Ana’s interest in finance developed out of her own entrepreneurial journey. As a business owner, she has first-hand experience with the topics she covers for Bankrate. As a finance expert, Ana has ghostwritten for CFOs of fintech companies and authored resources that help small business owners, finance departments, and everyone in between.
PayPal is a full-service, internet merchant account service specifically designed to allow you to process credit card payments on-line. Like any merchant account, PayPal does charge a fee to the seller for this service. But most businesses owners will agree that these fees are actually a small price to pay in order to offer this convenient payment option to their customers.
Much like a traditional merchant account provider, PayPal’s services are free for your buyer. So when a buyer makes a purchase and opts to pay for it from his personal PayPal account, there is no charge to him for this portion of the transaction. Before the money is transferred to your PayPal account, PayPal takes a fixed fee per transaction and a percentage of the total amount of the sale. There are no monthly statements or other service fees. The amount deposited into your PayPal is the total you receive from the sale.
What Are PayPal’s Fees?
Before we can answer that question, you must understand that PayPal serves several different purposes and so they offer several different kinds of plans. For the purposes of this article we will only discuss in overall terms the basic fees for their basic business merchant account.
On Sales: Like any other fee charged for a service, these numbers do change, but at the time of this writing, PayPal’s fees for a basic US business account are listed as follows:
- 1. For sales within the US: 2.9% of the sale + $0.30 per transaction
- 2. Discounted rated for volume: As low as 2.2%
- 3. International sales: a fixed fee based on the currency received for the sale, + 3.9% per transaction
PayPal also offers a card reader for sellers who want to be able to accept PayPal transaction on-the-go. When you use a PayPal Here card reader you pay 2.7% when you swipe a credit card at time of purchase, or 3.5% + $0.15 is you manually enter the credit card information.
On Returns: Your buyer made a purchase and paid for it through his PayPal account. PayPal processed the transaction and deposited the purchase price into your account, less their fees. But now your buyer wants to return the merchandise for a refund. How much does he get back?
Well, you can’t very well penalize your buyer for the fees you paid for the convenience of using PayPal. So PayPal debits the total amount of the sale from your account to return to the buyer. They refund the 2.9% you paid on the total of the sale (or a percentage of this amount if the buyer is only returning a portion of the original sale), however, the $0.30 per transaction fee is non-refundable and comes out of your account to make up the total refund to the buyer. In other words, returns actually cost you an additional $0.30 per transaction.
The Pros and Cons.
There are definitely some financial benefits to choosing PayPal over a traditional merchant account or third-party credit card processing provider.
However, there are some negatives as well.
PayPal can be integrated into your credit card processing system in several ways. It can be used as your single means of processing credit cards, it can be integrated with your on-line payment gateway, or it can be used in addition to your present credit card processor. But however you use your PayPal account, you will find that offering this payment option can really pay off.