£5000 over 9 years overpaid to PayPal

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Last week we received an email at Tamebay HQ from a retailer claiming that PayPal had been overcharging them for nine years to the tune of some £5000 or so.

It would appear that it’s true, although “PayPal overcharging” might arguably be described as “oversight” on the part of the retailer. When you sign up to PayPal you’ll be on their standard rate for receiving payments for goods and services which is is 3.4% (plus 20p per transaction).

PayPal Merchant Rate

If you receive more than £1,500.00 GBP per month, you’re eligible to apply for PayPal’s Merchant Rate, which lowers your fees as your sales volume increases in fee tranches of 2.9%, 2.4%, 1.9% ending up at 1.4% if your payment volume is more than £55,000 per month.

The snag here is that you can’t qualify for PayPal’s lower Merchant Rates until you’ve traded £1500,00 in the last month. That means you’ve got to remember to go back to PayPal and click a button or you’ll remain on PayPal’s standard rates. Once you’ve applied for the Merchant Rate, even if you drop below, as soon as you rise above £1500 your fees will drop again.

Tamebay Opinion

Dan and I chatted about this and we had two differing opinions, though we both think the other has a point:

Chris’ thoughts

My first reaction was incredulity that someone could trade on PayPal for nine years and have never heard of the Merchant Discount Rate. I can understand not applying straight away, I recall kicking myself after three months of trading because I forgot to apply for it, but that was only two months after I was first eligible. However nine years not to have realised there was a discount to be had is a long time.

I’m a big believer in reading User Agreements and as a business I think it’s more incumbent of us to ensure we know what contracts we’ve agreed to. Certainly I like to keep an eye on costs, and PayPal have had plenty of fee changes over the years, albeit mainly for International transactions, but also recently in keeping the 20p when a transaction is refunded.

Whether it be eBay fees (when did you last check you’re on the best level eBay shop for your business?), PayPal fees, Courier Fees, Postage costs, bank fees, or simply the rent on your warehouse it’s hard to fathom a business running for nine years without bothering to check how much they were paying in PayPal fees.

Dan’s thoughts

Why don’t PayPal proactively help eBay merchants get the best PayPal rate they are eligible for? If it was greed, they wouldn’t have the rate at all. It’s just laziness. I think PayPal should let merchants know, in good faith, that a) the rate exists b) they should apply and c) what the benefits are. Yes, the seller in question here has shown a lack of curiosity, but that isn’t in itself a sin.

In my opinion, PayPal has been remiss though, maybe even deliberately concealing. I would encourage the merchant to contact the FSA and raise a complaint. It might not get anywhere, but it might publicise the issue

How many other sellers aren’t getting PayPal’s best rate, despite being eligible?

Check your own PayPal fees and apply for the discount

Dan and I are in 100% agreement here. It’s up to a business to check that they’re on the best deal. If you’re paying for any service it’s worth checking around to see if a better deal is available. We also agree PayPal make it harder than is necessary to qualify for the Merchant Fees. We can think of no reason why a merchant wouldn’t want to access merchant fees and get a discount.

If you’re not already on them you can apply to access PayPal’s Merchant Rate on the PayPal site. If you don’t qualify you’ll need to reapply in 30 days time.

28 Responses

  1. Thanks for that, I had never heard of it – just did it and they approved me right away for a slightly lower rate! 🙂

  2. I signed up for the merchant rate 2 years ago, only recently have I found that they did apply it for the 1st month but they removed the discount for the following 23 months,

    I didn’t think to check until recently, only to find they had been charging the 3.4% not the 2.9% as advertised, I have never dropped below the £1500.00 since May 2011, so have been overcharged by 0.5%, they have overcharged around £10 per month,

    Is there any point in chasing this up with paypal or am I wasting my time ?,

  3. I think this is shocking!
    Just applied after two years trading & being charged 3.4% – Now down to 2.9%…

    This is terrible business ethics from a monopoly holder…

    Paypal should be legally obliged to implement their own rules

    A few people ‘in the know’ should not benefit by being ‘in the know’ at the expense of everyone else being ‘out of the know’!

  4. Earlier in my career I was an Accountant in Industry. In Industry responsibilities are divided between various people. In most Businesses the Chief Accountant or more likely the Company Secretary would be responsible for ensuring that every Agreement and Contract was not only read but actioned. So if there were discounts available under a contract it was applied for.

    But most of our businesses are relatively small and probably do not have a Specialist “Company Secretary” or if we have a “Company Secretary” its nominally the wife. She is happy to sign things but does not have the Accountancy or Legal Training to do the job properly. Everybody else is working flat out on other jobs such as selling, packing, obtaining new stock etc. They just do not have the time to read through dozens of pages of “small print”. Yet if somebody did they would find these discounts or even the responsibilities the company has which it is not doing.

    It is to be regretted but the real answer is to employ a Company Secretary and they do not come cheap) with the right training and not just give the job title to the wife.

  5. I remember being a naive bronze power seller in 2004 having just made $1K in sales the previous month and wondering why I was still being charged 2.9%. A few days later I figured it out and was only paying 2.2%.

