When creating a business strategy, entrepreneurs often focus on the cost of materials, overhead expenses, and labor hours. However, payment processing fees can quickly cut into your company’s bottom line. If you are currently paying PayPal business account fees, you’re likely spending more than you realize.
With PayPal business fees, you’re paying a fixed-rate fee and a percentage fee for every transaction. Moreover, there are many cross-border, chargeback, and dispute fees on top of these basic charges.
Are you overpaying for your PayPal business account? Read on to learn more about how these fees work.
TL;DR
- Although PayPal accounts are free to set up, there are many transaction and account fees to consider as well.
- The amount you pay in processing fees will vary based on the payment method involved.
- Often, companies have to pay extra for hardware, invoicing tools, chargeback fees, and additional costs.
- There are different account plans available. Higher account levels cost more and may be restricted to certain types of businesses, such as high-volume merchants.
- While PayPal accounts are convenient, the high cost can be prohibitive for some companies. In these instances, it’s a good idea to look for an alternative to PayPal merchant accounts.
How Do PayPal Business Account Fees Work?
PayPal allows businesses to process online and offline payments. While it originally became famous for its online payment processing, PayPal also offers in-person terminals and card readers for a fee.
Additionally, merchants can process PayPal, credit card, mobile wallet, debit card, Pay Later, and Venmo payments using their PayPal merchant account. Depending on the payment type involved, the total cost can vary.
As a business, you can expect to pay some of the following PayPal business transaction fees.
Standard Transaction Fees
When it comes to PayPal merchant fees, you’ll always pay some variation of the standard transaction fee. This charge can vary based on the payment type involved. It always involves a fixed fee as well as a percentage of the transaction.
For instance, processing PayPal payments will cost the merchant 3.49% of the transaction total and $0.49 per transaction. To run a credit card payment, you’ll need to pay 2.89% of the transaction total as well as $0.29 per transaction.
Chargeback and Dispute Fees
The Merchant Dispute Fee is charged for any transaction that a customer disputes with PayPal. Companies that have a dispute rate of 1.5% of their transaction volume and a volume of at least 100 transactions in the preceding month are charged a High Volume Dispute Fee. In the United States, the Merchant Dispute Fee is $15. For the High Volume Dispute Fee, the rate goes up to $30.
PayPal charges a chargeback fee of $30. However, like dispute fees, this fee varies based on the location.
Currency Conversion
If you have to convert between different currencies, there is another PayPal business account cost to consider. Transactions that are paid for in a currency other than the currency of the goods and services are charged a 4% spread. Similarly, PayPal charges the same fee when you send money to friends or request PayPal Payouts in a different currency. For any other transactions, the currency conversion spread starts at 3%.
Cross-Border Fees
Besides currency conversion charges, there are also cross-border fees to consider. Different rates are charged based on which country’s currency is used For example, if the currency used is United States dollars, the flat fee is $0.49. On top of this amount, there is a charge of 1.5% worth of the transaction total.
Withdrawal Fees
There are varying PayPal business fees based on how you withdraw your funds. The following are just a few examples of how much you can expect to pay when you want to access your earnings.
- Standard Withdrawal to a Bank Account: No Fee
- Instant Withdrawal to a Bank Account: 1.5%
- Standard Withdrawal to an Eligible Linked Debit Card: No Fee
- Instant Withdrawal to an Eligible Linked Debit Card: 1.5%
Why Do “Free” PayPal Business Accounts Cost So Much?
Is a business PayPal account free? While it may look free, there are many more costs associated with PayPal accounts than merchants may realize at first.
PayPal has 434 million active accounts, making it an incredibly popular method for sending and receiving payments. Many merchants are attracted to the convenience and low setup costs of these accounts.
While PayPal accounts may be free to set up, they are not free to use. We’ve discussed just a handful of the most common PayPal business account fees, but there are many other costs that are charged. You may have to pay to set up a terminal or to implement advanced chargeback protections. Many services involve add-on costs, which can quickly add up.
What Are Some of the Most Common PayPal Business Fees?
To get a better understanding of the total PayPal business account cost, we’ll take a look at some of the most common PayPal merchant fees for different transaction types. Besides payment processing costs, we’ll also review some of the extra fees you may end up paying.
PayPal Merchant Fees Based on the Transaction Type
No matter what, each transaction your company processes will be charged PayPal business transaction fees. These will include a fixed-rate fee and a percentage fee, which varies based on the type of payment method used.
