How to Avoid PayPal Fees

by Manage Money

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Whether you are an individual or business owner, paying fees to move money isn’t fun. When it comes to PayPal, there are a few ways to avoid paying fees, and when avoiding them is impossible, there are ways to minimize them.

The best strategy for you depends on what the type of fee is and what your needs are.

For individuals to avoid PayPal fees:

  • Send or receive money by selecting “Sending to a Friend” with your PayPal balance or bank account
  • Transfer money to your bank using the standard transfer

For business accounts, you cannot avoid fees, but there are several ways to minimize them:

  • Calculate the cost of fees in your service
  • Opt to be paid less frequently
  • Apply for micropayments
  • Request a PayPal cash card
  • Use an invoicing platform to lower fees
  • Get paid in your primary currency

Before we look at each of these options in-depth, let’s look at when PayPal charges fees and their rates.

When Does PayPal Charge Fees?

PayPal will charge you fees for various services.

  • When you send money using a debit card or credit card.
  • When you send or receive a payment from someone in another country.
  • When you instantly transfer money to a bank account or debit card.
  • When you buy or sell cryptocurrency.
  • When loading cash into the PayPal Cash or Cash Plus Account using the app or PayPal Cash card.
  • When withdrawing from PayPal Cash or Cash Plus Account with the PayPal Cash card at an ATM.
  • When you or your business receives money from selling goods and services.

What are the Rates?

The rates for PayPal differ based on the type of purchase, the country it’s in, and the type of currency you use. These rates are anywhere from 1.5% to 3.5%.

Remember, if you’re sending money via PayPal through your bank account or PayPal account to a friend or family member, there is no fee!

Fee structure

PayPal’s consumer and merchant fee structure is over 34 total pages. To help, we’ve broken it down into three main categories for you.

Consumer Fees

You pay consumer fees, when appropriate, for using the money that you have with PayPal. There are various fixed fees for converting currencies and sending money through a card. For simplicity, the US fee is $0.30, but if you’re sending money abroad or through a card, see the complete list of fees.

Transaction TypeRate
Online or in-store (when no currency conversion occurs)No fee
Holding cryptocurrency in your accountNo fee
Sending and receiving domestic personal transactions through your PayPal balance or bank account – giving or receiving money from friends or family without a commercial purchaseNo fee
Sending money to a friend in the USA through a card2.90% + $0.30
Sending US dollars internationally to personal friends and family through a card. A minimum charge of 99 cents and a maximum of $4.995% + 2.90% + $0.30
Transfer money in or out of PayPal account through your bank accountNo fee

Merchant Fees

If you are a merchant using PayPal, there is no way to get out of paying fees. Here are the standard merchant types and their percentage rates. If you are not in the US, the fixed fee will be different, so check it here.

Transaction TypeRateUS Fixed Fee
Commercial Transactions – Online2.90% + fixed fee30 cents
Commercial Transactions – In-Store2.70% + fixed fee 30 cents
PayPal’s pay later offers2.90% + fixed fee30 cents
QR code Transactions – 10.01 USD and above1.90% + fixed fee10 cents
QR code Transactions – 10.00 USD and below2.40% + fixed fee5 cents
Venmo2.90% + fixed fee1.5%

Cryptocurrency Fees

Cryptocurrency is a digital currency that is created through Cryptography. It is not physical and not issued by a central bank, country, or community. It utilizes a decentralized network and works through a distributed ledger technology, known as a Blockchain.

As of 2020, PayPal users in the US (except Hawaii) can purchase Bitcoin, Ethereum, Litecoin, and Bitcoin Cash through their PayPal account.

PayPal’s Crypto fees are from the spread (or margin) between the market price from their trading service provider (Paxos) and the exchange rate between US dollars and the Crypto asset, and a transaction fee buying or selling crypto assets.

The exchange rate is estimated to be about 0.50%, but that could be higher or lower because cryptocurrency prices change rapidly. Rest assured, when you buy or sell Crypto assets, the exchange rate and transaction fees will be apparent.

Purchase or Sale AmountFee
1.00 – 24.99 USD0.50 USD
25.00 – 100.00 USD2.30%
100.01 – 200.00 USD2.00%
200.01 – 1000.00 USD1.80%
1000.01 USD +1.50%

How to Avoid Consumer PayPal Fees

There are two main instances when PayPal charges a fee. The first is when you send money to someone, and the second is when you transfer money to your bank or debit card. There are ways to avoid both fees. Let’s start with sending money to someone.

Ask to Be Paid as a Friend

When you get a payment request, it will look like the image below. You’ll have two choices – sending as a friend or paying for an item or service.

If you select the “Sending to a friend” option, there will be no fee for the person receiving the money when you send it from your bank or PayPal balance.

If this is so easy, why does anyone ever select the other option?

