If you’ve ever bought or sold anything on Ebay, you know that Paypal is the most convenient and most widely used form of payment for transactions.
Paypal is really convenient. You get paid immediately and can transfer the funds immediately after getting paid (there are some restrictions) to your bank account. It’s one thing you don’t have to worry about and you definitely save a lot of time not having to be concerned about accepting certain credit cards and processing payments. It’s automatic and you don’t have to deal with it.
PayPal is Expensive!
Of course, with any service, there are fees. Paypal takes part of every deposit that comes to your account, for business accounts. For a $250 transfer into your account (from your own bank account), you would pay over $6.50. That’s almost 3% just to fund your account. And of course there are fees for accepting payments too. Another 3%. So if you’re doing business regularly and there is money coming in and out of your account, you can end up paying a lot for this convenience.
There are no other tools out there that do what Paypal does and is used and accepted by so many people and online stores. When using Ebay, you actually pay two sets of fees: Ebay fees and Paypal fees. This can really cut into your profits and you should calculate this when deciding on the price you want to set for your items.
I just received $40 for selling an item, and of that, actually received $38.54 after the fees, which is over 3% in fees. Not horrendous, but if you’re doing a decent amount of business, it definitely adds up. Paypal is a great service and there’s no replacement. But know that you’re paying for that quality. With all the free services out there, I’m surprised they are able to be THE go to payment service with little competition from others who would accept smaller fees.
Changing The Rules
This summer, Paypal sneakily rolled out new fees of 2.9%, plus 30 cents for payments classified as “Goods” or “Services.” Previously these types of payments were free (typically they were used for transferring money between friends, or having money transferred from outside of Ebay), but without alerting anyone, Paypal added these fees to all types of accounts. They sent an e-mail regarding the positives changes that were happening, but that email didn’t say anything about changes to the fee structure.
Enjoy this service, but be aware that with Paypal, you are paying a high premium for the convenience of using their service. For awhile, Google Checkout provided comparable service for free, but started charging similar fees earlier in the year. At least they were up-front about it. I’m interested to see when the next service will roll out with lower fees and higher transparency.