Paypal Caveats – How to Limit Fees When Sending Money
By Matthew Tomkin aka reoddai
Paypal is a popular method for sending money in exchange for sports memorabilia online. In addition to allowing transactions all over the globe, it allows users to conveniently link their e-mail to local bank cards, credit cards, bank accounts and store funds in a relatively secure online account. Currently, Paypal tends to focus their attention to eBay transactions. However, collectors can use Paypal for non-eBay transactions and transfer money between individuals securely, such as in trades here at SCF.
Traditionally, the burden of fee payments rested heavily on the seller. Recent changes now allow for certain payments to have the fee paid by the buyer. The most likely fees consist of transaction fees for the use of a credit or bank card, money transfer fees and cross-border fees. Below is a list that details the most common fees and what the average user should expect to pay.
NORTH AMERICAN RESIDENTS:
Receiving Money from within your country:
· Free – If paid from bank transfer or Paypal balance
· 2.9% + $0.30 – If paid by bank or credit card
· 2.9% + $0.30 – For any commercial transaction – regardless of funding source
Receiving Money from outside of your country:
· +1% – in addition to any fees mentioned above
· 2.5% – added onto the current exchange rate
Pay Fewer Fees – Buyer!
From the buyer’s prospective, money is always sent free. As the buyer though, you have the power to choose whether or not your seller will pay fees. If you are known to send payments without fees, sellers are more likely to want to deal with you as they end up with more money in their pockets, or they may sell to you for less.
Most online transactions are conducted in USD. If your local currency is not USD, Paypal charges a 2.5% premium on the current exchange rate any time money is converted to or from your local currency. Try to negotiate with the seller to accept payment with your local currency whenever possible. Most sellers will reject this and insist on payment in USD, but it’s worth a try especially if you both live in the same country. As a work around, I suggest becoming a seller first. By selling and building up your own Paypal balance you can avoid ever having to pay this premium.
The buyer has the power to choose whether or not the seller will pay fees. Before we talk about how we can send money without being subjected to fees, its important to know what those fees buy.
When non-eBay Paypal payments are subjected to fees, the “PayPal Buyer Complaint Policy” protects the buyer. This is similar to the eBay dispute process in every way except for two important points:
1. “Significantly not as described” claims cannot be escalated
2. If an escalated claim is found in your favour, your refund is limited to whatever the seller has left in their account.
If you choose to pay with a bank or credit card, then the payment will be subjected to fees and the rest of these steps won’t help. As a courtesy, I recommend that you inform the seller how you are intending to pay so they are aware of the fee before they receive payment.
To send a payment that is subjected to the least amount of fees, send payments using a Paypal balance or via bank transfers in the currency you wish to send money.
When you log into Paypal and choose to send money, you should see a page like this:
The default when sending money is as a “Purchase”. If you are the buyer, you may be inclined to leave this tab the way it is. Sending money as a purchase will automatically result in a fee for the seller of 2.9% + $0.30. Alternatively, you can click on the “Personal” tab.
I usually choose “Other” and indicate the details in the description (trade with, thread of trade, etc.). Sending money as a personal transaction allows for the seller to receive the funds with as few fees as possible. This method also allows for you to see what fees the seller will be subjected to, and, if you’re feeling particularly generous, you can even opt to pay them on the seller’s behalf.
Pay Fewer Fees – Seller!
It’s often best to be pro-active if you want to limit the amount of fees that you pay. The Paypal user agreement states that you cannot ask the buyer to send money as a personal transaction, but you can still refer them to a helpful article if you think it will make a difference.
Before any money changes hands, you can ask the buyer where the funds are coming from. If they are from a credit card, you know that there will be a fee of 2.9% + $0.30. If your buyer is from a different country, then, 1% will be added on top of that (i.e.: 3.9% + $0.30). With the new Paypal tabs, as long as you aren’t selling through eBay (where Paypal fees are mandatory), the buyer has the option to pay the fees on their end. Negotiate with them about who should pay the fees. If the buyer is outside of your country you will always be subjected to a +1% fee, but sometimes a good manner and customer service can get that fee paid for you by the buyer without even asking.
When you’ve already received money, its not too late to do something. You can refund any payments received, along with any fees taken by Paypal and return it to the buyer. Remember that, you are trading cash in hand, for a chance at fewer fees. Sometimes, the buyer may be too confused or upset that their money was refunded and may opt to cancel the deal rather than have you save 50 cents on a transaction, especially if you come off as rude.
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