    I guess things were different back then though since I clearly remember eBay and PayPal both making a huge deal about how their debit card’s 1.5% cash back made your PayPal fees only 0.7%. Completely misleading advertising but I guess it spread awareness of the merchant rate.

  6. It makes you wonder when they’ve read the T&C’s & updates, which reference the Merchant rates

  7. Since raising this issue, I feel I should make clear that it was not a case of ‘not checking’ the rates.

    Paypal showed clearly in their fees section what the various rates were for the different volumes of business processed each month. They clearly showed, as a statement of fact, that the rates charged were pre-set and and no point on that list of charges did it say the YOU had to apply once you went through any of the qualification levels.

    They did however point out that if your level dropped below any current level, they had the right to increase your fee level.

    For the more sophisticated thinker this clearly means that they are always monitoring these volumes in order to be aware of that downturn in your monthly volume, but have clearly also decided not to take the appropriate action when your volumes go above any threshold.

    Whilst I can understand the business logic in not ‘volunteering’ to point out that your fee paying clients are overpaying, it is (in the least) ethically wrong, and may even be legally wrong as an ‘unfair’ practice.

    I shall be testing this in a small claims court yo see if this kind of practice is still tolerated in these days of poor banking practices.

  8. Interesting one this, I personally think it needs to something that is automatic, or at the very least an email to ask you to apply.

    I don’t know about anyone else but I don’t always have the time to check every detail of every form or invoice. Running your own business does take a lot of time, mainly on things that make no money! Things do get missed all the time and anyone that says otherwise must be lying!

    I think 9 years is pushing it a bit, for us it was about six months till we found out about this, from here if memory serves me!

  9. And do remember that it applies to all transactions in an account so be sure to use the same account for all your websites/eBay shops. John

  10. DANS point of view is the only sensible and decent one, no excuse at all for Paypal, If there is a lower rate, it should automatically apply regardless. you dont need to do anything to pay the higher Rate?????

  11. I suspect also that a significant number of sellers of lower value items are overpaying PayPal as a result of not being on the micropayments tariff.

  12. What’s annoying is that I knew paypal offered discounts for higher turnover, but I never knew I had to apply for it. I seemed to be under the impression that having a business account constituted to a merchant account offering me this as a standard.

    Anyway, thanks for the info, I now save 1%

  13. Please don’t slate me as I haven’t had time to read all the posts but when I read about this a year or two back the statement below led me to believe that once on the scheme you will AUTOMATICALLY be moved up or down the % scale without having to reapply to go up it.

    Maintaining your merchant rate
    After qualifying for merchant rate pricing, all members are expected to:

    Keep their PayPal account in good standing. Members may be downgraded to the Standard rate if a payment volume of more than £1,500.00 GBP is not maintained in the previous calendar month, or if they have unresolved chargebacks.


    Note: Members do not need to reapply for merchant rate pricing if payment volume drops below £1,500.00 GBP, unless their account is downgraded or if there are unresolved chargebacks.

  14. PayPal should be obliged to inform merchants whenever any rate change takes place, up or down.


  15. Where can I actually see what paypal show my current rate as on their website?

    If I got a merchant rate previously, and then had a month off trading, would I need to re-apply for the merchant rate?

  16. As the originator of this issue it is now beginning to become the GRAND issue that I always felt is should have been.

    Most commentators thought this was simply ‘daft’ that someone could have allowed this to happen. In my case is was any years, in most other hopefully it is much less – but in ALL cases it is an absolute disgrace that this seedy attitude to its fee paying customers was, and is still, allowed to continue without any ‘authority’ taking issue with it.

    Anyone wishing to examine what actions can be taken against this gross abuse, and the deliberate ‘overcharge’ to it’s customers when they clearly knew that a lower rate was applicable, should contact me directly.

    The sooner these type of companies are forced to act in a responsible manner towards their clients, the sooner this sleazy mentatlity will be eradicated.

  17. Hello

    Just seen this post and was concerned that I was being overcharged. Just checked my account (took me a while to find the info – it is buried) and I am on the middle rate. I cannot recollect ever requesting it, so it seems it was automatic for me….



    Very misinformative and irresponsible article.

    MAYBE YOU FORGOT TO MAKE CLEAR what being on the Merchant Rate means. That is: the £0.20p transaction fee on every payment is in addition to the % fee per transaction.

    Put simply, for sellers with an average payment value of under £20 (which is most sellers) the Merchant Rate WILL NOT SAVE A PENNY unless their monthly payments exceed £6,000 (very few sellers).

    I’m suprised (not!!) that no one else has commented on this!!

    As regards PP auto applying discounts, are you nuts? Do eBay (who own PayPal) ever do anything that benefits sellers if it reduces their income? Wake up guys, smell the coffee, eBay and PP is rigged and they don’t give a toss about us. They have us all by the balls and slowly tighten their grip untill they have screwed the last penny out of us!!

    We have all basically contributed to creating a monster that is now so large they don’t need to care about what a few informed (or mis-informed) people think. Do you think they care if a few leave? Many already have but far more have joined so they are always quids in. If fact, I expect they want the complainer to leave, after all they never listen or give any meaningful response to our concerns.

    It is what is is and its far too late now. Nothing will ever change for the better and they certainly don’t care about us.

    Suck it up or leave!!


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