Understanding PayPal Credit Card Fees

Does PayPal offer credit card processing?

PayPal offers credit card processing services to businesses of all sizes, transaction volumes and sales ticket values.

A PayPal Business Account makes it possible to accept debit and credit card payments from customers in-person at the point of sale (POS) and online. It also allows you to accept payments from digital wallets, such as Google Wallet or Apple Pay.

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How much does PayPal charge for credit card processing?

Like most credit card processors, PayPal charges a flat percentage rate on transactions, with per-transaction fees for specific payment types. The company maintains a few additional fees and optional services that may cost extra, though the basic service is available at no additional cost.

Here’s an overview of PayPal’s processing rates and per-transaction fees:

• Credit card processing: Credit card processing services start at 2.89% plus $0.29 per transaction. This cost can be lowered if you use PayPal card readers and POS system hardware.
• Point-of-sale payments: Transactions performed through a PayPal point of sale card reader cost 2.29% plus $0.09 per transaction. This rate also applies to QR code transactions.
• Card-not-present transactions: When a card is manually keyed in with the customer at the point of sale, it costs 3.49% plus $0.49 per transaction. This rate also applies to PayPal and Venmo balances.
• Website and digital invoice payments: Online invoices paid by credit card cost 3.49% plus $0.49 per transaction. This rate applies to debit and credit cards that you accept through your website or by digital invoice.
• Virtual terminal payments: A virtual terminal allows you to manually enter card payments in a web browser without the customer present. PayPal’s virtual terminal costs $30 per month and 3.39% plus $0.29 per transaction. When you accept credit cards over the phone, by fax or through the mail, these fees will apply.

“One benefit I’ve experienced of using PayPal over other processors is that they refund payment fees when a customer’s payment is refunded, such as when a product is out of stock and an order cannot be fulfilled, or when a customer simply changes their mind and returns an item,” Lisa Robbins, vice president of operations at CustomVinylDecor.com, told us.

PayPal’s additional fees and services

There are a few additional fees PayPal charges. 

• Chargeback fees: Chargeback fees, which occur when a customer disputes a transaction and PayPal refunds their money, are $20 per incident.
• Cross-border fees: You incur cross-border fees when you accept payments from a customer outside the United States. PayPal adds 1.5% to the transaction value and an additional 3 to 4% if the transaction requires currency conversion.
• PayPal Payments Pro: $30 per month (this option allows you to accept payments directly on your website and includes a virtual terminal.)

Overall, PayPal keeps fees and additional costs to a bare minimum, making it one of the easiest and most cost-effective credit card processors. 

What are the terms and conditions of PayPal credit card processing?

PayPal does not require a long-term contract for its credit card processing services. Instead, you must accept a user agreement when signing up. Service is month-to-month and can be canceled anytime without penalty. 

We like that PayPal offers this flexibility because lower rates are generally available with full-service credit card processors. You can simply close your PayPal Business account without a termination fee and make the switch to a full-service credit card processor once your business grows large enough.

What are typical credit card processing fees?

The following are typical costs associated with payment processing, so you can easily compare industry standard rates and fees to PayPal. 

• Monthly fees: Many credit card processors charge a monthly fee (sometimes called a statement fee) that ranges from $5 to $15. It may be higher if it includes Payment Card Industry (PCI) compliance and gateway fees.
• Monthly minimum: The monthly minimum fee typically is $20 to $50. However, this usually refers to the amount you pay in processing costs, not the minimum dollar amount of sales that you must process monthly.
• PCI compliance fee: PCI compliance is $10 per month on average, when they’re charged. However, some companies may prorate it and charge it monthly or roll it into the monthly fee.
• Payment gateway fee: The payment gateway fee varies by the payment gateway you use. Most are charged monthly, though some also come with a small per-transaction fee.
• Various network fees: Other network fees — including Mastercard’s Merchant Location Fee and the Visa Fixed Acquirer Network Fee — may be passed on to you as monthly or annual fees.

Some fees are charged by occurrence, including the following:

• Batch fees: Batch fees are nominal, daily fees you pay when you close out the day’s sales. They typically cost 10 to 30 cents (usually the same amount as your per-transaction fee).
• Address Verification Service (AVS) fees: AVS fees are usually a few cents per transaction when you use this tool to verify the cardholder’s address and ZIP code to avoid credit card fraud.
• Voice authorization: Voice authorization is another anti-fraud tool with a small per-use fee. It’s rarely required, but you’re charged for each occurrence.
• Chargeback fees: Chargeback fees are usually $15 or $20 per incident but may be as much as $100.
• PCI noncompliance fees: PCI noncompliance fees are an expensive monthly cost you must pay if you fail to establish and maintain your PCI compliance. These could range from $5,000 to $100,000 depending on how severe the violation.
• Nonsufficient funds (NSF) fees: An NSF fee is charged if you don’t have enough money in your business bank account to pay the fees you owe the processor.

Some credit card processors also charge early account cancellation fees, club or membership fees, and fees for vague “additional services” referenced in a contract. Watch for these fees, as they can increase your monthly credit card processing costs dramatically.

Amanda Hoffman and Jennifer Dublino contributed to this article.