As a small business, it’s important to save wherever you can, and if you use paypal you may be wondering how you can avoid their fees. It may not seem that important, but if you are frequently sending or receiving money, you need to know how to avoid PayPal fees so you can maximize your income.
What are PayPal account fees?
PayPal fees depend on many factors including, the kind of account you have, the purpose for the transaction whether that be personal or for business, and the currency you are sending or receiving money in.
PayPal Business Account
If you are a small business that has an online store and would like to use PayPal as your payment processor, you will need to open a PayPal Business Account. There are two options for a business account, the first being Standard, and the second being Pro.
In Canada, for a PayPal Standard Business Account, there are no monthly fees and it has a transaction rate of 2.9% with a fixed fee of $0.30 (based on currency received). In this plan, you can start accepting credit card payments, get paid on eBay, send invoices online and take payments from mobile devices.
For the Pro Business Account, there is a monthly fee of $35 and has a transaction rate of 2.9% with a fixed fee of $0.30 (based on currency received). In this plan, you get everything from the Standard Business Account plan plus being able to take control of the payment experience and take credit cards by phone, fax or mail order.
PayPal Personal Account
If you are not a business owner and are using PayPal to receive payments for freelance work, for example, there will be fees associated with your account also.
When making a purchase with your PayPal account, it is free and there are no associated PayPal fees. But if you purchase something sold in a currency you do not have in your account, you will be charged a currency conversion fee.
This also applies when you send money in a currency you do not have in your account, when you receive money in a currency your account has not been configured to accept, and when you withdraw money to your linked bank account that is in a different currency than your bank holds.
PayPal’s currency conversion fee is 3.0% for Canadian dollars and 3.5% for all other currencies. The base exchange rate is based on rates from wholesale currency markets on the given day or prior business day depending on the time of transaction.
How to avoid PayPal fees
Here are some ways you can avoid PayPal fees for your business or personal PayPal account.
Change your payment structure
If you have a business model that charges for recurring services or products, such as subscriptions, coaching, or therapy, you can save money on PayPal fees by altering your payment structure.
For example, if you have a customer that is paying you weekly for your services, you can switch to a weekly payment schedule to reduce the amount of times you are charged PayPal transaction fees.
Friends and family payments
If you are using PayPal to request money from family and friends, there are no PayPal fees applied when receiving money.
You can do this with customers that you have a long established relationship with, but make sure they are aware that they will forfeit any payment protection.
Claim PayPal fees on your tax return
When you are doing you tax return for your small business you can include your PayPal fees and you may be rewarded with some tax reductions.
You will be required to document how much money you paid in PayPal fees, so we recommend keeping track of that sum throughout the year to make it easier.
Plan your pricing
If you know that you will be receiving payments through PayPal for your small business, you can plan ahead and incorporate the cost into the pricing of your products or text. By anticipating your fees and embedding them into your pricing, you remove the added cost of working with PayPal.
Change your payment gateway
If you are serious about avoiding PayPal’s seller and transaction fees then you should think about switching payment gateways. Penni Payments is an excellent option because they have competitively low transaction rates, making it the ultimate payment processor for small and large businesses alike.
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