transaction amount.
What are the fixed fees? It depends per currency that you are receiving. You will find the fee table in PayPal’s website here: PayPal Fixed Fees.
PayPal Payment Pro and Virtual Terminals
PayPal Payments Pro is a program where you can create your own customer checkout system. When customers pay, they will not see the PayPal brand. Instead, they will see yours. This program charges merchants $30 per month, plus receiving fees.
The program includes a virtual terminal. What does this mean? A physical terminal allows you to swipe your customer’s credit card for a payment. But what if the customer is not with you physically?
The virtual terminal is the solution to this. You can take your customer’s card details and type them in your PayPal account, and then you can charge them what they bought. On both PayPal Payments Pro and Virtual Terminal, the customer does not need a PayPal account.
Here are the fees for receiving money for this payment system:
- Payment is from the U.S. – 2.9% + $0.30 USD
- International Customers – 4.4% plus fixed fee
- Virtual Terminal transactions – 3.1% + $0.30 USD if your customer is from the same country as yours; additional 1.5% if your customer is outside your country
- American Express – 3.5% per transaction if the customer used an AMEX card to pay you
A simple calculation
Let us take two different situations to help you understand how to calculate the fees.
Situation 1:
- You are a merchant in Japan
- You sold an item to a customer in the United States
- The customer is paying USD
- The cost of the item is $200
The fee is 2.9% + $0.30. Therefore, the fee is 2.9% x $200 = $5.8 + $0.30 = $6.1.
Situation 2:
- You are a merchant in Japan
- You sold an item to a customer from New Zealand
- The customer is paying USD
- The cost of the item is $200
The fee is 4.4% + $0.30. Therefore, the fee is 4.4% x $200 = $8.8 + $0.30 = $9.1.
Things to Remember
Here are some things that you must remember so you do not get confused:
- Sending money is free for buying
- Sending money is free if the recipient is a friend or family, and if the source of funds is either a PayPal balance or bank account
- Sending money to friends and family costs 2.9% + $0.30 if the funding source is a credit to debit card
- Receiving money from friends and family is free
- Receiving money for goods and services is between 2.9% and 4.4% plus a fixed fee depending on the currency you are receiving
- Receiving money for goods and services from your physical store is between 2.7% and 4.2% with no fixed fee
Receiving money with PayPal Payments Pro and Virtual terminal is between 2.9% and 4.4%; there are other fees if AMEX is used, or if the customer is not from the same country as you, the merchant.
Summary
PayPal is not at all complicated. At most, you will be paying the average of 2.9% if you are a merchant. This fee can hit up to almost 5%, but this is not a huge amount compared to what other companies charge.
Other companies like Neteller and Skrill do not charge a fee when you receive money, but they charge your customers when they make the payment. And then they will charge you money if you withdraw.
Overall, PayPal is still the best option for online transactions. The fee is reasonable if you are going to think about the services, ease of use, and the security of the entire system.