Freelancing is not that privileged as you think. No matter how efficiently you perform your job, chasing clients for payment and getting paid is not less than an uphill battle. It’s a nail-biting phase until you get paid. But not anymore! Virtual payment platforms are the go-to choice and online payment giants like PayPal have turned the tables.
Freelancers and individual entrepreneurs from more than 200 different countries use this free and user-friendly payment gateway to get paid faster. PayPal also supports 25 different types of currencies. Being a recognized and trusted platform, even the customers feel secured to make payment.
What is PayPal?
Work from home and spread your business globally without any hurdle as PayPal makes it faster, safer, and easier to get paid. This digital payment platform was founded long back in 1998 and is well-recognized by people for sending and receiving money online. It creates better ways to manage transactions. Instead of revealing your bank details to any company or individual, PayPal comes across as a secured third party.
You just need to sign up and create your PayPal account and instantly start receiving money, either directly in your personal account or PayPal account. The email id which you use for signing in to PayPal acts as your PayPal account id. Once you receive your payment, it will be visible in your PayPal account dashboard.
In short, without PayPal, freelancers or individual entrepreneurs could have never experienced the peace and joy of smooth cash flow.
The bitter part is or rather the reality is PayPal is doing no charity! It will charge you a certain amount and you need to pay the PayPal fees for receiving money.
Despite being so commendable, PayPal revolves around its fees which is seen as a downside. But, of course, like you need payments to survive, even PayPal needs to make income to stay in business. That is why it charges fees for most business-related transactions.
PayPal is the second-most popular online payment processing platform where you can create an account for free and enjoy a comfortable yet secure online transaction. Let’s understand how it works!
How to receive money on PayPal?
Besides paying the PayPay fees for receiving money, you also need to follow some steps for keeping an uninterrupted cash flow. Here are some of them!
The email address that you used for your PayPal account registration is the predominant factor that you’ll require to receive money through PayPal.
If you have your PayPal account, you know which email address you must have used for registration. You just need to send that email address to the person who will be sending you the money. Once the sender correctly enters your email address in the dedicated field in their PayPal account and enters the money to be sent, you will receive the money instantly. After the payment is made, you will also receive an email notification regarding the payment made.
Even if the sender does not have a PayPal account, still they can send the money to you on your PayPal account. Payment can be made even using a debit or credit card.
If the sender is sending money via PayPal account, debit, or credit card then you might receive it within a few minutes. However, if the money is sent via bank account then it can take 3 to 5 days.
How to send money through PayPal?
You can send money to someone through PayPal with or without a PayPal account.
If you are a PayPal account holder and want to send money to your friends or family through an app or PayPal web browser then all you need to do is – Tap on send option, enter the recipient’s name, mobile number, or address. Enter the payment amount, choose a preferred payment method, review the necessary information and then tap send now. You can also change and choose the type of currency you want to send money in.
You need to also select the payment type. The payment type will determine the payment fees that will be added. If it is a personal payment like sending money to friends or family the payment fees could be less or sometimes, you can also avoid the additional fees. However, if you are paying for the goods or services, fees will be applied as PayPal purchase protection.
Let’s know the PayPal fee structure in detail
Do you always need to pay the PayPal fees for receiving money? Then First, let’s break the good news. For domestic personal transactions between friends or family, PayPal charges no fees.
How is this good news for the business? You’ll know later in this article.
Since we are focusing on freelancers and other businesses, who largely rely on digital payment channels, it is crucial for them to get acquainted with the global favorite, Paypal’s fee structure. As a new PayPal user, the fee structure might be confusing. It’s mainly because the percentage of the fees keeps on changing depending on various factors.
Predominantly, it differs as per countries/currencies:
|Currencies||Fees per transaction|
|U.S. Dollar||0.30 USD|
|Australian Dollar||0.30 AUD|
|U.K Pound Sterling||0.20 GBP|
|Canadian Dollar||0.30 EUR|
Apart from this fixed-rate, PayPal also charges a percentage of the amount on each transaction.
If your business operates within the U.S. and you accept online payments then the percentage of fees would be:
- For bank accounts of clients within the U.S.- 2.9%
- For bank accounts of clients outside the U.S.- 4.4%
Let’s make it more simpler with PayPal fee calculator:
No matter what method you use, know the situations when PayPal would charge a fee to avoid confusion.
