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How can I reduce my PayPal fees?
Paypal transaction fees can cost a small business heavily! I have been charged heavily when collecting payments from marketing clients! The percentages I was paying, as you can see in the image below were ridiculous! (see image)
Disclaimer: This article contains affiliate links. I NEVER promote service or products I don't believe in! If you follow my instructions you can use the software to get PayPal Fees reduced to $.50 per transaction!
I had to do something! I searched far and wide. I thought, "Surely there is a better more reasonable method of collecting payment!" I knew there had to be a way to lower these outrageous fees! The following is what I found to be the best method to lower or reduce PayPal fees for a small business! (see bottom of article)
The most common answer is to ask to be paid friends and family, which is actually against PayPal's terms of service. When you are paid money from clients, you will be charged a transaction fee of $0.30 plus 2.9% of the invoice. Transaction fees occur when money is received for goods or services. If your customer agrees to send you funds with the friends and family option in PayPal, you won’t pay a fee for collecting the money.
If you would like to get paid with the friends or family choice, you must adjust how you send invoices to the customer. There are several problems with friends and family option. In addition to being against PayPal's terms of service, you won't have the option to invoice and send reminders like you can as a business.
The only downside for your customer is that they won’t have payment protection if they agree to send you payment through the friends and family option. If you’re both okay with this technique, then this technique can be a good method to save money on PayPal fees, so long as PayPal doesn't find out. 🙂
Paypal is an electronic service that allows registered members send and receive money via their platform through online funds transfer.
How it works is that an online account is created and money is deposited, one of the advantages of this platform is that, it can be used to hasten payments. the money can then be withdrawn to through a credit card or a checking account.
The credit card details are requested for once the account is created, and the website won’t ask for it again. The good thing about the site is that credit card information is protected from both sellers and receivers. It is free to send and receive money through a PayPal account, but it is different using a credit card, a small percentage is withdrawn by the platform as a service charge.
The frequency of transactions may cause this amount to become frustrating. About 2.9% and $0.30 is held back by PayPal after every credit card transaction for the ones that occur in the US, and it could be more or less for other countries; therefore, a foolproof method was developed to cut down or reduce these costs, a few of them are:
1. Receiving money at longer intervals: Apart from the fact that PayPal charges 2.9% on every transaction which would be the same amount even if the intervals are longer, they also charge about $.30 for every sale, cutting down on the number of time money is received will see to it that the every transaction service charge of $.30 is avoided,
If payment had been received daily or weekly in time past, deciding to collect every fourth night or monthly will go a long way in cutting down the cost of a transaction. A lot of people use PayPal to send and receive freelance charges; this will go along way in helping both employers and freelancers reduce the cost of a transaction
2.Payment as a friend or family through PayPal: there’s an option on the service that allows for payment through these methods, although it has one or 2 downsides for the client, they will not have client protection, but if both parties are okay with this option, it will go a long way in reducing costs. One thing that can be done is to avoid sending an invoice through PayPal, it can be done through other platforms like Freshbooks classics, and if the invoice is still sent, the sender can even pay through the family and friends option instead of through the invoice.
Although it will take another step on the sender's path to use this option, because the invoice is not directly connected to the PayPal account will be worth it in the long run.
3. Include Paypal fees in your payment: while this option doesn’t precisely reduce PayPal fees, including them in a transaction request will not make you feel awful about the fees. How this works is that if you have calculated your payment fees and it is about $100, the PayPal fees could be about $4-5 including them is part of your payment will protect your money and see to it that the sender bears the cost of the transaction rather than you. You will still make your $100, and everyone is happy
The other option is to ask. You can ask your client to bear the cost of the PayPal transaction as part of your employment contract, an extra request of 3-5% on payments will do. Most clients have no problem with this.
4. Add Paypal Cost of Transaction to your tax return: although this option doesn’t directly reduce the transaction fees, it will reduce the amount of tax to be paid so that you can keep the major part of the money. Adding it to the tax return as an expense will make sure that the amount of tax you pay is reduced. A good way is to calculate the total amount of PayPal fees in a year and include it in the schedule C of your tax returns
5. Explore other Payment Methods: this is the easiest way to stop PayPal fees altogether despite the fact that its easy to use and very accessible is a direct deposit or a bank check, this will save a lot, in fact all, on transaction costs.
Most clients or companies accept the direct deposit option, and the money will be received just as fast and without any financial fuss. A bank Cheque, although slower will make the payment, transaction cost-free.
5. Using accounting Softwares: The most positively reviewed software is HERE, this software can be used for financial tracking and can be directly connected to your PayPal account.
It works by reducing the cost of PayPal use to a flat $0.50 no matter the amount instead of the $0.30 and the 2.9% although you have to subscribe to the software to use, which is about $9.95 per month for their smallest plan. So it is advisable to use this software as a means of reducing costs only if you will be receiving so much money of which the service charge for PayPal will not be more than the subscription cost for PayPal standard fees.
THIS IS THE SOFTWARE I USE. To use this opportunity, you have to use PayPal business payments.
Also, your client has to pay through their PayPal account or a bank account, if they use a credit card this service won’t work, but if they are connected to their bank with their PayPal account, then you can get PayPal fee's for $.50 per transaction! (instead of the $29 I paid in the picture at the top!)
SETUP INSTRUCTIONS ONCE YOU HAVE CREATED AN ACCOUNT
I. Go to settings; it is usually at the top right-hand corner of the software
II. Click on the subtab accept credit cards.'
III. Next to PayPal, click on the activate PayPal’ link
IV. Check the option next to PayPal standard’ and type in your PayPal email
V. Click 'Save'
When you bill a CLIENT, make sure you click PayPal Business Payments (this will give you the $.50 transaction fee.
NOTICE: this service only works if the two parties are resident in the US, so it might not work for international clients.
Using this Invoicing Software has saved me so much freaking money on PayPal fees, and I'm super appreciative for it! I have not found another method, so if you know of another software that will work with this PayPal Program, then let me know! 🙂