How much does PayPal charge in fees and how to avoid them

By Ritvars Lauza read
07 Mar, 2024
How much does PayPal charge in fees and how to avoid them

PayPal has become a staple in the online transactions market. In the United States, PayPal is the second most popular online payment method – surpassed only by credit card payments. Meanwhile in Europe, PayPal is the first choice payment for online purchases in many countries, including the UK, Germany, Italy, Ireland, Spain, and more. With its user-friendliness and simple password-only access, it makes it an easy choice for consumers.

But for sellers, there’s a big downside – PayPal seller fees.  

Shrouded in mysticism, often sellers never quite know how much PayPal charges and what to expect. This is extremely and understandably problematic for an online seller who is keeping close tabs on income and expenditures.

In this article, we’ll go through what fees there are, how many fees to expect and when, and how to reduce PayPal fees.

When does PayPal charge fees?

The reason PayPal fees are so confusing to the average person is because they vary slightly in each situation. The PayPal percentage can change depending on varying factors, such as your location, the country you’re sending money to/receiving from, if you have a business account or a personal account.

PayPal’s general rule of thumb is that for domestic personal transactions (between friends and family in the same country), there are no fees.

Here are the situations when there’s a fee:

  • When you receive a payment from a purchase
  • When you send or receive money from a different country from where you are based
  • When you send a payment using a debit or credit card
  • When you move money from PayPal to a debit or credit card (moving to a bank account, however, is free)

There are also special reduced rates for non-profits which can be beneficial if you qualify. But in this article, we’ll be focusing on the fees that are incurred from business purchases – as those represent the majority of those selling on Sellfy.

Understanding the PayPal fees that affect online businesses

Online businesses get saddled with a cocktail of fees, which include a two-part transaction fee, a currency conversion fee, and even a separate fee for accepting payments from other countries. In this section we’ll learn about the different kinds of fees and when they’re applied.

Goods and services fees

The fact of the matter is that for those selling goods or services, there will be a PayPal fee for receiving money.

Let’s get into the specifics.

For online store owners, if a purchase was made with a PayPal payment, there will be a fee applied to the merchant.

For example:

If a buyer purchases an item through Sellfy, they(the buyer) won’t be charged extra. However, the Sellfy seller will.

So how much does PayPal charge? Here are the different fees that a Sellfy seller should keep in mind:

Standard domestic (US) merchant fee

This is the standard merchant fee for a US seller selling to a US customer.

This is the fee:

$0.30 + 2.9% of the transaction amount

If you are based in a different country, the amounts will be slightly different. For example, in the UK, selling domestically incurs a fee of 0.20p + 3.4% of the transaction.

To find out the rates for the country you’re based in, you can Google the query “Paypal merchant fees in [insert the name of your country]”.

Alternatively, you can take a look at your PayPal User Agreement. You can do that by logging into your PayPal account, then scrolling to the bottom and clicking “Fees” in the footer of your page.

International transactions from abroad to US-based accounts

Paypal also charges fees when payments are made internationally – between two accounts that are registered in different countries.

This fee is:

4.4% of the transaction amount + fixed fee, depending on which country you're receiving from

The 4.4% sum is a result of an added 1.5% fee for accepting money from a different country, on top of the standard 2.9% user fee.

There are many exceptions to the rule, and the fees vary depending on which country you’re based in, and which country you’re receiving payments from.

For the most precise description of specific fees from specific countries, you’ll have to take a look at your PayPal user agreement. Follow the steps mentioned above to find it.

Fees for changing currency

If the transaction requires a change in currency, a currency exchange fee will also be applied.

The currency exchange fee is:

2.5% of the transaction amount

This comes on top of the rate for PayPal currency conversion – you can view PayPal’s conversion rate for currencies here.

Additional lesser-known PayPal fees

In addition to the fees already mentioned that can incur fees based on receiving payments, there are also other lesser-known fees that can be incurred as you conduct your online business.

