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Last Time on Part 1…

·         A Complete Seller’s Guide: Part 1 – All of eBay’s Online Auction Fees

And Now the Conclusion…

In Part 1 of my two-part segment, I discussed “All of eBay’s Online Auction Fees.” In Part 2, I’m going to talk about PayPal, an online money transaction service also owned by eBay. In fact, PayPal is used by many online websites, including Bukisa and Triond. Many people using PayPal don’t realize the true extent of the service’s fees. Although eBay.com has tried to change its policy and force both its buyers and sellers to interact through PayPal (what a surprise since using PayPal makes eBay even more money), most of eBay’s sellers still accept money orders and cashier’s checks.

In this article, I’m going to answer the most commonly asked questions regarding PayPal and its fees.

Why do people think PayPal is a free service?

PayPal’s Terms of Service can be a bit confusing. PayPal is only free in the following situations:

· It’s free to open up a PayPal account.

· It’s free to send money that’s already in your PayPal account to another PayPal account in your own currency.

· It’s free to receive money from another PayPal account in Canada or the U.S. (hence Triond).

· It’s free to add money into your PayPal account.

· It’s free to withdraw $150.00 or more from your PayPal account directly into your bank account.

Let me explain with an example. When Triond sends your monthly earnings into your PayPal account, there is no charge. The money is simply added from Triond’s PayPal account balance into your PayPal account balance.

How does PayPal make money?

It’s free for you to receive money from another PayPal account balance, however, it’s not free to receive money from another person’s Credit Card or Debit Card balance through PayPal. Here are all of the ways PayPal makes its profit:

· PayPal charges you 50 cents to withdraw $149.00 or less from your PayPal account balance directly into your bank account. If you’re depositing U.S. funds into a Canadian bank account, or Canadian funds into a U.S. bank account, the exchange rate will include a 1.0% to 2.5% spread that will be retained by PayPal. The exact percentage depends on your monthly sales volume:

o 2.5% of the withdrawal = Monthly sales less than $3,000.00

o 1.5% of the withdrawal = Monthly sales between $3,000.01 and $125,000.00

o 1.0% of the withdrawal = Monthly sales higher than $125,000.01

· Most of us have a Credit Card or Debit Card associated with our PayPal accounts to, for example, pay for items we’ve purchased from eBay auctions. PayPal charges you the following percentage rates for receiving and accepting Credit Card or Debit Card payments sent by other people in Canada or the U.S:

o 2.9% of the payment + 30 cents = Monthly sales less than $3,000.00

o 2.5% of the payment + 30 cents = Monthly sales between $3,000.01 and $12,000.00

o 2.2% of the payment + 30 cents = Monthly sales between $12,000.01 and $125,000.00

o 1.9% of the payment + 30 cents = Monthly sales higher than $125,000.01

· PayPal charges you “5.9% of the payment + an extra fee” to accept Credit Card or Debit Card payments sent by other people not in Canada or the U.S. This “extra fee” is calculated so that the lower your monthly sales, the higher PayPal charges you.

o 3.9% of the payment + 30 cents = Monthly sales less than $3,000.00

o 3.5% of the payment + 30 cents = Monthly sales between $3,000.01 and $12,000.00

o 3.2% of the payment + 30 cents = Monthly sales between $12,000.01 and $125,000.00

o 2.9% of the payment + 30 cents = Monthly sales higher than $125,000.01

In summary, the only person who gets charged by PayPal is the person receiving the Credit Card or Debit Card payment. So taking eBay as an example, the buyer of an item doesn’t have to pay to send money through PayPal, but the seller of the item has to pay PayPal to receive the buyer’s payment.

However, keep in mind that if the buyer pays only with their PayPal Account Balance and not with a Credit or Debit Card, the seller does not have to pay PayPal to receive the buyer’s payment.

And as we can see from the above rates, it’s cheaper to receive money from Canada and the United States than to receive it from other countries.

Why are there 2 kinds of PayPal Accounts?

PayPal offers two different kinds of accounts – a free “Personal Account” and a paid “Premier/Business Account.” Most of us have Personal Accounts. Although they’re free, they come with certain restrictions:

· You cannot receive more than $650 a month.

· As long as you’re within the $650 monthly receiving limit, you cannot accept more than 5 Credit or Debit Card payments per year.

To lift these 2 restrictions, you’ll need to upgrade to a Premier or Business Account. Of course, there’s one big disadvantage with upgrading.

As I mentioned previously, with a Personal Account, you only get charged when you receive payments from Credit and Debit Cards. If you receive payments from a PayPal Account Balance, you’re not charged at all. But once you upgrade to a Premier or Business Account, you now get charged to receive any kind of payment, even if it’s from another PayPal Account Balance. The rate is “1.9% to 2.9% of the payment + 30 cents” for receiving payments from Canada and the U.S., and “2.9% to 3.9% of the payment + an extra fee” for receiving payments from outside Canada and the U.S. The “extra fee” is the same as the “extra fee” I talked about earlier for receiving money outside Canada and the U.S. (see the 3rd black bullet under the “How does PayPal make money?” section above).

What does getting “Verified” mean?

The final topic I’m going to talk about is with regards to becoming “Verified” on PayPal.

Regardless of what kind of PayPal Account you have (Personal, Premier or Business), there are 2 restrictions:

· You cannot send more than $3,700.00 total from your PayPal account.

· You cannot withdraw more than $700.00 from your PayPal account each month.

To lift these 2 restrictions, you’ll need to verify your PayPal account. This is done by adding and linking your bank account to your PayPal account to enable instant transfer between both accounts.

Personally, I would not do this since if a hacker ever obtained access into the PayPal network, he/she would have complete access to all of the funds in your bank account. However, if you want to lift the total sending and monthly withdrawing limits, you’ll have to become verified.

Closing Remarks

As you can see, these costs can be quite confusing. I hope I was able to explain all of the fees as clearly as possible. Remember that eBay sellers will need to pay these PayPal transaction fees on top of their eBay “Item Listing Fee” and “Item Selling Fee,” so keep all of this in mind when you put an item up for sale on eBay.com.

I’ll do my best to keep this topic updated with the latest PayPal receiving fees, but keep in mind that you can always find the latest fees on the PayPal Fees Page. All fees in this article and on the PayPal Fees Page are in U.S. dollars.

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