PayPal Doubles Fees, Forgets to Tell Customers

By Matt Mickiewicz | August 19, 2009 | Web Tech

If you’re a PayPal customer, you may be in for a surprise the next time you look at your account.

Personal accounts are now charged a 2.9% fee + 30 cents to receive payments for “Goods” or “Services”, something that was previously free. No formal announcement about the change was made.

“We didn’t want to make a huge formal communication out of this pricing change, because we weren’t really adding any fees, and we were hoping it would be a more useful experience for people.” — Charlotte Hill, PayPal PR Manager

Read that again. They chose not to announce it because it would be a more useful experience. PayPal’s director of product marketing, Heinz Waelchli was also less than forthcoming on the PayPal blog while trying to spin the story.

This double-dipping — charging both sellers and receivers for transactions — will result in a major increase in fee revenue for eBay Inc. which owns PayPal.

Want to get around this blatant money grab? Get a Premium or Business Account with PayPal. Or just ditch PayPal altogether, and sign up for Google Checkout.

Written By:

Matt Mickiewicz

Matt is the co-founder of SitePoint and 99designs and Flippa. He lives in Vancouver, Canada.

Website
>> More Posts By Matt Mickiewicz

{ 51 comments }

Mrauction1 August 30, 2011 at 10:00 pm: This is a not a FDIC backed company!! A bank without regulations!! I’m small time and its hit me the hardest!! NO REGULATIONS!! This company should be regulated…
sitehatchery September 2, 2009 at 3:49 am: @john64738
If it’s a business transaction, then the receiving party should be charged a fee. In your case, you should be charged. This is how it has always been for business transactions. Trying to pretend that it’s a personal transaction to avoid fees is unethical. PayPal is trying to eliminate this.
john64738 September 2, 2009 at 2:12 am: I just noticed today that they now charge for receiving money on personal accounts. I am a landlord and my tenants pay me with paypal. I do have a paypal business account for CC transactions as well, but used the private account for such regular things for years. They seem to have charged this since June. I never noticed, since the confirmation email “you have received $xxx” would list the full amount. I refunded all payments I could, but the June payments I could not. Paypal’s customer reps in India were not able to bend the policy even one day. I will instruct all regular payment senders to use online banking or a different free service and close my personal paypal account.
I think the fee is justified for CC payments, in fact last time I checked, PayPal was the cheapest company to handle CC payments for me. It was nice that paypal-to-paypal payments used to be free (if you had set up a personal account for those cases). I wish they would have announced the policy change a little more obvious so it wouldn’t have cost me money. The general attitude towards their customers clearly shows that there is not enough competition.
To those of you who go “about time that you personal account people pay like we business account users do”: I assume you only receive money from random people who may or may not have their paypal accounts linked to credit cards only, therefore you MUST use the business/premiere accounts and are hit with the charge. Or you are mad that you didn’t see the loophole, or to lazy to set it up. I hardly believe that you think it was the “ethical” way to pay PayPal for every transaction, even if it was internally to their bank.
Personally I think CC companies should be strictly regulated, as they are like the Mafia if you think about it !
Smarter than you. August 26, 2009 at 2:54 am: Mike wrote:
Personal accounts are now charged a 2.9% fee + 30 cents to receive payments for “Goods” or “Services”, something that was previously free. No formal announcement about the change was made.
THIS IS TRUE!
Folks write some B.S. about how they’re closing a personal account loophole to try to get around the fees, or worse yet claim nothing has changed. What’s changed is what Mike says above has changed. This ‘loophole’ isn’t a loophole at all; it was a big reason most early adopters of PayPal adopted it in the first place – it was a FREE way to send AND receive money between users of Palm (as in PalmPilot) devices. I was there. I was one of them.
Michelle August 24, 2009 at 6:39 am: Ummm, personally, I hate paying PayPal’s fees because I sell little things for little profit. I simply don’t use ebay or paypal as much as I used to. But this reminds me of another issue: credit cards and debit cards. Sure, credit and debit cards are handy, but do you ever think about the amount of money a merchant loses because they have to take the cards? The fees for providing such a service to their customers is outstanding! I use cash whenever I can. Or a good ole fashioned check.