They include:

  • Money-withdraw fee – though withdrawing directly to your bank account is claimed to be free, there is a fee to withdraw outside of the US and UK. Some banks may also individually charge for a withdrawal from PayPal.
  • Reversed payment fee – if you refund a payment to a customer, you will only receive a portion of your paid fee to PayPal – they will retain the fixed fee (for example, in the US for domestic payments that would be $0.30).

How to lower PayPal fees as an online seller

The good news is that with knowledge comes power. Now that we know what the fees are, we can take active steps towards lowering them.

Here are some of the things that you can do as a Sellfy store owner to reduce your Paypal fees.

Use micropayments (under $10)

If the majority of transactions you make are under $10 a piece, it’s possible that it would be more beneficial to you in the long run if you were to switch to micropayments. Here’s how they compare:

  1. Standard merchant fee: 2.9% + $0.30
  2. Micropayment fee: 5% of the transaction

Though it seems counterintuitive, the reduction of the $0.30 fee can be more effective than the 5% PayPal percentage per transaction. In other words – it pays off to nix the flat fee and go for a percentage-based fee.

For example, if you’re selling an ebook for $10.00, here are the fees for both formats:

If using the standard merchant rate:
10.00 - 0.29 - 0.30 = 9.41
If using the micropayment merchant rate
10.00 - 0.5 = 9.50

In the case of the standard merchant fee, you’re left with $9.41, while with the micropayment, you’re left with $9.50. Though it’s a $0.09 difference, it can certainly add up. And when it comes to PayPal fees, every little bit counts.
You can have micropayment fees applied to your account by filling out the micropayment application, which you can get by getting in touch with PayPal support.

Apply for “Merchant rates”

If you’re consistently doing at least $3000 in sales every month, you can apply for Merchant Rates. This lowers your transaction rate to 1.9%, a very convenient transaction fee when it comes to PayPal.

In order to apply for Merchant rates, first make sure that you meet the requirements:

  • consistently receiving at least $3,000 in PayPal payments every month
  • your PayPal account is in good standing – you do not have a negative balance

Find the application form here.

Note: these rates can be revoked if you don’t meet to $3000 monthly requirements.

Sell in the local currency

We know that the fee for exchanging currency itself incurs a fee of 2.5% of the sum of the transaction amount.

By accepting payments in only the same currency that you sell in, you’re able to avoid the currency exchange fee altogether.

Do that by going to your account and designating a primary currency. This will be the default currency that your request and send money through.

Go to your PayPal profile, then go to “My Money”, then scroll down to “Currencies”. Click on the three dots next to the currency itself and click “Make primary” to designate it as your top choice.

If the currency of your choice is not on the list you see, select “Add a currency” and choose which currency you want to add. Then proceed with the previously explained process to make it your Primary currency.

Consider alternative payment platforms

When it comes down to it – if PayPal fees are getting too big, you can always consider alternatives and drop the platform altogether. Or as a minimum – diversifying your payment options. After all, putting all of your eggs in one basket is never a good idea.

For Sellfy sellers, an additional option for payment processing is Stripe. Not only does it provide an alternative to PayPal, but on Sellfy it also lets you accept card payments.

Stripe charges the same amount for transactions – 2.9% of the total amount + a $0.30 fee. But the difference is that it doesn’t charge for international transactions. If the majority of your business is across borders, you may consider Stripe as a more viable option.

You can choose to use Stipe on Sellfy by going to your account’s “Payment options” section, and choosing to enable Stripe and/or disable PayPal. Simply enter the required keys that you can find in your Stripe dashboard.

You are not a slave to PayPal

The best thing you can do for your online business is to understand your financial obligations, where money is going, and take responsibility for reducing them.

When it comes down to it, you’re not working for PayPal. PayPal is working for you. Make sure to take advantage of the savings on PayPal fees, or consider a different platform altogether.  

Have any other tips on lowering PayPal fees that we missed? Leave them in the comments!

Ritvars is the marketing lead at Sellfy. With over 6 years of experience in online marketing & eCommerce, Ritvars shares his knowledge in Sellfy blog. He is inspired by the success of Sellfy creators and is passionate about finding new ways how he can help them succeed.