How to Avoid High Paypal Fees
Personally, I don’t think PayPal’s fees are very high at all, but there may be ways to make a saving. In the article below, I have listed all the ways I know that allow you to avoid high PayPal fees. The highest fees appear to be the money receiving fees, and the less-than-mid-market rate on their exchange rates. I have included methods that will help you avoid or lower both types of fees when using PayPal. Just remember that PayPal has to make its money somehow, and their fees are quite reasonable when you consider all the tools and services that PayPal offers.
Avoiding High Exchange Rates By Transferring Your Money To An Exchange Company
Take a look at the fees that PayPal offers and the exchange rate that they offer. PayPal has a conversion calculator that you may use where you may see what your current balance is and what your converted currency balance will be. Once you know how much PayPal is going to give you, get a quote from other transfer and exchange companies and see if they can beat what PayPal is offering.
You now have to transfer your money from PayPal to the transfer company so that you may have it converted. That is the tricky part because there are very few transfer and exchange companies—but there is a way around it. Even though very few exchange companies will accept you loading/paying with PayPal, many of them will accept MasterCard. Simply apply for a PayPal MasterCard, which they currently call the “PayPal Access Card.” They may call it something different in your country.
The PayPal MasterCard uses funds from your PayPal balance, so simply pay with your PayPal MasterCard and your currency is transferred from your PayPal account to the transfer company.
The PayPal MasterCard is not a credit card, which means you are not charged a fee for taking a cash advance. When you transfer money from a credit card company to an exchange/transfer company, your credit card company charges a cash advance fee and will probably give you a nasty APR rate for your cash advance amount. However, the PayPal MasterCard is not a credit card and you are therefore not charged a cash advance fee.
There are currently no maintenance fees for having a PayPal MasterCard, there are no minimum balance requirements, and a credit check is not required. Plus, passing your foreign currency through to an exchange company via PayPal means you do not need a multi-currency bank account. This means that if you are exchanging a foreign currency into your own, then you may transfer the foreign currency to the exchange company, convert the currency, and then transfer it directly to your bank account rather than transferring back to PayPal.
I am not sure why it happens, but some people complain that they had a currency in their account that was not transferred over. For example, one person said she had Thai Baht in her account and that she used her PayPal MasterCard to load Thai Baht into the exchange company’s account. However, instead of using her Thai Baht balance, it drew money from her bank account, converted it, and then sent it to the exchange company. I don’t know why this happened, so beware of this possible problem.
Getting a PayPal MasterCard may take two weeks or longer, and there is always a chance that your chosen exchange company will accept MasterCard, but will still not accept a PayPal MasterCard.
I was told by a commenter that his PayPal MasterCard still charged a cash advance fee. I cannot confirm this, and it has never happened to me, but maybe it is a regional thing—still it is another potential problem to look out for.
Apply As A Merchant For Lower Fees
I am not going to cover this one in full because it varies from country to country. In some countries, you are able to apply for a merchant or business account and then work your way to getting lower PayPal fees. Yet, in other countries such as the USA, there is no way to lower your fees with a business or merchant account.
If you sign up for a business account or a merchant account, you may be able to earn lower fees by simply having the business or merchant account, or you may earn discounts by receiving enough money. In some countries, your PayPal account will have a tiered system where you get a lower rate for transacting X amount per month, and you get an even lower rate if you transact XX amounts per month. If your country has such incentives, then you may avoid high PayPal fees that way.
Getting your merchant or business account discount seems to be the biggest problem, and as I mentioned, not every country has a fees discount system. I am not sure how it works for some countries, but I know that it used to be where you could just apply for a merchant or business account and that gave you access to the discounts. I am not sure how it works now because I know of some people having to maintain a certain monthly income with their PayPal account, and then they have to fill out the Merchant Rate Application form.
Pay Family And Friends
If you are receiving a one-off payment from somebody, and it is not part of a business venture, such as if you have just sold your car, then you may have that person pay you as a family or friend and you will not have to pay fees. Beware that if you try to scam PayPal by repeatedly having money sent to you that is for business purposes, then they will fine you. In addition, if you use the “Family and friends” payment and receiving method, aka the free method, you are not covered by any of PayPal’s sending or receiving policies. If fraud occurs, then it is on your head.
If you are receiving one off payments that are not from your family or friends, then you can probably get away with having the money sent to you via the free family and friends method. It will save you having to pay the 2.9% and 30 cents fee that usually goes with receiving money via PayPal.