tony August 21, 2009 at 5:12 pm: It’s high time that an alternative to paypal is available. This can be done, must be done, and will be done. It will be done by smart entrepreneurs who know that massive amounts of people will dump paypal and their dishonest business policies to use their service.
Perhaps paypal should be investigated by the bureaucrats in Washington?
Karamasoo August 21, 2009 at 2:54 am: Also if you have not noticed, sellers pay a fee to ebay for listing their items. Paypal charges you too for sells made at Ebay which is a sister/brother of paypal. Besides the two charges, paypal holds your money in their bank for 21 days or until a positive message is left at you Ebay account or an itme has been delivered to the buyer(of which is not alway the case, as pay pal credits your accout 3-4 days after the item is delivered. Now my question, Why is Ebay/Paypal making all this abnormal profis by double charging customers? They should be regulated.
Karamasoo.
Sire August 20, 2009 at 1:55 pm: I’ve just checked my account and so far no fees. I will be keeping a check on it, but even if there is a small fee, I think it’s probably worth it for the service they are providing.
sitehatchery August 20, 2009 at 9:24 am: This only relates to receiving commercial money through PayPal’s send money service:
https://www.thepaypalblog.com/2009/08/a-clarification-on-paypal%E2%80%99s-recent-send-money-updates/
It’s free if it’s for friends and family if paid with a PayPal balance or a bank account. Check out this specific service here:
https://cms.paypal.com/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/sendmoney_microsite&payment_source=p2p_blog
According to PayPal’s updated rate table, under “Commercial transactions”, updated June 3, 2009, SENDING money is free in the US if the payment is fully funded by a PayPal account or bank account.
“A commercial transaction involves buying and selling goods or services, and payments received when you send a ‘request money’ using PayPal.”
So in other words, if you request money though PayPal and then receive the money for services, you get charged the commercial transaction fee. THIS HAS ALWAYS BEEN LIKE THIS.
THE DIFFERENCE NOW IS THAT IF IT’S A PERSONAL TRANSACTION, SENDING AND RECEIVING IS FREE.
JUST LOOK AT THE RATE TABLE FOR YOURSELF. THERE’S NO DOUBLE DIPPING INVOLVED.
The August 19 update does not give a rate table. Instead, this is all it says:
“In some instances, personal transaction pricing may not be available, the transaction will be considered a commercial transaction and the commercial transaction fees shall apply. This may occur on non-PayPal websites that offer you the ability to send a payment from your PayPal account.”
So in other words, if I make a payment for goods or services outside of PayPal – like with a PayPal button or a PayPal shopping cart – that transaction is automatically assumed to be commercial and the person receiving the money will get charged the commercial rate. However, if a transaction is made within PayPal, the person can identify the transaction as personal and avoid this fee.
Jason August 20, 2009 at 6:23 am: I am getting tired of Paypal. I am happy that http://www.alertpay.com is around since it’s giving us another option now. I’ve been using them for 3 years now, and honestly, they are getting better and better. I actually stopped using paypal altogether since I can rely on AlertPay now.
Paypal is making so much money and then they decide to find a “clever” way to make more. It’s BS.
AndrewCooper August 20, 2009 at 4:55 am: Only thing to say now is Paypal isn’t free. Because it takes money from senders / recipients for themselves. They can’t say it’s free anymore. Also, this is bad for personal people. If there isn’t any fees for sending / recieving on a personal account for personal debts rather than goods / services then I have no beef with them.
Andrew Cooper
Emil August 20, 2009 at 4:24 am: Haha I love the explanations from the paypal official, they could not be more cynical even if they tried to. That’s why I use Moneybookers guys :) Tried PP once, left unhappy and for the last 2 years I’m proud customer of moneybookers. I have a personal account based in UK (I’m from Poland though) and they charge me about 0.50 pounds for sending money while receiving is free :)I love them because they support many local payment providers in Europe which is not the case with paypal however.
