If you’re a freelancer or entrepreneur, then you know the importance of online payment processing. PayPal is currently the number one online payment processing platform in the world. Unfortunately, many people are less than thrilled about why PayPal charges a fee. Fortunately, there’s a way to decrease or even eliminate these fees.
This article will discuss what PayPal is all about, its charges and fees, and how you can decrease them. So whether you’re looking to ditch PayPal for another service or want to learn how to reduce your fees, this article is for you!
What is PayPal?
PayPal is an online payment processing platform that allows individuals and businesses to transfer money. The company charges fees for every made transaction. For individuals, the fee is usually a percentage of the total transaction. For businesses, PayPal charges a flat fee per transaction.
PayPal has completely revolutionized the way we do business. In the past, getting paid meant waiting for a check to come in the mail, which could take weeks! With PayPal, you can get paid almost instantly. And, since PayPal is an online platform, it’s available 24/7.
Instead of giving away your bank account details to an individual or company, PayPal acts as a secure third party. With PayPal, your financial information stays private, and you also get support if something goes wrong with the transaction.
You can get paid any time, anywhere, regardless of where you are in the world. All you need is a stable internet connection and your PayPal account.
Why Does PayPal Charge Fees?
Now that we know more about PayPal let’s discuss why the company charges fees. After all, these fees can add up, especially if you’re a freelancer or entrepreneur who relies on PayPal to get paid.
These fees are PayPal’s way of making money. The company isn’t giving away their services for free, after all. They need to keep the lights on while also providing services to as many clients as possible. To do this, PayPal charges a fee for each transaction.
PayPal Fee Structure
Let’s look at the company’s fee structure to understand how PayPal fees work. PayPal starts by applying a “fixed-rate fee” to every transaction that you do on its platform. This fee varies depending on the transaction’s currency.
Some of the most popular currencies and their corresponding fees include:
- US Dollar — 0.30 USD per transaction
- Canadian Dollar — 0.30 CAD per transaction
- UK Pounds Sterling — 0.20 GBP per transaction
- Euro — 0.35 EUR per transaction
- Australian Dollar — 0.30 AUD per transaction
On top of the aforementioned fixed rate fee, PayPal also charges a percentage of each transaction total. The percentage will vary depending on your and your client’s bank account location. Online transactions are usually subject to higher fees than in-person transactions.
For example, suppose you’re located in the US, and you’re accepting online payments. That means your fee percentage would look like this:
- 2.9% of your client’s bank account is within the US.
- 4.4% of your client’s bank account is overseas.
These variable fees take out a larger portion of your income than the fixed fees applied to each transaction. So, for instance, if you’re getting paid $100 by a client in the US, your PayPal fee would be $0.30 (the fixed rate fee) plus $0.29 (the variable percentage fee). That means PayPal would take out a total of $0.59, or 0.59% of the total transaction.
If you’re receiving payments from a European client, your variable percentage fee would be higher. In this case, PayPal would take out $0.35 (the fixed rate fee) plus $0.44 (the variable percentage fee). That means your total PayPal fee would be $0.79, or 0.79% of the total transaction.
As you can see, PayPal fees can add up, especially if you’re doing a lot of business overseas.
Why do Freelancers and Entrepreneurs Use PayPal?
So many freelancers and entrepreneurs rely on PayPal to get paid. If you’re completely new to freelancing or entrepreneurship, online payments might be the only method you know. And, since PayPal is the most popular online payment processor, it makes sense that you would use the platform to get paid.
At first, you might think that the fee PayPal charges are quite significant. However, you should also know that these fees also come with numerous benefits:
- Your clients can make instant payments to your account.
- Your clients don’t need a PayPal account to make payments.
- PayPal charges far less than many other payment services.
- You can set up a PayPal account for yourself in minutes!
No payment processing solution is perfect. However, when offering your clients a quick and easy system, PayPal remains the best option.
How to Decrease PayPal Fees?
If you’re a freelancer or entrepreneur who relies on PayPal to get paid, you might be looking for ways to reduce your fees. While there’s no way to avoid PayPal fees completely, there are a few things you can do to decrease them:
List PayPal Fees as ‘Billable Expense’
The best and most effective way to offset PayPal fees is to list them as billable expenses. However, you’re essentially charging your clients for the PayPal fee rather than paying it yourself when you do this.
The only downside to this method is that your clients might not be happy about paying an additional fee on their invoices. In this case, you’ll need to be upfront about why you’re charging the fee and how it will benefit them.
For example, you could send them an email or personal message saying something like this: “If it would be okay, I would like to include the PayPal fee to your invoice total. This way, I’ll be able to receive the full amount of your payment.” In most cases, the client will agree to this as long as you’re transparent.
Receive Fewer Payments
While this method is effective, it’s only to a certain degree. You see, the more payments you receive, the more PayPal fees you’ll have to pay. So, if you want to reduce your PayPal fees, you can receive fewer payments.
Of course, this isn’t always possible or practical. For example, if you’re running a business, you can’t exactly tell your clients to only make payments once a month! However, if you’re a freelancer who only works with a handful of clients, you could try this method.
Send your clients an email and let them know you’ll be invoicing them once a month (or every two weeks, etc.) instead of after each project. This way, you’ll only have to pay PayPal fees once (or twice) a month instead of after every project.
Request Clients to Pay Your “As a Friend”
This next method is quite common for freelancers and small businesses. When you request that your clients pay you as a friend, they can avoid being charged the PayPal fee.
However, there’s a catch. PayPal won’t offer buyer protection if you’re paid as a friend. So, if the client doesn’t pay you or if they dispute the charges, you wouldn’t be able to get your money back.
Of course, this method is only ideal if you trust your clients and are confident they’ll make the payment. If not, it’s best to steer clear of this method and opt for one of the others on this list.
Choose the Ideal Withdrawal Method
Receiving money via PayPal already bombards you with a ton of fees. But, at the same time, the same thing also happens when you withdraw that money from your PayPal account.
Several withdrawal methods are available, each with its own set of fees. So, if you want to reduce your fees, you need to choose the withdrawal method that charges the least.
In most cases, this will be a direct deposit to your bank account. While fees are still associated with this method, they’re often lower than the other alternatives.
Of course, the only way to determine which method is best for you is to compare the fees side-by-side. Once you’ve done that, you can choose the withdrawal method that charges the least in fees.
Why Use ReliaBills?
If you want to negate PayPal fees completely, the best thing you can do is streamline your payment processing with ReliaBills. Creating a comprehensive invoicing and payment processing system is important for businesses looking to get paid, and ReliaBills is the perfect partner for the job.
ReliaBills is a web-based invoicing platform that helps businesses manage their invoices and payments in one place. Not only does it automate the invoicing and payment process, but it also integrates with Quickbooks so that you can keep track of your finances with ease.
By setting up a recurring billing system with ReliaBills, you can get paid directly to your pockets without having to deal with fees from PayPal or any other payment processor.
Overall, using ReliaBills is the best way to avoid PayPal fees. It will save you money in the long run and streamline your invoicing and payment process, so you can focus on running your business. So what are you waiting for? Get started today by creating an account!
PayPal fees can be a pain, but there are ways to reduce them. Whether you choose to receive payments less often or request that your clients pay you as a friend, there are several methods you can use to reduce the fees you’re paying.
Of course, the best way to avoid PayPal fees altogether is to use ReliaBills. Not only will it save you money, but it will also streamline your invoicing and payment process. So why not give it a try? Create an account today and see how ReliaBills can benefit your business.