PayPal is putting new limits on a feature in its payment system that allows people to receive money without paying extra fees, the companyrecently announced. Starting July 28th, only personal PayPal accounts will be able to get funds via Friends & Family, a transaction method intended for trusted recipients.
There are two ways of sending money on PayPal: Friends & Family and Goods & Services. F&F is intended for paying your friend back for dinner, for example, or giving your kid some birthday money — you know who’s receiving the funds and what you’re paying them for. There’s typically no fee involved, but it also drops protections for issues that might come up, like refunds or scams.
G&S is intended for purchases, and money sent this way is subject to PayPal fees. Everyone hates fees! But with G&S, if the thing you buy isn’t as described, it’s damaged when it arrives, or it just never gets to the buyer, you can often easily get a refund for the purchase.
Many businesses handle transactions using a PayPal business account and take payments for goods and services through F&F, even though you’re technically not supposed to. The buyer might not realize the difference or care, or the business and the customer could agree to send cash that way to avoid seller fees. This is fairly common in many informal transactions, like people selling things on social media platforms — perhaps the buyer knows the seller personally and trusts that they’ll deliver. Sometimes sellers insist on F&F to avoid transaction fees, which causes problems if something goes wrong down the line.
The change is already causing frustration on the part of some creators, who use PayPal to run their business and will now be subject to additional transaction fees.
With this new change, US business accounts won’t be able to accept fee-free personal payments, and people who use PayPal for their company will need to create a personal account to receive money fee-free from friends and family.
PayPal didn’t immediately respond to questions about whether it changed the rules to crack down on miscategorized purchases but said in the announcement the tweak will “drive consistency on [the] platform” and “[remove] confusion around which payments are eligible for buyer and seller protections.”
In the same announcement, PayPal also said the transaction fee structure for goods and services would change beginning later this month. Currently, sellers pay 2.89 percent plus $0.49 per transaction, but starting July 28th, that will change to 2.99 percent without an additional flat fee.
FAQs
You can no longer accept friends and family payments on your Business account. However, if you'd like to receive friends and family payments, you can use or create a Personal account. If you don't use other business products with your account, you can also change your Business account to a Personal account.
How do I avoid paying fees on PayPal friends and family? ›
If you're using PayPal Friends and Family to send money within the US, you should have fees only when you pay with your card (or if you send in different currencies)¹: Paying with PayPal balance or a bank account: no fee.
Can I pay friends and family with a PayPal business account? ›
To send money to your daughter using PayPal, you can use the "Send & Request" feature. However, if you have a business account, you may not be able to use the "Send as friends and family" option. Here's how you can send money to your daughter: Log in to your PayPal business account.
How do I avoid PayPal fees for my business? ›
How to avoid PayPal fees
- Use the "Friends and Family" option. When sending money through PayPal, you have the option to use the 'Friends and Family' category instead of 'Goods and Services'. ...
- Receive payments in the same currency. ...
- Offer local pickup or delivery options. ...
- Use other payment methods if possible.
Personal payments aren't covered by PayPal Purchase Protection. You can make a personal payment to anyone in the US for free if you use your bank account or PayPal Balance. If you use a debit or credit card, there will be a small charge for your payment. Go to our Fees page for more information.
Does PayPal charge a fee for a business account? ›
How much does it cost to open a PayPal Business Account? It's free to sign up for an account. PayPal merchant account fees only apply to transactions—which means you only start paying when you start selling. There are no set-up costs, monthly fees, or cancellations fees.
Is there a way to bypass PayPal fees? ›
How To Avoid PayPal Fees
- Setup A Business Account. By setting up a business account through PayPal you will have reduced fees. ...
- Request To Be Paid As “Friend or Family” ...
- Apply For Lower Fees. ...
- Deduct PayPal Fees From Your Tax Returns. ...
- Use a PayPal Alternative.
In fact, using PayPal friends and family for business purchases is explicitly against their User Agreement: “You must not use the “send money to a friend or family member” feature in your PayPal account when you are paying for goods or services.”
Why not use PayPal friends and family? ›
If a seller is encouraging you to send a 'Friends and Family' payment when you're buying a good or service, you should refuse. You could be dealing with a scammer who knows that your payment won't be covered by our Purchase Protection if it's a 'Friends and Family' payment.
Can I have separate personal and business PayPal accounts? ›
In short, the answer is “Yes”. You can have more than one PayPal account if it'll be one Personal account and one Business account. However, each account must have a separate email address and financial information. You can also upgrade your Personal account to a Business account.
Why are PayPal invoice fees so high? PayPal invoice fees are considered high because they are a percentage of the transaction amount and can add up quickly for businesses with high transaction volumes. Additionally, PayPal charges extra fees for any cross-border transaction and currency conversion.
Why not to use PayPal for business? ›
You are limited in terms of use and are subject to account suspension at any time which can result in frozen funds for months. It can take up to three days to receive your funds. There are a number of people who refuse to use PayPal, which may result in lost business.
Can I change my PayPal account from business to normal? ›
Most business accounts cannot be downgraded, so we recommend opening a new personal account. If you want to use the same email address that's registered with your business account, you'll need to close your business account first.
Can a PayPal business account accept friends and family? ›
You can no longer accept friends and family payments on your Business account. However, if you'd like to receive friends and family payments, you can use or create a Personal account. If you don't use other business products with your account, you can also change your Business account to a Personal account.
How to send money via PayPal to friends and family with no fees? ›
It's free to send money domestically using your PayPal balance or bank account. Money sent from a credit or debit card will incur a 2.9% transaction fee plus a $0.30 flat fee. International fees apply for money sent abroad.
How do I avoid sending PayPal fees to family? ›
Request “friends and family” Payments
PayPal fees will always apply to invoice-based payments. However, if clients send funds via the “friends and family” method, the recipient won't pay to receive the money. Clients who send the money via their bank account and/or PayPal balance won't pay any fees.
How to send someone money on PayPal without a fee? ›
What are the fees for sending money using PayPal? If the payment method is a PayPal balance, bank account, or Amex Send Account, there is no fee; if the payment method is another card, the fee will be 2.90% + a fixed fee. International fees apply for money sent abroad. Learn more about our fees here.
How to send money to friends and family on PayPal for free? ›
Frequently asked questions
- Log in to your PayPal account.
- Choose “Send & Request.”
- Enter your recipient's name, PayPal username, email, or mobile number. ...
- Enter the amount, choose the currency, and add a note if you'd like. ...
- Choose whether you're “Paying for an item or Service” or “Sending to a friend.”
Here are four ways to reduce the amount or even avoid PayPal fees when receiving money for your business:
- Bill Them to Your Client. ...
- Mark Fees as Deductions. ...
- Opt for an Alternative Payment Method.
To stay in business, the company needs to make some form of income off of its services. To do this, PayPal charges a fee for most transactions that go through its system. And in most cases, these fees are charged to the person or company receiving the money.
