Hack 23 Lower Your Seller Fees

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Here are five ways to lower the commissions PayPal charges you when you receive money.

Many sellers using PayPal don't sell enough to really care about an extra 0.7% transaction fee. For them, the convenience of PayPal is enough. With no startup fees, no monthly fees, and no long-term commitment, PayPal is a no-brainer. However, when you start doing $5,000 per month in sales, those fees start to add up. Many merchants don't realize there are extra steps they can take to reduce or offset their transaction fees.

3.11.1 Apply for the Merchant Rate

The standard rate (known as the discount rate by credit card merchants) for accepting a payment with a PayPal Premier or Business account is 2.9% plus $0.30 per transaction. (This rate applies to transactions between U.S. accounts; fees vary for oversees or international transactions.) You can reduce your rate to 2.5%, 2.2%, or even 1.9% (plus US$0.30 per transaction) by qualifying for the PayPal merchant rate. Table 3-1 illustrates this new tiered fee structure.

Table 3-1. Tiered structure for the PayPal merchant rate (in USD)




2.9% + $0.30


2.5% + $0.30


2.2% + $0.30


1.9% + $0.30

The rates in Table 3-1 apply to payments from U.S. buyers. Payments from non-U.S. buyers are assessed an additional 1%.

To qualify for the lower rates, you must have a Premier or Business account in good standing that has been open for at least 90 days and you must have received at least $3,000 in payments in a single calendar month. (Note that these criteria apply to U.S. account holders only; international accounts might need to meet other requirements.)

To apply, follow these steps:

  1. Log in to your PayPal Premier or Business account (if you're still using a Personal Account, refer to the introduction to this chapter for upgrade details).

  2. Click Fees at the bottom of the page.

  3. On the Receive Funds row, click the rate link in the Premier/Business Account column (for U.S. sellers, this link reads "1.9% + $0.30 USD to 2.9% + $0.30 USD"). Click Merchant Rate at the top of the next page, and then click Apply Now on the page that appears.

  4. Fill out the Merchant Rate Application, as shown in Figure 3-5.

    Figure 3-5. Using the Merchant Rate Application form to lower your discount rate

  5. Click Submit when you're done.

The confirmation screen will tell you if your request was accepted, denied, or queued for review. If all goes well, the new, lower rate should go into effect immediately!

Receiving fees are determined at the beginning of every month, based on your receiving volume in the previous calendar month. Once you complete the aforementioned one-time merchant rate application, PayPal automatically assigns the appropriate rate for each month.

3.11.2 Ask for eChecks

There is a maximum fee of US$5.00 for each eCheck payment you receive. To put this in perspective, the standard fee to accept a US$1,000 payment funded by a credit card is $29.30, nearly six times the measly $5 fee for a $1,000 eCheck. If you use eChecks for all your large payments, you will enjoy significant savings. See the beginning of this chapter for more information on eChecks.

3.11.3 Receive Money into Your Personal Account

If you hold both a Personal and a Premier or Business account, you can ask any customers who prefer to make payments funded by their bank account or PayPal balance to send payments to your Personal PayPal account. Receiving a payment into your Personal account incurs no fee, but you won't be able to accept payments funded by credit cards.

Personal accounts are also limited to receiving US$1,000 (or the equivalent in other currencies) per month. This limit is reset each month on the anniversary of the account's opening. To view your Personal account's limit:

  1. Log into your PayPal account.

  2. Click the My Account tab, and then click the Overview subtab.

  3. Click View Limits.

3.11.4 Enroll in the PayPal Money Market

The PayPal Money Market Fund allows you to earn returns on your PayPal balance by turning your PayPal account into an investment from which you can earn dividends. To enroll in the PayPal Money Market, click the Money Market link in the Enhance Account section of your account overview page and follow the directions.

At the time of this writing, the current yield is 0.99%. There is no limit on withdrawals and no minimum investment.

Be advised that rates of return fluctuate and enrolling in any money market account carries risk. The money market account is not insured and might lose value. Read the prospectus carefully (it is available on the PayPal site) and consider consulting a qualified financial advisor.

3.11.5 Use the PayPal ATM/Debit Card

PayPal pays you a 1.5% cash-back bonus for every purchase made with the PayPal ATM/debit card when you use it as a MasterCard. The bonus does not apply to ATM withdrawals or point-of-sale purchases when you use your ATM card PIN. To take advantage of this offer, you need to have a Business or Premier account, add a credit card, and add (and confirm) a bank account [Hack #2].

If you use your PayPal debit card to pay your eBay seller fees, you'll effectively lower your eBay fees by 1.5%!

3.11.6 Let Your Customers Pay

Naturally, if your customers pay your seller fees for you [Hack #14], you won't pay any fees at all. Among other things, a buyer can use PayPal's Mass Pay feature to not only cover the seller's fees, but to do so at only 2% (as opposed to the 2.9% plus $.30 normally charged).