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PayPal Fees – The Ultimate Guide for 2021

PayPal fees
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PayPal is an online payment gateway used by millions to send and receive money. If you’re a freelancer working from home, you can use PayPal to receive your pay-check. While PayPal isn’t a bank, payment via the platform is quick, secure, and international. But that comes at a cost, in the form of PayPal fees. Note that the fees below were accurate at the time of writing (July 2021) and these fees may change over time. Check PayPal’s website frequently to stay up to date with the latest fees.

 

What Fees Does PayPal Charge?

PayPal has three main types of fees: PayPal Payouts, currency conversions, and withdrawal fees. There’s also an inactivity fee. Luckily, for domestic transfers in the UK, there are no transaction fees.

PayPal Payouts

PayPal Payouts is a service for transferring money to many people at once. The service lets you issue mass payments faster, saving you valuable time. It comes with a fee of around 2%, not exceeding the fee cap of £10/$14, or £60/$90 for international transfers.

Currency Conversions

Currency conversions occur when PayPal converts a foreign currency into your local currency. Their rate will be worse for you than the market exchange rate, as that’s where PayPal makes its money on these kinds of transactions. They offer you a more expensive rate, and pocket the difference between that and the market exchange rate. It’s a common practice for these kinds of businesses, and it allows them to offer some of their services apparently for free. The fee is around 3% above the base market rate for business accounts.

Withdrawals

The withdrawal fee is what PayPal charges to transfer money from your PayPal balance to your bank account. In the UK, there are no fees for withdrawals to your bank account, but there is a 3% fee to withdraw your money to a US bank account. For PayPal credit card withdrawals, there is a fixed fee of £1.50 or $2.50.

Inactivity Fee

PayPal also introduced an inactivity fee, which means if you don’t log into your account at least once a year, PayPal charges you £9. If you have a PayPal business account, or even a personal account that you occasionally use for shopping, you should never need to worry about this fee!

Next, we’ll discuss PayPal’s seller fees, PayPal business fees, and PayPal fees for receiving money.

 

PayPal Seller Fees

If you’re a veteran online seller or freelancer, then you probably have some sort of PayPal business account. If so, there are some fees you should take note of. After all, the seller pays the fees, not the buyer.

There are no fees to create a standard PayPal business account. The fees only come when you receive money from others. Note that there are setup fees associated with the two other kinds of PayPal business account, and you can learn more about them in this article. If you sign up for a PayPal Payments Pro business account, there is a subscription fee of £20/$30 a month.

Chargebacks and Disputes

Beware of chargeback and dispute fees. If your client or customer isn’t happy with what you have given them, they can dispute the payment. Chargeback fees are £14/$20. Dispute fees vary depending on how many disputes you face in a given timespan. Therefore, to avoid higher dispute fees, you need to provide a quality of products or services that won’t lead to your customers disputing payments!

Finally, in case you want to try and cheat the system by telling clients to pay with PayPal Donations instead – don’t do it. The fees are exactly the same as the normal transaction fees. Next, we will discuss the various PayPal business fees.

 

PayPal Business Fees

PayPal business accounts are great for companies to manage their finances, especially when they have large amounts of money going in and out. However, PayPal business accounts are also ideal for freelancers. You can learn more about choosing between a personal and a business account as a freelancer in this article.

To start, PayPal Payouts is a way to mass-pay different vendors or employees at once. This applies to freelancers too as you may hire or train other freelancers under your wing. The base rate for PayPal Payouts in the UK is 2%, but with a domestic maximum fee cap of £10. The international maximum fee cap is £60. In the US, the rate is 2% of the total transferred amount, with a maximum cap of $14. The international maximum cap is $90.

Regarding PayPal currency conversions, the amount isn’t explicitly stated. For example, when you have currency A and convert it to currency B before sending it, the recipient will pay around 4% of the amount as a fee. In other cases, the currency conversion fee is just 3%. This is highly dependent on other factors, like the amount of money sent and the currencies involved. In the UK, the currency conversion fee is about 3% above the base market rate.

Different Withdrawal Fees

The final fee to note is the withdrawal fee. In the UK, there aren’t any withdrawal fees to UK bank accounts, but there is a 3% withdrawal fee to US accounts (from the UK).

In the US, there isn’t a withdrawal fee to local linked bank accounts. But if you want to skip waiting the 3-5 business days, you can pay 1% of your total transaction amount for instant transfers to your bank account or credit card. The maximum cap per instant withdrawal is $25,000 for bank accounts and $50,000 for credit cards. The most you will pay for instant withdrawals is $10.

Keep in mind that this is the base rate for withdrawal fees. If you have different currencies in your PayPal balance, you have to convert them to your local currency before making the withdrawal.

Do It Right the First Time

Also, when withdrawing into a bank account, make sure you put all your details in correctly. If for some reason the withdrawal doesn’t go through, there’s an additional £0.50 charged to your total amount, not to mention 3-5 business days wasted waiting on the payment that never came!

 

PayPal Fees for Receiving Money

When receiving domestic payments, there is a transaction fee of 2.9% + £0.30 (fixed fee). Interestingly, using QR code payments lowers the rate to 1.5% + £0.10 for transactions over £10, and 2% + £0.05 for transactions below £10. For international payments, there is an additional charge ranging from 0.50% in European countries like Germany and Spain, to 2% in non-European nations.

Freelancers and sellers can also receive money via credit and debit cards. In this case, you are subject to PayPal’s online credit card payment services agreement. For domestic transactions, credit card payments with Visa, Mastercard, or Maestro card types have a fee of 1.2% + a fixed fee (£0.30), and an interchange fee (0.2%-2%) if applicable. For American Express credit card payments, the fee is 3.5%.

When receiving international payments, you pay the domestic rate and an additional charge which we covered earlier.

PayPal Micropayments

If you’re selling goods or providing services for a small amount of money, you can apply for a PayPal Micropayments account. This lowers the net fee you have to pay, especially if you receive small payments of less than £5 in the UK, or $10 in the US, at a time.

In the UK, the micropayments fee is 5% + £0.05 for domestic payments, and 6% + £0.05 for international transactions. In the US, domestic payments also incur a 5% + $0.05, while international payments have a 6.5% + $0.05 fee.

While PayPal has a full list of fees, not all of them apply to sellers and freelancers. You should take note of your transaction fees (when receiving), PayPal Payout fees (if you delegate work to others), currency conversion, and withdrawal fees.

If you want to learn more about using PayPal, check out these articles. For more about freelancing and business in general, head over to the Sophical Blog.

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