Understanding PayPal Credit Card Fees

Does PayPal offer credit card processing?

PayPal is best known for its peer-to-peer money transfer services. But, 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 35 million merchants with approximately 400 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 (i.e., credit cards, debit cards, and contactless payments from digital wallets like Apple Pay, Google Wallet, and Samsung Wallet). It also applies to QR code transactions.
• 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: 2.99% 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: 3.39% of each transaction plus 29 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.

These fees don’t always apply if a transaction can’t be completed. Lisa Robbins, vice president of operations at CustomVinylDecor.com, explained to business.com that PayPal will refund such fees during certain situations. “One benefit I’ve experienced of using PayPal over other processors is that they refund payment fees when a customer’s payment is refunded, such as when a product is out of stock and an order cannot be fulfilled, or when a customer simply changes their mind and returns an item,” she said. “Many other credit card processors don’t refund the fee when a payment refund is made. This can get expensive for any business that has to issue refunds to customers.”

PayPal’s additional fees and services

PayPal eliminates most of the fees found throughout the credit card processing industry. However, 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 4% 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 7 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)

For nonprofit businesses, PayPal offers discounted rates of 1.99%, Robbins said. “They also offer customer invoicing with the ability to receive payment directly as a PayPal transfer or by credit card.”

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. “In order to use PayPal to process credit cards, a PayPal Business account is required, which contractually obligates a business owner to agree to the agreed upon fees and to abide by the PayPal policies,” Robbins said.

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; lower rates are generally available with full-service credit card processors. Robbins said that this makes it simple to incorporate PayPal processing through online shops. “[Their] payment modules for popular shopping carts (Shopify, BigCommerce, WooCommerce, etc.) are easy to install and set up,” she noted.

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 $15 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. “If you have a basic PayPal Business account, there is no monthly fee,” Robbins said. “However, if you set up a PayPal Payments Pro account (which gives you access to additional features like customizable checkout, virtual terminal access, and the ability to accept payments over the phone or via fax) there is a $30 monthly fee associated with your account.”

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 $20 to $50. 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. However, 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 $100.
• PCI noncompliance fees: PCI noncompliance fees are an expensive monthly cost 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; they can increase your monthly credit card processing costs dramatically.

PayPal can help businesses succeed

Credit card processing is essential for modern businesses, as consumers increasingly prefer cashless payments. Offering diverse payment options like credit cards and digital wallets boosts customer satisfaction and streamlines the checkout process. PayPal simplifies this with transparent fees and flexible month-to-month agreements. Understanding the fees and options available helps you select a solution tailored for your business needs.

Amanda Hoffman and Jennifer Dublino contributed to this article.