Because of PayPal Purchase Protection. This protection allows you to dispute claims when:

  • You didn’t receive your item from a seller (referred to as an “Item Not Received” claim), or
  • You received an item, but the thing isn’t what you ordered (referred to as a “Significantly Not as Described” claim).

Think of it this way. As a seller, you don’t get to choose if the fee applies to your good or service; the customer does. Anytime the customer rightly chooses “Paying for an item or service,” the seller gets charged a fee for using PayPay. This action entitles the customer to the PayPal Purchase Protection.

As a customer, it doesn’t hurt to say that a payment is for an item or service. It won’t increase the request for money, won’t change what you send, and won’t save you a fee. Only the seller is ever charged a fee. This means it’s advantageous for you to select the correct field each time you send a payment.

Change How You Transfer Money out of PayPal

When transferring money out of PayPal, there are two ways to be charged a fee:

  • You choose the instant transfer option (1% fee up to $10)
  • You choose to transfer the money utilizing a paper check ($1.50 fee)

You can avoid all these fees by choosing your bank’s standard transfer, which takes 1-3 business days.

How to Minimize Business PayPal Fees

If you can’t avoid PayPal fees entirely by having clients select “Sending to a Friend,” what are ways to limit them? The answer is specific to your business’ needs and how you’re using PayPal.

Calculate the Fee in the Cost of Your Service

This strategy doesn’t reduce your PayPal fees but ensures you cover costs. To calculate the fee, multiply your invoice by 2.9% + $0.30 (per transaction). There are two ways to cover this cost.

This first is to set your hourly or daily rates to include fees, so your net profit is what you want. For example, instead of charging $25/hour, you charge $26.06 to cover the expenses. This practice will ensure that you receive $25/hour after PayPal fees and not cut into your profits.

Another way is to require your clients to pay the fees. This practice of charging a “convenience fee” is becoming more common as more business moves online. If the invoice is for $500, the “convenience fee” would be $15.24. If it helps get you more business, offer to take it off if they pay you through a method with no fees, like a check.

Don’t forget about the $.30 fee for each transaction. If your invoice billing is in multiple parts, you’ll need to calculate that as well.

To double-check your math, use this PayPal Fee Calculator. The Reverse PayPal Fee Calculator is especially helpful when calculating the convenience fee.

Note: PayPal restricts you from charging an extra fee for using PayPal, but they can’t stop you from charging an additional fee for all electronic payments. Your invoice needs to show this e-payment fee. If you set it as a fee to use PayPal, you’re breaking the PayPal Terms of Service.

Apply for Lower Fees

If you’re a business, you can apply for lower merchant fees in less than two minutes. This strategy can take you from 2.9% to 2.2% instantly. You have to process $3,000 or more of transactions per month to qualify.

Follow these steps to apply:

  1. Go to
  2. Click Fees near the bottom of the page.
  3. Scroll down to Selling with PayPal, click Check It Out.
  4. Click Merchant rates.
  5. Near the bottom of the page, click Log in to log in and complete the application.
  6. Click Submit

Opt to Be Paid Less Often

If you’re doing many transactions with daily or weekly subscriptions, switching to monthly or annual payment plans may be for you.

This is because PayPal charges a percentage of the transaction as well as a fixed fee per transaction. Right now, that is 2.9% plus 30 cents per transaction. If you can change from daily to weekly payments or weekly to monthly, this can save you big bucks.

It may seem small, but $0.30 in savings adds up if you’re doing hundreds or thousands of transactions!

Apply for Micropayments

Micropayments are payments that are under $10.00, and this fee structure could be ideal for your business. If your business handles most of these small payments, this can save you a lot of cash. Here’s how the two compare.

Regular FeeMicropayment Fee
2.9% + $0.30 per transaction5.0% + $0.05 per transaction
$1.00 charge cost $0.33 in fees$1.00 charge cost $0.10 in fees
$9.00 charge cost $0.56 in fees$9.00 charge cost $0.50 in fees

As you can see, there’s a big difference in fees. You can increase your margins by 10-50% immediately by using micropayments. If you’re using PayPal to process a high-volume of low-cost transactions, we suggest applying for Micropayments. To apply, connect with PayPal customer support.

Here’s the big catch about micropayments – this rate will apply to all commercial transaction payments received into your applicable PayPal account. That means if you get a transaction of $100, it’s significantly more than using the standard fees. It’s a double-edged sword, but it’s probably a solid switch to make if you primarily deal in micropayments.

Request a PayPal Cash Card

A PayPal cash card functions the same as a debit card for your PayPal account. It will allow you to access your money, and the card has no fee at any retailer that takes Mastercard. You can also use this at an ATM to withdraw up to $400. You must use a MoneyPass ATM to avoid any AMT fees. Using other ATMs may result in a fee.