If PayPal figures out what you are up to, where you are receiving money without paying fees, then they have a right to close your account. They may also fine you or ask you for back payment for the fees you avoided. At the very least, they will not cover you within any of their buyer, seller, payer or receiver protection policies.
Add The Fee Into Your Invoice
It is a clear violation of PayPal’s terms to add your receiving fees into the invoice you create when you ask others to pay you. Bitcoin sellers on bitcoin marketplaces will often ask for you to include their receiving fees as part of the sales price, but it is fairly uncommon anywhere else. One the one hand, when you price up your product or service, you could always include your receiving fee along with your other overheads. Or, you could add an extra charge to your PayPal invoice and call it “Payment processing” or “Payment accounting” fees.
If you charge the sender for your receiving fees, then you are avoiding the PayPal receiving fee by having your payer pay it instead. If the person paying you is happy to do this, then give it a try, just make sure you do not mention it explicitly in your invoice. Call the charge something else, such as a, “Payment accounting fee.”
The most obvious problem is that your payer may not be happy about paying you and paying your receiving fees too. If your payer is not willing to dance to that tune, then you are out of luck. However, I did mention that you may consider your receiving fees when you are pricing up your product or service. After all, you must have considered your other overheads, so why not add this one in as well. The other problem is that PayPal can close your account if they find out you are charging your senders for your receiving fees because it says in PayPal’s terms and conditions that you are not allows to charge your sender for your receiving fees.
In addition, if you start charging your clients for your receiving fees, then your client may think you are cheap or money grubbing. Your client may also resent the unwelcome increase in price. Other clients may consider it unprofessional that you are charging them for your PayPal receiving fees when a legitimate business or business person would have made allowances for the fees during the price setting process. In addition, if there is a charge back or some sort of refund, your client may be unhappy that you receive the PayPal receiving fee back when he or she paid it.
Paypal Fees Are Tax Deductible
Though it is slightly contrary to the title of this article, what about making no effort at all to avoid high Paypal fees and simply add them to your tax returns as business expenses? PayPal receiving fees are tax deductible as business expenses, so you can add them to your tax return and lower your tax bill as a result. It may not be the mind-blowing fees cheat that you were hoping for, but money is money, and it works in your favor if you have made a taxable profit this year.
If you have made a taxable profit, then your business expenses will help lower the amount of tax you eventually have to pay. There will be an obvious waiting time between when you pay the fees and when you benefit from them on your tax bill, but it shouldn’t make much difference if you are making a profit and keeping your head above water.
If you are not making a taxable profit, then you are going to have to suck up the fees. In addition, if you are not in business and you are simply looking for a way to avoid high Paypal fees, then taking it off your taxes is not something you can enjoy.
Avoid High Paypal Fees By Switching
If you are serious about avoiding PayPal fees, then you may change companies. You could find another online wallet that your payer is happy to use, and if you are receiving money from overseas, then you can try a lower-priced exchange such as CurrencyFair or Transferwise. Nobody says you have to abandon PayPal when you switch. There is nothing stopping you from opening an account with another online wallet or exchange company and using your new accounts for specific transactions. Meanwhile, keep your PayPal account for other transfers, and keep your PayPal account to use as a secure way to make purchases online.
Figure out which fee you are unhappy with; be it the receiving fee or be it the unfavorable exchange rate, and use another company based on that. If you are unhappy with the receiving fees, then find another online wallet that charges a lower fee. If you are unhappy with the exchange rate you are getting, then find an exchange company that passes money from your payer’s bank account into your bank account. You may even find a company that charges the sender rather than the receiver.
Other firms have to make money too, and you should be wary of other fees. For example, you may choose another online wallet and enjoy a lower fee when you receive money, but they may make their fees back by adding withdrawal fees, or they may have a monthly maintenance fee instead. PayPal makes its money by charging a fee to the receiver, and by offering a less-than-mid-market rate on their exchange rates. Other online wallets and exchange companies are going to have their own way of making money that you are going to have to learn and be aware of before you switch.
Conclusion – Do You Need To Break The Rules To Avoid High PayPal Fees?
As I mentioned in the introduction, PayPal’s highest fees are their money-receiving fees and their less-than-mid-market rate on their exchange rates. Some of the tips on this article may be used in a less-than-honest way, which is a shame because PayPal’s fees are not that high when you consider all the services and security they offer. Strongly consider other options before you start trying less-than-honest methods because even though they may be legal, should you really try to stiff PayPal when they are offering such a good service?