Introduction to PayPal Fees
When considering PayPal as your payment processor, it's crucial to understand the fees you may be charged. Every transaction is not created equal, and if your company is considered high-risk based on the goods or services you offer, it can affect your processing fees and standing regarding the PayPal User Agreement.
How Much Does PayPal Charge?
For companies in the USA, PayPal's standard fee is 2.9% + $0.30 per transaction. This fee combines different charges and adds PayPal's own fee on top. The parties involved in the transaction (issuing bank, credit card association, merchant bank, and payment processor) each receive a percentage of the sale, known as the "interchange".
Breakdown of PayPal Fees
When a transaction processes through PayPal, the following fees occur:
Interchange Fee: A percentage of the sale amount determined by the issuing bank, plus a fixed transaction fee.
Assessment Fee: Charged by 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
There are several strategies businesses can use to avoid or reduce PayPal fees:
Setup A Business Account: This can result in reduced fees and access to PayPal Working Capital.
Request To Be Paid As "Friend or Family": This option avoids fees but offers no payment protection.
Apply For Lower Fees: Businesses earning more than $3,000 per month can apply for reduced rates.
Deduct PayPal Fees From Your Tax Returns: Ensure proper tax filing for online payment businesses.
Use a PayPal Alternative: Consider other payment processors that may better suit your business needs.
Alternatives to Using PayPal
While PayPal may be suitable for businesses in their early stages, there are several reasons to consider alternatives:
- PayPal accounts can be frozen due to various factors.
- Seller Protection policies don't cover digital goods.
- Significant chargeback fees may apply.
- Customer service can be difficult to reach.
For high-risk businesses, specialized payment processors like PayKings offer tailored solutions. These providers can often offer pre-approval for high-risk merchant accounts with competitive rates.
Conclusion
While PayPal is a popular choice for many businesses, it's essential to understand its fee structure and potential limitations, especially for high-risk merchants. By exploring alternatives and understanding ways to minimize fees, businesses can make informed decisions about their payment processing solutions that best fit their needs and risk profiles.
