Overview of PayPal Fees Structure and Tricks to Decrease the Fees

Paypal fees for receiving money

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 giant like PayPal has 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 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 cashflow.

The bitter part is or rather the reality is PayPal is doing no charity! It will charge you fees.

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 of the business-related transactions.

Let’s know the PayPal fee structure in detail

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 keep on changing depending on various factors.

Predominantly, it differs as per countries/currencies:

  • U.S. Dollar – 0.30 USD per transaction
  • Australian Dollar – 0.30 AUD per transaction
  • Euro – 0.35 EUR per transaction
  • U.K. Pounds Sterling – 0.20 GBP per transaction
  • Canadian Dollar – 0.30 EUR per transaction

Apart from this fixed-rate, PayPal also charges a percentage of amount on each transaction.

If your business operates within the U.S. and you accept online payments then the percentage of fees would be:

  • 2.9% (if your client’s bank account is within the U.S.)
  • 4.4% (if your client’s bank account is outside the U.S.)

Situations when PayPal would charge you a fee:

  • When you receive payment for the purchase made
  • When you receive payment from a different country from where you are based
  • When your money is moved from Paypal account to debit or credit card
  • Fees for changing currency

Feeling heartbroken about the fees charged? Relax.

Every problem has a solution, you can lower your PayPal fees!

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

Fees are inescapable but reducing them is possible. Here are few ways for reducing your PayPal fees as a freelancer or a small business owner:

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 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 as 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 in 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 borderless multiple currency account, you can receive money in Australian Dollars, US Dollars, British Pounds, Euros or any other currency 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 sorted and rewarding, isn’t it?

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