PayPal has made it easy for people to work from home while spreading their businesses globally with fewer hurdles since it is easy, safe, and faster to receive payments. This is a digital platform founded in 1999 and has become one of the most recognized platforms for receiving and sending money online. It has also created an improved way to manage financial transactions. Rather than revealing your bank account details to an individual or company, PayPal represents a secure and reliable third party.
All required to start using PayPal is to register or sign-up for a PayPal account, and you can instantly start receiving funds either to your PayPal account or a personal bank account. The email ID that you use when you sign into PayPal represents your PayPal account ID. As soon as you have received a payment, it will appear in your PayPal Account Dashboard. But the reality of PayPal is that it will charge you a fee for certain types of transactions.
The PayPal Fee Structure
When it comes to personal domestic transactions between family or friends, PayPal does not charge a fee. But for businesses and freelancers that rely mainly on a digital payment channel, it becomes important to understand PayPal’s fee structure. For those that are new to PayPal, the fee structure can seem confusing at first. This mainly has to do with the fee percentage that changes according to different factors.
Primarily, the fees structure of PayPal will differ between currencies and countries. For example:
- S. Dollar – 0.30 USD per transaction
- Euro – 0.35 EUR per transaction
- Australian Dollar – 0.30 AUD per transaction
- Canadian Dollar – 0.30 EUR per transaction
- K. Pounds Sterling – 0.20 GBP per transaction
In addition to the fixed-rate, PayPal will also charge a percentage based on the transaction amount. If you run a business that operates in the U.S. and you accept payments online, the fee percentage would be:
- 9% of your customer pays from a bank account in the U.S.
- 4% of your customer pays from a bank account outside the U.S.
When Does PayPal Charge You A Fee:
- When you receive payments from a purchase made
- When you receive payments from another country
- When you move your money from your PayPal account to a credit or debit card
- PayPal also charges a fee to change currency
Freelancing is often associated with variable incomes. Most freelancers know the importance of saving every penny. There is a way to save on the fees that PayPal charges.
Tips On How To Decrease Or Lower Your PayPal Fees When You Receive Payments
Fees are unfortunately inescapable, but there is a way to reduce them. Below are a few tips you can use to reduce your PayPal fees if you are an owner of a small business or a freelancer.
PayPal Fees As Billable Expenses
This is perhaps the best method to receive funds via PayPal while avoiding hefty fees. When invoicing clients or customers as either a “small business” or as a “freelancer,” the fee amount that you charge should be included as a “billable expense” in your invoice. This method is a legal way to pass these fees as billable expenses to your customers. In this way, your transaction fees are paid by the customer rather than you.
For example, if the work you provided costs $1,300 and the online payment is made within the U.S., you would need to add the PayPal standard fee of $30, which is a respective fee U.S. + 2.9%. The total amount that you would then invoice would be $1338. If you invoice this amount as your “billable expense,” after PayPal has subtracted the applicable fee, you will still be paid $1,300, which equates to the costs of the services you provided. In this way, you receive your full payment, and your PayPal fees will also be covered.
Ask Your Customers To Pay You As A Friend
If you are looking for ways to avoid paying additional fees and don’t want to ask your customers to pay the fee, there is a way for both parties to avoid paying these amounts. To avoid these fees, you can ask your customer or client to make a payment “as a friend.”
When customers make a payment via PayPal, there is an option to make the transaction business-related or personal. If your customer chooses the personal option, the transaction will not be subjected to any additional fees. This option should only be used as a short-term option to avoid these fees. If PayPal picks up that this is happening too often, they might terminate your account.
PayPal Fees As A Business Expense
Similar to how you add a PayPal fee as a “billable expense,” and your customer incurs that amount, you can also show this amount in the form of a “business expense.”
When you list these fees as business expenses when you submit your taxes, it can lower the burdens of PayPal fees when you receive money.
If you are still not convinced by these tips, you also have the option to use another trusted and reliable digital-payment mode. TransferWise is one of the alternatives with no markups or hidden fees. TransferWise only requests a nominal upfront fee on every transaction.