If you’re considering setting up a Paypal Business Account to sell things online, you need to understand the transaction fees.
Paypal takes a small fee for each sale. The exact amount varies depending on a couple of different factors, but generally it’s between 3% – 4%. So if your client paid you $100 you would get $97 or $96.
One advantage of having a Paypal business account compared with bank merchant accounts is that Paypal does not charge you setup and monthly fees. All you pay with a Paypal business account is the transaction fee on each sale. However, the 3% fee only applies to domestic payments in US dollars. There’s an additional 2.5% charge for any currency conversion and a 1% charge to receive payments from another country .
While it might seem unfair that you have to pay a transaction fee to use your Paypal business account, there’s really no way to get paid online that doesn’t involve fees. Paying a fee or commission for services rendered is just part of doing business. I suppose you could ask customers to mail you a cheque, but that takes time and you probably won’t make nearly as many sales.
Paypal is so much faster and easier for clients, and it also gives them the option of using a credit card.
Paypal won’t alert you to this, but once you have more than $3000 a month coming in to your Paypal business account the fee can be lowered on request. Note I said “on request”. You have to remember to apply.
When setting up a Paypal Business Account, you will be asked what kind of account you want. There are about six different options, but the two you will probably find most convenient are Website Payments Standard, and Website Payments Pro
Which type of Paypal business account should you get? I have “Standard” and it does just fine for me. I think most most small businesses starting out online would find Website Payments Standard meets their needs.