The other reason to spring for the PayPal Cash Card is that it is a rewards card. For using it, you get cashback bonuses. It won’t help avoid PayPal fees, but it does recoup some of the cost!

Use an Invoice Platform to Lower Fees

Specific invoice platforms use “PayPal Business Payments,” which charges a flat $0.50 per transaction. Using PayPal Business means you can receive $500 or $5,000 for just $0.50.

Business Payments uses certain third parties’ products or services where the sender must fund their payment exclusively using either (or both) their PayPal balance or E-check.

When you send an invoice, you must have the “PayPal Business Payments” selected, and the customer pays with a PayPal account. This whole process is called an “e-check,” and it sure beats sending a physical check in the mail!

To take advantage of Business Payments, both companies must be in the same country and have PayPal Business Payments. It does not work if the customer pays with a credit card!

Currently, the PayPal Business Payment is only through select third-party providers. Below are two options for you.

  • Harvest – Easy timesheet tracking, invoicing, and integration with PayPal make this an easy choice.
  • ReliaBills – This free account lets you invoice, automate payment reminders, has a monthly billing option, and makes automatic payments for you!

Get Paid in Your Primary Currency

To avoid any PayPal currency fees, have the customer covert their payment before sending it to you. That way, there isn’t a conversion charge!

The second way to mitigate a conversation charge is to include the currency conversion charge in the invoice. Call it a “conversion charge” and build it into the contract. Similar to our method above, for avoiding the merchant fees, just do the math for your specific conversion fee and add it to the invoice.

PayPal Alternatives

PayPal is great for many, but others might prefer an alternative. We’ve compiled a list of the most popular for you to check out.

  • Stripe is a multi-national, online payment infrastructure built for the internet. They have a simple payment plan that is 2.9% + $0.30 per successful charge. There are no monthly fees, setup fees, or hidden charges, and they add discounts for volume or having multiple-products.
  • Shopify allows you to start a business anytime. For about $30 a month, you use their resources to build a webstore. Their fees are 2.9% and $0.30 per charge. If you want to avoid PayPal fees, these are higher because you’re paying to set up an online shop. The positive? Shopify is a market leader, and you can easily spend more than $30 a month to set up a website somewhere else.
  • Venmo has quickly become a favorite for friends to share money or split a bill. It costs zero dollars to sign up, to send money, and there are no monthly fees. Venmo does not charge fees for sending money from a linked bank account, debit card, or your Venmo account. There is a 3% fee for sending money using a linked credit card. If you want to avoid fees, don’t use a credit card! Venmo also has a brand new business account option with consumer protection. Currently, the fee is 1.9% + $0.10 for a payment.
  • TransferWise specializes in wire transfers abroad. A wire transfer is sending money through exchanges. You get the current exchange rate for transfers, and studies have shown that, on average, it’s 19x cheaper than sending money through PayPal. It is multi-currency banking without exorbitant exchange fees or brick and mortar banks!
  • Payoneer is a payment platform that empowers businesses, online sellers, and freelancers to pay and get paid globally as easily as they do locally. You can track payments all in one dashboard for business owners instead of logging into each digital marketplace where you sell. In addition, you can do payment processing and pay suppliers, freelancers, and other contractors with Payoneer.
  • Dwolla might be for you if you’re into creating your payment API infrastructure. It provides the security, reliability, and trust of a payment platform. You then build it the way you want for your customers on the front end. If all of that terminology is foreign to you, this isn’t your payment platform!

Other forms of Payment

If you’re looking for something other than an electronic payment, you can always go old school and accept only cash or checks.

If you’re a business with recurring payments, you can check with your bank about Electronic Fund Transfer (EFT). EFT is a direct payment that is generally free or incredibly cheap, so it’s worth checking out!

Claim PayPal Fees on Your Taxes

This last tip doesn’t have to do with mitigating fees but minimizing their impact on your bottom line.

In the United States, you can deduct transaction fees on your tax return. This will not lower any costs, but it will lower your tax bill at the end of the year. Add up how much you paid in fees and include it in your Schedule C.

In Conclusion

There are only two ways to avoid PayPal fees – sending money to a friend and changing how to transfer money out of PayPal. While merchants can’t avoid PayPal fees entirely, there are many ways to minimize them.

Don’t forget, PayPal isn’t for everyone. If you’ve realized that, sign up for one of our alternatives, or look into other payment forms like Cash, Checks, or EFTs with your bank to maximize your money. If you do end up paying fees, don’t forget to claim those fees on your business taxes!

Alexander Newby

Alexander Newby

Alexander is a fully licensed financial advisor. His entrepreneurial spirit and a passion for the wealthy life have freed him to live a life he loves living. Though he faced plenty of obstacles along the way, he overcame. Through his struggles, Alex learned what it truly means to pursue the Wealthy Life in all the ways that matter most. He's been in pursuit ever since.

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