It should be noted that the fixed charge per transaction is based on the cost for businesses in the United States. Depending on which country you are processing transactions in, this amount will vary.
| Fee Type | What It Is | How Much It Is |
| Card Processing | This is the cost for running credit card transactions, such as Visa and MasterCard payments. | Starting at 2.89% + $0.29 per transaction |
| PayPal and Venmo | This fee covers all PayPal and Venmo transactions. | 3.49% + $0.49 per transaction |
| PayPal’s Pay Later Program | The Pay Later program allows customers to buy now and pay later (BNPL). It costs more for merchants, but it can help you reach customers who might otherwise miss out on the purchase. | 4.99% + $0.49 per transaction |
| Tap to Pay and POS | This fee is what merchants pay for in-person transactions. | 2.29% + $0.09 per transaction |
| Expanded Checkout | Besides credit cards, the expanded checkout options include Google Pay and Apple Pay payments. | 2.89% + $0.29 per transaction |
Additional PayPal Fees
On top of the regular PayPal business transaction fees, there are situations where you may be charged additional fees as well. For example, cross-border transactions, chargebacks, disputed transactions, and currency conversion all involve extra costs.
| Fee Type | What It Is | How Much It Is |
| Manual Card Entry | If you type the card in manually, you’ll pay more to process the transaction. | 3.49% + $0.09 per transaction |
| Card Reader | To get a card reader, you have to pay a fee for the card reader. Afterward, you still have to pay the regular transaction fees as well. | $29 for your first card reader |
| Terminal | For each terminal, you’ll pay a fee to get the terminal. Then, you’ll also have to pay transaction fees. | $199 |
| PayPal and Venmo Invoicing | This fee is for transactions where you invoice clients through PayPal or Venmo. | 3.49% + $0.49 per transaction |
| Pay Later Invoicing | For Pay Later invoices, you can expect to pay more than regular BNPL fees. | 4.99% + $0.49 per transaction |
| Cards and Apple Pay Invoicing | If you use invoicing with cards and Apple Pay, you’ll pay a bit more than you normally would for these payment types. | 2.99% + $0.49 per transaction |
| International Commercial Transactions | All international commercial transactions are charged an added percentage fee. | 1.50% |
| Recurring Billing | If you want to charge customers a recurring amount each month, you’ll have to pay an added fee. | $10 per month |
It’s important to note that these are just some of the major PayPal business account fees. You’ll also pay added PayPal merchant fees for things like chargeback protection services, buyer authentication services, uncaptured authorization transactions, and failing to implement express checkout processes.
What Are the Main Types of PayPal Business Accounts?
When you sign up for a PayPal business account, you’ll need to decide which account type you need. While all of these accounts allow you to accept payments, each one is designed for a different sales channel, business size, and customization level. The right option depends on your company’s budget, desired customer experience, and volume requirements.
PayPal Business Standard
PayPal Business Standard is the basic option for businesses. Designed with small businesses in mind, it is fast to set up and accepts a range of card payments. When customers click the payment option on your site, they are redirected to PayPal, where they can complete the purchase.
PayPal Business Plus
With Business Plus, you can access added benefits. It comes with advanced fraud protection, increased payment options, and an improved checkout flow. Although you still have to pay transaction fees, some of the add-on options from the Business Standard plan are included in the price of PayPal Business Plus.
PayPal Pro
PayPal Pro is ideal if you want more customization options for your checkout experience. Rather than redirecting buyers to PayPal, this option allows customers to purchase goods directly from your website.
However, this convenience comes at a cost. On top of transaction fees, you’ll have to pay a monthly fee. You’ll also be required to meet added compliance standards.
PayPal Enterprise
As the name suggests, PayPal Enterprise is designed for large, high-volume companies. This plan features dedicated account management, customized payment solutions, and tailored integrations. It works best for major enterprises that need customized payment flows and unique services.
How PayCompass Can Help You Access More Affordable Payment Processing Services
For business owners, the biggest problem with using PayPal isn’t the upfront PayPal business account cost. The issue is how much all of these fixed-rate fees, percentage fees, cross-border charges, and chargeback expenses add up to when they are combined. If you’re struggling to afford PayPal merchant services and need a PayPal alternative, PayCompass has the options you need.
PayCompass can help through our skilled pricing negotiations and transparent prices. We assist merchants in negotiating better payment processing costs based on their size, industry, transaction volume, and risk profile.
As a part of our services, we’ll conduct a free evaluation of your current processing fees so that you can understand how much you’re really paying right now. Then, we can use this information to offer tailored payment solutions.
For many merchants, one of the biggest hassles with PayPal is navigating locked accounts and restricted accounts. Thanks to our chargeback prevention tools, dedicated account support, and comprehensive risk management, you can avoid unexpected restrictions and maintain your company’s cash flow.
Final Thoughts
Is a business PayPal account free? Unfortunately, PayPal merchant accounts have fees that can quickly add up. They may be free to set up, but they are not free to operate. Besides the normal fixed-rate fee and percentage fee, you can also be charged add-on fees for chargebacks, disputed transactions, international transactions, and a range of services.
These PayPal business account fees are incredibly complex, making it difficult for merchants to figure out exactly how much they will be paying. If a client switches from their Spanish credit card to a United States Pay Later account, you’ll end up paying a different rate for the exact same products and services. You’ll also have to pay for invoicing tools, hardware, payouts, and other costs.
Rather than pay onerous PayPal business fees, merchants can look for an alternative option. At PayCompass, we can help you evaluate and negotiate your payment processing fees. We prioritize transparency, so you’ll know exactly what you’re paying in transaction costs.
If you’re ready to investigate cost-effective alternatives to PayPal, reach out to our merchant account experts today.
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