Scott August 20, 2009 at 4:16 am: Get your facts straight before defaming the company
JeffD August 20, 2009 at 4:05 am: Ken wrote:
All you people who are advocating boycott are forgetting one thing. Since this will effectivly double their profits…
Time out. What so many appear to be missing is that the doubling fees and double-dipping charges appear to be wholly without substance or merit.
As far as I can tell, all PayPal is doing is preventing people from using Personal PayPal accounts to circumvent the fees which those sellers among us (like myself) who have properly established Business or Premium accounts pay all the time. I don’t think there’s anything wrong with that.
FWIW, I blogged about this issue at nSiteful.com
Bryan August 20, 2009 at 3:19 am: This guy work for Google?
–charging both sellers and receivers for transactions — What the hell does that mean? Is a receiver a buyer? Is a receiver the guy who gets the money from the sale? Wouldn’t he then be the seller? So then this should read: — charging both the sellers and sellers for transactions –?
I’m not a PayPal fan and really hate the fact that eBay has forced everyone (except those of us that take credit cards) to accept PayPal as the ONLY method of payment.
eBay & PayPal — the 900 lb Gorilla, Monopoly, Big Oil, The Only Game in Town, All of the above. Take your shots. I’ll be happy to shoot also. But this just doesn’t make any sense. Maybe just badly written.
Les August 20, 2009 at 2:41 am: Unethical or not, that is business but they should have made some sort of announcement before making the change – not that I use or would use Paypal anyway.
As for Google Checkout, you can bet your bottom dollar that they too will “look again” at their pricing policies, just to remain “competitive” you understand ;)
It stinks for their users but hey – that’s life.
JeffD August 20, 2009 at 2:11 am: Ken wrote (emphasis mine):
All you people who are advocating boycott are forgetting one thing. Since this will effectivly double their profits…
Time out. What so many seem to be missing is that the doubling fees and double-dipping charges appear to be wholly without substance or merit.
As far as I can tell, all PayPal is doing is preventing people from using Personal PayPal accounts to circumvent the fees which those sellers among us (like myself) who have properly established Business or Premium accounts pay all the time. I don’t think there’s anything wrong with that.
FWIW, I blogged about this issue here:
http://tinyurl.com/muphkh
Justin August 20, 2009 at 2:08 am: PayPal,
I know a couple great PR agencies if you’re looking for one. I would highly suggest it. Communication, transparency, openness, and honesty are the ways of business in the future. We’re not going to put up with this. If you tell me there is a 30 cent fee first, that’s cool. If you sneak it by and don’t tell me, then you’re evil.
Open the communication PayPal, let us know what you’re up to.
PayPal User August 20, 2009 at 1:46 am: I have to disagree with the lack of communication as Anonymous points out. PayPal has given about a 6 month window to upgrade SDK for older Signio/Intuit/Verisign Payflow clients, with an increase in notifications as the date draws closer. I know it’s a different product market, but goes to show that not everyone working for PayPal sucks.
Ken August 20, 2009 at 1:41 am: All you people who are advocating boycott are forgetting one thing. Since this will effectivly double their profits, unless OVER HALF of PayPal’s current customers stop using PayPal forever, they are still making more money than they were before doing this.
WebKarnage August 19, 2009 at 11:54 pm: Checking things more carefully before posting might not hurt Matt.
Anonymous August 19, 2009 at 11:19 pm: Paypal loves not to communicate with clients. I remember a month ago, they changed the url of the standard checkout, causing thousands (or millions?) of oscommerce shops / standard checkout forms not to working. One client did not received Paypal payments from the online shop for a week until a customer notified us about the problem… It was simple change in the url, they should have notified the merchants or create an alias/redirection…
Antonis
derek martin August 19, 2009 at 11:10 pm: I think you have misread what they’ve done.
According to the PayPal Blog entry you link to:
“sending personal payments funded through their bank account or PayPal balance . . . is and has always been free.”
It goes on to say that if they’re sending payments for business or commercial reasons, they will continue to charge a fee, as always.
