PayPal Pumps Up Processing Fees

PayPal has announced a bunch of changes to its payment processing fees, including hikes on its digital payment products.
Tom Fogden

PayPal has announced price hikes for some of its merchant fees.

The new changes, which take effect in August, will see fees rise from 2.9% to as much as 3.49% for some PayPal Digital Payments. These changes could have big impacts on some small businesses. However, it's not all bad news, as charity transactions will drop below 2%.

Here's a closer look at the fees and the changes that PayPal will be making.

PayPal Digital Payment Changes

Here's an overview of all the changes PayPal is making – remember, it previously charged 2.9% + 30 cents.

  • For PayPal payment products, such as PayPal Checkout, Pay with Venmo, PayPal Credit, Pay in 4, PayPal Pay with Rewards, and checkout with crypto — the rate will be 3.49% + 49 cents per transaction.
  • In-person payments over $10 — the rate will be 1.9% + 10 cents
  • In-person payments under $10 — the rate will be 2.4% + 5 cents
  • “Certain” in-person debit and credit transactions — the rate will be 2.29% + 9 cents
  • Online credit and debit transactions without Chargeback Protection — 2.59% + 49 cents
  • Online credit and debit transactions with — 2.99% + 49 cents
  • Charity transactions for confirmed charities (subject to application and pre-approval) — 1.99% + 49 cents

If you're a small bar or restaurant, for example, the drop for in-person rates over and under $10 might prove a big benefit.

However, if you're a small business selling on an ecommerce platform, the changes to PayPal payment products might put a more sizeable dent in your finances.

Thinking ecommerce? Your first stop should be our expert guide to the Best Ecommerce Website Builders

Why is PayPal Making These Changes?

As usual with price hike announcements, PayPal's Dan Leberman senior vice president of small to medium businesses and partners skirted around the topic.

“As PayPal has been evolving our business alongside our merchant business partners, we have accelerated the rollout of products, features, and capabilities, delivering more benefits than ever before. With this, PayPal has become more than just a button or payment processor to be a full commerce platform capable of driving growth for businesses of all sizes online or in person,” he wrote.

In essence, PayPal has decided to invest in data analytics, fraud detection tools, and new “consumer experiences” and decided that merchants will have to foot the bill.

PayPal was also keen to show it remains the premier choice for payment processing, apparently:

  • Consumers who choose PayPal as a payment method are 60% more likely to convert than consumers who do not choose PayPal as a payment method.
  • Consumers are nearly three times more likely to complete their purchase when PayPal is available at checkout.
  • Buy Now, Pay Later solutions have resulted in a 15% lift in payment volume for businesses.

That's all well and good but the changes will still eat into some business' bottom lines.

How Do PayPal's Fees Stack Up with its Rivals?

According to PayPal, its new fees still manage to undercut its main competitors: Stripe and Square.

PayPal's 2.59% + 49 cent fee for online credit and debit card payments is cheaper than Stripe's 2.9% + 30 cent fee. However, its Digital Payments fee — the PayPal Checkout, Pay with Venmo, PayPal Credit, etc. is more expensive at 3.49% + 49 cents.

For in-person payments, PayPal again demonstrates that it is cheaper than Square. PayPal Digital Payments are at 1.9% + 10 cents, while Samsung, Apple, and Google Pay transactions, as well as regular credit and debit card fees, come in at 2.29% + 9 cents. Square, meanwhile, charges 2.6% + 10 cents.

However, with Square, you also get access to a full POS system and online store for your business — with PayPal, you'll have to pay two companies for two separate platforms. That's not to say that PayPal might work out cheaper for some businesses, but we remain unconvinced.

Like the sound of Square? Check out our guide to Square POS Pricing for more

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Tom Fogden is a writer for Tech.co with a range of experience in the world of tech publishing. Tom covers everything from cybersecurity, to social media, website builders, and point of sale software when he's not reviewing the latest phones.

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