How to reduce your PayPal fees

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Every business wants to cut costs where possible. And as an online retailer or ecommerce merchant, on eBay or your own website, one particular expense you might face are PayPal fees. There are two PayPal schemes that you should be aware of if you want to reduce your bill.

PayPal Merchant Rate

If you take payments worth more than £1500 a month, you can get a reduction on the rack rate of 3.4% + 20p. And the more money you take, the greater the reduction PayPal offers. (See the table below.) And you can find the help page with more information on PayPal here.

Here are the fees:

PayPal Merchant Rate

You need to opt in to get the PayPal Merchant Rate and you can do that when you log in or just give them a call. If you process more than 55k a month, incidentally, then they require a phone call application to discuss your personal needs as a matter of course.

As far as we know, PayPal never proactively contacts merchants to offer them a better rate. You must apply. The PayPal Merchant Rate represents a decent reduction even for relatively small merchants and is well worth investigating by all sellers as a matter of urgency.

PayPal Micropayments

The other scheme that it pays to be aware of if you want to reduce your PayPal fees is relevant to what they call Micropayments and this will be of particular interest if you make a lot of small value transactions. Like with the merchant rate, you get preferential and lower PayPal fees but your sales price must be quite small.

Micropayments is ideal for businesses that process payments under £5 for any type of low value purchases – from digital goods, online gaming, music or software downloads, to membership fees, donations or small items such as stationary. Whether you sell on eBay or your own website, you can take advantage of our lower rates to increase revenue.
– PayPal

You can find the relevant page on the PayPal site about micropayments here.

Remember that, with both these schemes, that you need to be proactive, apply and make sure that you are getting the best PayPal rate.

13 Responses

  1. Just in case anyone is wondering if it’s worth calling, we got a rate of 1.4%+20p for a monthly Paypal turnover of around 120k which seems to be far better than any of the banks rates offered.

  2. I would have thought you’d have got a better rate than 1.4%. We turnover around 60k per month through paypal and get 1.4% + 20p as well.

  3. How do you start the conversation when you are putting £100k+ a month through them and they know you have no choice as an Ebay seller?

  4. Ok, I hope this doesn’t come across as mines bigger than yours – but this is really interesting stuff and comes at the perfect time for me!

    We do a lot through Paypal (>£3m PA) and our rate is also 1.4% +20p. After reviewing our costs recently I am working hard to reduce commissions like this and our Paypal bill was something that stood out. So, just a couple weeks ago I pushed relatively hard with our account manager and was told outright that this is the best rate available…

    Would love to know if even bigger retailers also pay the same?

  5. Would love to hear more on this – we work with expense analysts (we’re bricks and mortar as well) who are currently looking at all our online processing fees, and PayPal is so high (comparatively) we even debated the merits of turning it off as a payment option. I will ask them if they’ve ever heard of it being negotiated down.

    (as an aside – does this kind of thing get discussed at the London meetups?)

  6. 1.4% is the lowest rate that PayPal do, they tried to persuade us to switch to them, from our merchant account and they were keen to tell me that they could get rates as low as 1.4%. Seeing as how our merchant account starts at that rate and can be negotiated down from there, I told them to take a hike.

  7. Why not try Adyen instead on Paypal if it’s for your own site. They charge 0.9 – 1.1% plus 0.10 cents of a euro per transaction. They pay out twice a week, Tuesday’s and Friday’s if I remember rightly. That would cut a lot of peoples bills if you are using Paypal.
    Find it here:-


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