Understanding PayPal Credit Card Fees

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 business is vast, serving 29 million merchants with more than 435 million customers worldwide. Through PayPal Zettle ― the company’s card reader and point-of-sale (POS) system ― or PayPal’s online checkout options, your business can begin accepting debit and credit card payments from customers.

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, depending on your business’s needs. 

How much does PayPal charge for credit card processing?

When accepting credit cards with PayPal, you’ll find competitive rates and few fees. Here’s an overview of PayPal’s processing rates and per-transaction fees. Remember that there will be some cost variations depending on payment type and how you capture card information:

• In-person payments: 2.29% of each transaction plus 9 cents per transaction. This rate applies to payments you accept in person using the PayPal Zettle card reader and POS system, including credit cards, debit cards and contactless payments from digital wallets like Apple Pay, Google Pay and Samsung Pay.
• Card-not-present transactions: 3.49% of each transaction plus 9 cents per transaction. This rate applies to credit and debit cards you manually key in. You can avoid these higher fees using a PayPal card reader for all in-person transactions.
• Website and digital invoice payments: 2.89% of each transaction plus 49 cents per transaction. This rate applies to debit and credit cards that you accept through your website or by digital invoice.
• Virtual terminal payments: 3.09% of each transaction plus 49 cents per transaction. This rate applies to Visa, Mastercard and Discover card payments you accept through PayPal’s virtual terminal. When you accept credit cards over the phone, by fax or through the mail, these fees will apply. 

PayPal’s additional fees and services

While PayPal eliminates most of the fees found throughout the credit card processing industry, you should be aware of the few it maintains, including the following: 

• 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 1% if the transaction requires currency conversion.

PayPal also offers optional services with monthly costs, including the following:

• 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, making it one of the easiest and most cost-effective credit card processors. The transparency in pricing and fees means merchants who partner with PayPal won’t get any unpleasant surprises when they receive their monthly statements.

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. This flexibility is helpful 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 are typical credit card processing fees?

Credit card processing companies typically charge a litany of fees that range from $5 per month to more than $45 per incident. These costs can add up quickly. 

While PayPal doesn’t charge most of these fees, it’s helpful to understand what industry-standard credit card processing fees entail. 

Consider the following recurring fees: 

• 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 $25. 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 $100 annually on average, although 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 $45.
• PCI noncompliance fees: PCI noncompliance is an expensive monthly fee you must pay if you fail to establish and maintain your PCI compliance.
• 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 when signing up with a credit card processor as they can increase your monthly credit card processing costs dramatically.

PayPal credit card processing FAQs

Does PayPal have monthly fees?

No. Unlike many payment processors, PayPal does not charge monthly fees for its basic credit card processing services. It only charges monthly fees if you add an optional service to your account or upgrade to PayPal Payments Pro ($30 monthly). PayPal Payments Pro provides a virtual terminal and allows you to accept payments directly on your website instead of redirecting customers to a hosted payment page.

Are there any hidden fees with PayPal?

There are no hidden fees with PayPal. What you see is what you get. The only fees 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 charges a flat rate as a percentage of each transaction, plus a standard per-transaction fee on specific payment types.

Can you negotiate PayPal credit card processing fees?

No. While some credit card processors allow you to negotiate the processor’s markup in their pricing, PayPal’s minimal and transparent fees mean you can’t negotiate pricing with the company. Its only additional fees ― chargeback and cross-border fees ― are nonnegotiable.

How do you decrease PayPal fees?

You can’t decrease the fees associated with PayPal’s credit card processing services. Luckily, most of PayPal’s fees are easy to avoid. For example, if you conduct business domestically, you don’t have to worry about cross-border or currency conversion fees. If you can keep transaction disputes to a minimum, chargeback fees shouldn’t be a problem.

Having said that, consider the following ways to minimize your costs when you use PayPal:

• Change how often you get paid. While this isn’t an option for every business, receiving fewer payments limits PayPal’s fees. Because PayPal extracts fees every time money is deposited into your account, you’ll pay fewer fees if you get paid less. For instance, if you switch from getting paid weekly to biweekly, this can eliminate some fees.
• Change how you transfer your funds. While instant transfers are popular, 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.
• Use accounting software. The accounting software application FreshBooks has an agreement with PayPal that may help you reduce or eliminate certain fees.

Jennifer Dublino contributed to this article.