Credit card processing is a virtual necessity in modern business. Fewer consumers than ever carry cash, and more each year expect all businesses to accept debit cards and credit cards. Some customers have even begun using digital wallets, such as Apple Pay, Google Pay and Samsung Pay. Opening up these payment methods to your customers gives them a better checkout experience and boosts their overall satisfaction in their interactions with your business.
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Unfortunately, credit card processing services can be difficult to navigate, with complex pricing structures, fee schedules and hidden fees. PayPal’s credit card processing services eliminates the confusion with transparent pricing and fees so you won’t be surprised when you receive your statement at the end of the month. If you want to better understand PayPal’s credit card processing pricing and fee schedule, read on.
Check out our detailed comparison of Paypal versus Square for help determining which credit card processor is the best for your business.
Does PayPal offer credit card processing?
While PayPal is best known for its peer-to-peer money transfer services, it also offers credit card processing services to businesses of all sizes, transaction volumes and sales ticket values. PayPal’s credit card processing services earned it our best pick for mobile credit card processor for Android devices, though it offers an identical slate of features for Apple devices.
PayPal’s credit card processing business is huge, serving 23 million merchants with more than 246 million customers worldwide. Through PayPal Business and the PayPal Here mobile application, your business can begin accepting debit card and credit card payments from your customers.
Like most credit card processors, PayPal charges a flat percentage rate on transactions, with per-transaction fees for certain types of payments. The company maintains a few additional fees and optional services that could cost extra, depending on your business’s needs. This guide will help you better understand PayPal’s credit card fees, and how you can best position your business to reduce these costs.
How much does PayPal charge for credit card processing?
Working with PayPal for payment processing services gives businesses relatively competitive rates and few fees. Full-service payment processors generally charge a lot of fees on top of their processing rates and per-transaction fees, including setup fees, statement fees, minimum monthly processing fees, annual fees, PCI compliance fees and early cancellation fees. PayPal eliminates these types of fees – even though most are common throughout the industry – making its pricing a bit simpler to navigate and understand.
Here’s an overview of PayPal’s processing rates and per-transaction fees. Keep in mind that there is some variance in costs, depending on the type of payment your customers use and how the card information was captured.
- 2.7% of each transaction: This rate applies to payments you accept in person using the PayPal Here mobile application and a card reader, including credit cards, debit cards, and contactless payments from digital wallets. PayPal works with all major credit card brands and applies this same rate to each, as well as mobile wallets like Apple Pay, Google Pay, and Samsung Pay.
- 3.5% of each transaction plus 15 cents per transaction: This rate applies to credit cards and debit cards you manually key in or scan using the PayPal Here mobile application. You can avoid these higher fees by using a PayPal card reader for all in-person transactions.
- 2.9% of each transaction plus 30 cents per transaction: This rate applies to debit cards and credit cards that you accept through your website or by digital invoice.
- 3.1% of each transaction plus 30 cents per transaction: This rate applies to Visa, Mastercard and Discover card payments that you accept through PayPal’s virtual terminal. These payments are typically accepted over the phone, by fax or through the mail.
- 3.5% of each transaction: This rate applies to any American Express cards you accept through PayPal’s virtual terminal, PayPal Payments Advanced or PayPal Payments Pro.
While PayPal eliminates most of the fees found throughout the credit card processing industry, you should be aware of the few it maintains. These include chargeback fees and cross-border fees. Chargeback fees, which occur whenever a customer disputes a transaction and PayPal refunds their money to them, are $20 per incident. You incur cross-border fees whenever you accept payments from a customer outside the U.S.: These add 1.5% in fees on top of the transaction value, and an additional 1% if the transaction requires currency conversion.
In addition to those fees, PayPal offers these optional services, which have monthly costs:
- Recurring billing service: $10 per month
- Advanced fraud protection services: $10 per month plus 5 cents per transaction
- 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. This makes it one of the easiest and most cost-effective credit card processors to work with. The transparency in pricing and fees means merchants who partner with PayPal won’t get any unpleasant surprises when they receive their monthly statement.
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 at any time without penalty. This is useful for growing businesses that expect their processing volume to increase over time, as lower rates are generally available with full-service credit card processors. Despite the higher fees full-service processors maintain, high-volume businesses would eventually save more when charged lower rates. Once your business reaches this point, you can close your PayPal account without a termination fee and make the switch to a full-service credit card processor.
What is the average fee for credit card processing?
Typically, credit card processing companies charge a litany of fees. These can add up quickly, each ranging from $5 per month to more than $45 per incident. Here’s a quick look at the most common fees we encountered during our review of the credit card processing industry. Keep in mind that PayPal eliminates most of these fees, simplifying pricing and making it easier to keep costs down.
