What are PayPal fees? Why Does PayPal Charge a Fee? PayPal is one of the largest online payments systems, with 227 million active accounts around the globe. It’s also a popular option for accepting payments among online sellers.

But as with any payments system, you’ll need to factor transaction fees into your pricing and the cost of running your business. Ahead, learn how to calculate PayPal fees, what cut PayPal takes, and how PayPal fees work with Shopify Payments.

What are PayPal fees?

As you may already have guessed, PayPal fees make up a percentage of the total amount of money that you are paying or receiving. Regardless of the type of transaction, the most likely scenario is that you will pay a transaction fee.

However, the PayPal transfer fee can be confusing to most sellers: several factors affect the amount you have to pay to process your transaction. If you’re an entrepreneur or a general online seller, this may be a problem when you write down the transactions.

The most important factor that you have to know is the context for why PayPal is charging that specific amount for your transaction. The most common contexts are the following:

• If you’re receiving money from a person who is in a different country than yours
• Whether you’re receiving a payment for a good or a service
• If the payment is made using a linked credit or debit card rather than the balance in the payer’s PayPal account
• If you’re transferring your PayPal balance to a linked credit or debit card

There is one notable exception: if you’re sending money to friends and family, PayPal doesn’t charge you any additional fees unless you use your debit or credit card to send that money. There are other cases in which you pay lower fees, such as when you’re a non-profit organization using the platform to receive donations.

Why Does PayPal Charge a Fee?

PayPal is a publicly-traded for-profit business that generates income by charging fees. PayPal uses cash generated from fees to maintain a high level of services, pay its employees, and introduce innovative payment methods. PayPal’s shareholders are generally rewarded through a higher stock price when fee revenues increase from quarter to quarter.

How Much are PayPal Fees?

PayPal’s fees vary by domestic vs. international, payment type, currency received, payment method, and consumer vs. merchant fees. PayPal is free for online and in-store consumer transactions without currency conversion. For commercial transactions for merchants, PayPal charges fees that are a percentage of the amount (ranging from 1.90% to 3.49%) plus a fixed fee per transaction.

The fixed fee per transaction depends on a price schedule for the country’s currency received. We don’t include a discussion of any currency conversion fees for international transactions that may be international payments or international currency receipts.

Payment options selected will result in different PayPal fees. PayPal offers branded debit cards and prepaid cards. PayPal Credit gives its customers special financing purchases of over $99.

PayPal periodically updates its fee schedules for consumers and merchants.

To quickly determine PayPal fees, try using a PayPal fee calculator.

PayPal Merchant Fees

PayPal charges merchant fees, called commercial transaction fees, for payments received from customers in a business transaction. Merchants using PayPal range from small businesses to large enterprise companies.

Additional fees for payment processing charged by merchant services companies acting as the payment processor may apply. PayPal also has several other fees, including a chargeback fee.

PayPal merchants use a business account with a linked bank account called a merchant account and eligible linked debit cards or credit cards to withdraw and transfer funds received out of PayPal.

PayPal’s Goods and Services Fee

PayPal merchant fees for commercial transactions vary based on the payment method, which PayPal calls the Alternative Payment Method (APM). Commercial transactions include selling goods or services but may include other types of commercial transactions.

PayPal Payouts applies to PayPal payments to freelancers, independent contractors, affiliate programs, and mass payments to vendors.

Merchants apply to PayPal to use Micropayments pricing for lower amounts of goods and services transactions.

The PayPal domestic merchant fees for receiving commercial transaction payments by Alternative Payment Method are shown in the table below. Add 1.50% to the domestic percentage of merchant fees for all commercial international transactions excluding American Express transactions through PayPal.

The fixed fee for U.S. dollars currency received transactions is $0.49 and can be much higher for international currencies.

How PayPal fees work with Shopify Payments

PayPal Express is a supported payment gateway for Shopify merchants and is easy to integrate into your store. When you set up your Shopify store, Shopify will create a PayPal Express Checkout account for you, using the email address associated with your Shopify account.

If you already have a PayPal account with that email address, you’ll receive payments from orders made with PayPal right away. If you don’t, you’ll have to finish setting up your PayPal account. You can add your email address to your existing PayPal account or create a new PayPal business account with the same email address you use to sign in to your store.

If you’re using Shopify Payments and PayPal Express together as your payment gateways, you pay only the fees for the payment gateway that your customer uses to check out. You won’t be double billed.

For more on accepting Paypal payments in your Shopify store, you can check out our help docs or contact support.

Understanding PayPal Fees as an Online Business

If you own an online business (or plan to have one), it’s imperative that you carefully study how PayPal fees work for receiving and sending money. In some cases, business owners are overwhelmed with so many fees that they don’t understand how to calculate them. To help you understand how PayPal fees work for an online business, we’ve put a list of questions together that explains how those fees work.

What Kinds of Fees Can I Expect on PayPal?

A transaction fee applies differently to the merchant and the client. If you have an online business, you will pay an additional fee for every purchase that your clients make. In this case, the client doesn’t have to pay any additional fees.

For example, if you have a design agency that offers web design services, every time that someone makes a payment via PayPal to your business, they pay the standard set price in your invoice, while you pay an additional fee which depends on the nature of the transaction.

The following are the different types of fees that you can expect when someone makes a purchase through PayPal:

Within the United States

The standard fees for online purchases made within the U.S. are 2.9% + $0.30 per transaction. However, if the sale occurs in your store’s physical location, and someone pays through PayPal, the fees are 2.7% + $0.30 per transaction.

International Fees

If your account is US-based, but the funds you’re receiving come from a PayPal account from a different country, the rates change a bit. If the transaction is entirely online, you pay a fee of 4.4% + $0.30, rather than the standard fee of 2.9% + $0.30.

On the other hand, if the transaction occurs at your physical store, and the PayPal account from the client is from a different country, the fee is 4.2% + $0.30, rather than 2.7%+ $0.30. While these are the two main conditions in which you can get different fees, some additional factors can affect the rate you get. We will explain them further below.

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