- For online purchase made within the UFor bank accounts of clients within the U.S.- 2.9%
- For bank accounts of clients outside the U.S.- 4.4%.S. the fee would be 2.9%+$0.30
- For the purchase that is made within U.S. and at the store’s physical location, then the fee would be 2.7%+$0.30
- In case of international transaction online, the rate would be 4.4%+$0.30
- Whereas, if the same transaction happens at the physical location of the store and the clients is based outside U.S. then the rate would be 4.2%+$0.30
- PayPal also charges fees for currency change which is 2.5% of the total amount you are receiving.
- PayPal also charges a fixed rate for eligible non-profit organisation, which is 2.2%+$0.30
- You would be delighted to know that PayPal also offers access to various credit and debit card transactions and the fees are:
- U.S card swipe: 2.7%
- Manual transaction: 3.5%+$0.15
- Invoices: 2.9%+$0.30
- Cross-Border Transfer: 1.5%
- In case of refunding the payment to your clients, PayPal will keep the rate same that you paid while recovering the money.
- If you wish to withdraw the amount from your PayPal account to your bank account, debit card or credit card then the fees structure depends upon the country you are located in. Here are the fees structure for withdrawals:
- For per day/transaction/week the withdrawal fees for debit cards is $5k.
- The fees per transaction for bank accounts is $25k.
Feeling heartbroken about the fees charged? Relax.
Every problem has a solution, you can lower your PayPal fees for receiving money!
Freelancing comes with a variable income. We know how important it is for you to save every penny. With a heavy heart, you see your incoming money getting depleted. Don’t feel helpless, you are getting an opportunity to save money, so just grab it.
PayPal is not that evil too. If it is giving you an opportunity to easily get paid for your efforts, it also offers some means of escape from the fees (though not directly).
Tricks to Lower/Decrease your PayPal fees for receiving payment
PayPal fees as a billable expense
This is one of the best ways to receive money via PayPal without hurting you with fees. When you invoice your client as a freelancer or a small business, you include the amount of the fee as a billable expense in the invoice.
This is actually a legal method to pass the fees as a billable expense to your client. This way the transaction fees would be paid by your client, instead of you.
For example – If your work costs $1300 and if the online payment is within the U.S. itself then as per adding PayPal standard fees of $30 – that’s the respective fees for U.S. + 2.9%) – Total invoice amount would be $1338. So if you invoice the amount as a billable expense, after Paypal cuts the applicable fees, you would be left with a total amount of $1300 that is the cost of your service offered. You will receive the full payment plus the fees will also be paid.
Ask the client to pay you as a friend
We already mentioned this as good news in this article, remember? Let’s understand this in detail. If you want to avoid paying the additional fees and don’t want even your clients to pay then there is a secret trick. The trick is to ask your client to pay you as a friend.
When a client makes payment via PayPal they can see an option of making the transaction either personal or business-related. If the client picks personal, the transaction isn’t subject to additional fees.
This might work as a short-term trick to avoid fees. If PayPal notices this often, your account is likely to get terminated. So play safe.
PayPal fees as a business expense
Just like you can add Paypal fees as a billable expense and incur the amount from the client, you can similarly show it as a business expense too.
Listing as a business expense in your taxes will help you to reduce the burden of PayPal fees for receiving money. For any further reference or need, make sure to keep records of PayPal transactions and also the fees charged.
Switch to alternative
If none of these above tricks seems convincing, you can simply switch to some other trusted digital payment mode. Transferwise works as a great alternative. No markups, no hidden fees, Tranferwise just ask for small upfront fees for each transaction.
With this digital payment gateway, the payment directly goes into your bank account. You don’t even have to look into the Transferwise account to see if you received payment.
Global transactions are super easy. With a borderless multiple currency accounts, you can receive money in Australian Dollars, US Dollars, British Pounds, Euros or any other currency and that too with no fees.
Automate invoicing and get paid faster with Billbooks
You all know that Billbooks helps to create and send professional-looking invoices in less than 60 seconds. But do you know, with Billbooks you can even get paid faster? The invoicing software makes it easier for your clients to pay you via Credit card, Debit card, Visa, Amex, and also through secured and leading payment gateways like PayPal, Stripe, Authorize.Net, 2Checkout, and Braintree.
The freelancing job now looks much more sorted and rewarding, isn’t it?