If you read the announcement the PayPal Blog links to, it says that sending money through the PayPal website is still free, BUT if you send through a 3rd party website, and PayPal can’t verify if it’s for personal or commercial reasons, they will assume it’s for commercial reasons, and charge the fee.
Moral of the story? Send money through paypal.com and you’ll be okay.
http://geek.derekmartin.ca
peach August 19, 2009 at 10:42 pm: damn this sucks. I hope paypal is not going back to their old ways, they used to have a dreadful reputation, they were doing great in the last couple of years.
LDavies August 19, 2009 at 10:38 pm: Like others have said, this doesn’t seem to be anything new.
Paypal is crucial for those that need away to transfer money internationally. As an example, in the UK I deposit a USD check into my bank for $450.00. After the FOUR weeks to clear the funds we pay fees of approximately $20.00 on each end for check processing, plus a crappy exchange rate. 10% of that payment lost to banking fees. Comparing to standard merchant accounts usually charge in the region of over 3% plus a monthly fee. Sorry, Paypal wins hands down. I found google checkout a pain in the arse to comply with requirements.
dna_05 August 19, 2009 at 10:20 pm: This site is a joke. The article doesn’t make sense at all.
No news in it and a lot of contradictions.. no wonders no one reads SP anymore.
Smola August 19, 2009 at 10:17 pm: I just checked Google Checkout. They have the EXACT same pricing structure that PayPal does. 2.9% + .30
JeffD August 19, 2009 at 9:08 pm: Maybe I’m not understanding something, but all your post really says is that people who sell goods and services with a personal account will have to pay fees to get paid (just like those of us with proper accounts for sellers do). If that’s right, then I say it’s not a bad move (even if it was spun poorly by the PR / marketing folks). I see no reason someone should be able to setup a personal account to try to get around the fees (in which case the more legitimate sellers are basically paying their way for them).
Exactly my take.
I’ve had my issues with PayPal, and I’m not an apologist for them. But facts are facts. I have considered SitePoint.com a reputable and excellent resource, and I refer my clients to it. I hope the author will check his facts and correct any inaccuracies – in the body of his post.
Dean C August 19, 2009 at 6:21 pm: Nice closing statement regarding Google Checkout. I couldn’t recommend it enough. It’s superbly documented, has a large community of support via google groups and is a joy to work with. Compared with PayPal’s API, it’s awful.
Anonymous August 19, 2009 at 5:43 pm: We use Paypal business extensively. But this kind of approach makes us feel uncomfortable. We never know when they will suddenly change things for us!
Dan Grossman August 19, 2009 at 5:12 pm: Had me worried for a moment with that post title. But since I have a business account (which is identical to a premiere account, but with a business name instead of my name shown on the payment pages), I already paid a fee to receive funds regardless of the source. Was a personal account benefit, and I guess too many eBay sellers were using personal accounts for their liking.
Richard August 19, 2009 at 5:00 pm: Wow are Paypal’s PR people so out of touch with reality? How is keeping us in the dark about ratcheting up the fees going to be a useful experience for us?
Time for new PR people I think.
The Barking Unicorn August 19, 2009 at 3:47 pm: “charging both sellers and receivers for transactions”
Sellers are the ones who receive money, aren’t they?
It’s about time the freeloading was ended. Pay your way or write a check, or ship a jar of pennies. And don’t cheat by claiming the media rate.
Paypal is a far easier and less expensive electronic payment method than wire services or bank transfers. Only the most pathetic skinflints begrudge PP its fee.
Jorge August 19, 2009 at 1:57 pm: It makes me angry. I will never use paypal again. To bad for them.
JeffD August 19, 2009 at 1:52 pm: This double-dipping — charging both sellers and receivers for transactions…
According to my understanding, that is inaccurate.
aweb4u August 19, 2009 at 1:51 pm: If I’m not mistaken, Google Checkout is for US and UK merchants only? Or has this changed?
linda August 19, 2009 at 1:20 pm: My payments have always had almost a 3% commission taken out of them. I don’t see this as a change. Maybe it is for older accounts, but not mine established approx 15 months ago.
timethief August 19, 2009 at 1:18 pm: Sly and not appreciated.
jerichvc August 19, 2009 at 12:50 pm: they are already charging since then (from months ago). this is not new. unless….