Most credit card processing companies charge these recurring fees:
- The monthly fee (sometimes called a statement fee) usually ranges from $5 to $15. It may be higher if it includes PCI compliance and gateway fees.
- The monthly minimum fee is normally $25, though this usually refers to the amount you pay in processing costs, not the minimum dollar amount of sales you must process per month.
- PCI compliance is $100 per year on average, though some companies may prorate it and charge it monthly, sometimes rolling it into the monthly 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, such as Mastercard’s merchant location fee and the Visa Fixed Acquirer Network Fee, may be passed on to you as either monthly or annual fees.
These fees are also common but only charged per occurrence:
- Batch fees are nominal, daily fees that you pay when you close out the day’s sales, costing 10 to 30 cents (usually the same amount as your per-transaction fee).
- Address Verification Service (AVS) fees are usually a few cents per transaction when you use this anti-fraud tool to verify the address and ZIP code of the cardholder.
- 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 are usually $15 or $20 per incident but may be as much as $45.
- PCI noncompliance is an expensive monthly fee that you must pay if you fail to establish and maintain your PCI compliance.
- A non-sufficient funds (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. If you are signing up with a credit card processor, look out for these fees, as they can dramatically increase your monthly costs for credit card processing.
Does PayPal have monthly fees?
No. Unlike many other payment processors, PayPal does not charge monthly fees for its basic credit card processing services. It only charges monthly fees if you add one of its optional services to your account, such as recurrent billing or advanced fraud protection, or if you upgrade to PayPal Payments Pro, which allows you to accept payments directly on your website rather than redirecting your customers to a hosted payment page and provides you with a virtual terminal.
Full-service credit card processors typically charge various monthly fees, which may include a statement fee, which ranges from $5 to $15 per month, and a monthly minimum transaction fee incurred if merchants don’t meet a certain transaction volume or value for the month. Monthly fees may also include PCI compliance fees, which can cost up to $100 per year, and a payment gateway fee if you accept payments online. Additionally, payment processors often charge various card network fees.
PayPal charges none of these fees, instead levying a flat rate (and sometimes a per-transaction fee) dependent on the type of transaction and how card information is entered. PayPal’s transparent pricing and fee structure let you know what to expect when you sign up with the company for your business’s credit card processing needs.
Are there any hidden fees with PayPal?
There are no hidden fees with PayPal. What you see is what you get. The only fees you need to look out for are chargebacks associated with disputed transactions, and cross-border and currency conversion fees when you accept international payments. Other than these fees, PayPal simply charges a flat rate as a percentage of each transaction, plus a standard per-transaction fee on certain types of payments.
Can you negotiate PayPal credit card processing fees?
PayPal’s minimal and transparent fees mean you cannot negotiate pricing with the company. Some credit card processors allow you to negotiate the processor’s markup in their pricing, but because PayPal charges a flat rate plus per-transaction fees for certain payment types, you cannot negotiate the pricing. Its only additional fees – chargeback and cross-border fees – are non-negotiable as well.
How do you decrease PayPal fees?
You cannot decrease the fees associated with PayPal’s credit card processing services. Luckily, most of PayPal’s fees are easy to avoid. For example, so long as you only conduct business domestically, you don’t have to worry about cross-border or currency conversion fees. Moreover, if you can keep transaction disputes to a minimum, chargeback fees should not become much of a problem for your business.
Credit card processing doesn’t have to be complicated. While many processors have complex rate and fee schedules as well as a litany of hidden fees, PayPal is transparent with its pricing. You won’t incur any monthly fees, and the fees that PayPal does charge are clearly marked. If you partner with PayPal for credit card processing services, you shouldn’t get any surprises on your monthly statement.
Additionally, according to Kayla’s Loan, other tips for decreasing or avoiding PayPal fees are as follows:
- Change how often get paid. While this is not an option for everyone, receiving fewer payments limits PayPal’s fees. Given that PayPal extracts fees every time money is deposited into your account, by getting paid less, you pay fewer fees. For instance, if you switch from getting paid weekly to biweekly, this can eliminate some of the fees you are presently paying.
- Change how you transfer your funds. For instance, while instant transfers are a popular option, these transfers also include unnecessary fees. By simply waiting for an extra day or two, you can get the funds transferred into your bank account without paying any fees at all.
- Use accounting software. FreshBooks, an accounting software application, presently has an agreement with PayPal that may help you reduce or eliminate certain fees.
If you want to learn more about how to choose a credit card processor, see our buyer’s guide for a detailed overview of the buying process.