kmull August 19, 2009 at 12:48 pm: Has anyone used Revolution Money Exchange for a ton of transactions? It is like PayPal, but free. I’ve used it in the past when they were offering a bonus to sign up. But haven’t used them for my web services because no one else uses them.
Perhaps it is time to make a move to RME?
Paul August 19, 2009 at 12:47 pm: I’m confused. I’ve sold a ot on Ebay and I’ve always paid 2.9% + $.30 to receive funds (3.9% if from an international customer). What’s the change?? Looks the same to me.
Neil Creek August 19, 2009 at 12:44 pm: I *have* a business account. I’m charged this disgraceful new fee as well. Google checkout is useless though, as the buyer has to sign up an account with google checkout as well. They can’t just give payment details and be on their way. This stinks.
Jenn mattern August 19, 2009 at 12:43 pm: Maybe I’m not understanding something, but all your post really says is that people who sell goods and services with a personal account will have to pay fees to get paid (just like those of us with proper accounts for sellers do). If that’s right, then I say it’s not a bad move (even if it was spun poorly by the PR / marketing folks). I see no reason someone should be able to setup a personal account to try to get around the fees (in which case the more legitimate sellers are basically paying their way for them). Again, maybe something wasn’t clear and I’m misunderstanding the change from your post.
bals28mjk August 19, 2009 at 12:40 pm: Paypal (and eBay who owns paypal) play dirty. They’re a bunch of bullies who coast on their popularity. It’s probably illegal, but they don’t care. They have lawyers, they sue too. Not surprised, nor will I be when it happens again.
Vantrix August 19, 2009 at 12:16 pm: I would say a wrong move on the part of Paypal,they ought to have informed their users about the changes to their fee structure.
If you are using Paypal to receive money for rendering services to your clients, it would be a good idea if you request your clients to add the transfer fee to your total amount as paypal charges the receiver. One of the nifty tool that i use for the same is http://www.ppcalc.com
Anita CM
http://www.vantrix.net
Matt Mickiewicz August 19, 2009 at 10:51 am: @sitehatchery:
Check the “PayPal Policy Updates” page when you login into your account. You’ll see the update to their pricing structure there.
For example, many bloggers in the past received payment for their services from their employes via PayPal and were not charged any fees for receiving funds. They will now be see 2.9% + 30 cents deducted for every incoming payment for “services”. PC World Magazine has also written up this story: http://www.pcworld.com/article/169843/paypal_adds_fees_sneakily.html .
sitehatchery August 19, 2009 at 10:25 am: Hold the press. Facts are wrong. Paypal let’s the sender OR the recipient, but NOT both. This is a great service. Now instead of vendors tacking on extra to cover Paypal fees (against Paypals policy), the sender can decide to take the fees. This actually results in LESS money to paypal because it is no longer necessary for vendors to tack on a percentage. Great service.
Dan Schulz August 19, 2009 at 10:11 am: Okay, I know we have a few lawyers among us (Deena, where are you?) – is this even LEGAL? (Have you also noticed the other changes, such as the one that says YOU are responsible for all chargebacks, disputes, claims, etc…?)
sitehatchery August 19, 2009 at 10:03 am: You have this backwards. You said “Personal accounts are now charged a 2.9% fee + 30 cents to receive payments for Goods or Services, something that was previously free.”
Actually, this has something that has always been charged. When I receive money through PayPal for goods or services rendered, there’s always an amount deducted. But never have they charged me to send the money.
And it still is free to send money according to PayPal:
https://cms.paypal.com/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/send_money_fees
volomike August 19, 2009 at 10:03 am: Worst news I have heard this month. Paypal should fire their Public Relations Director.
How blatantly rude can they be? Also, even if they did tell people about it, couldn’t they have also phased it in gradually rather than the sudden cost increase? I mean, I already have fees eat up a huge bit of my client payments, but now they will be even larger.
The only way Paypal will get the message is to boycott them. Say, I’ve been hearing good things about Plimus.com, although I haven’t used them. I just checked out their API.
And last I heard about Google Checkout, their currency restrictions were too tight and they didn’t permit Canadian merchants?
robotwink August 19, 2009 at 9:58 am: WOW, this is really unethical. Shame on you PayPal, shame on you.