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PayPal is (generally) free for US personal money-sending

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I can never quite remember how PayPal's fee system works, and various people have asked me not to use PayPal in transferring money because they're worried it'll charge a fee.

So I went and looked at their help pages describing their fees.

They have a publicly accessible fee summary page that sums it up pretty clearly; worth a look. They also have another fees page with slightly more info.

Here are some more details from their help page about fees, which I think you can only view if you're logged in. Note for people viewing this entry in the future: I have no connection to PayPal and can't promise that the following info will continue to be true. Please check PayPal's help pages before relying on this info.

PayPal doesn't charge a fee to open a PayPal account.

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It's free within the U.S. to send money to family and friends when you use only your PayPal balance or bank account[...].

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There is a fee to send money as a personal payment using a debit card or credit card. [...]

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It's free to receive money from friends or family in the U.S. when they send the money from the PayPal website using only their PayPal balance or their bank account[...].

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There's no fee to use PayPal to purchase goods or services. However, if you receive money for goods or services (such as from selling an item on eBay), [there's a fee].

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There is a fee when you send a payment to someone in another country or if you receive a payment from someone in another country.

[...]

You can withdraw money from your PayPal account to your bank account at no cost. If you prefer to receive a check, there is a $1.50 fee.

So, the following series of transactions, which is mostly what I use PayPal for, is free at every step:

  1. I transfer money from my bank account to PayPal. (I've previously set up my bank account to interact well with PayPal; that may take a little work and some time, and btw you probably shouldn't give PayPal access to any account where you keep a lot of money.)
  2. I use PayPal to transfer the money to someone else in the US. (PayPal now has several options for indicating what kind of transaction you're performing; for example, the Gift option (under the Personal tab) is often handy.)
  3. The recipient transfers the received money from their PayPal account to their bank account.

I asked PayPal late last year, via email, to clarify when it's legitimate to use the Personal tab and when it isn't. They said (I'm paraphrasing) that any business-related transaction counts as a Purchase. Authors receiving payments for their work, landlords receiving money for rent, members paying dues to organizations, etc; that's all Purchase, not Personal, so the recipient is charged a fee for those situations.

Note: I've known several people who've run into huge problems with various aspects of using PayPal. I use it semi-regularly without a problem, but I'm not saying it's a perfect service. My point in this entry is not to say PayPal is great, just to say that it doesn't charge fees if you use it to transfer money in certain kinds of transactions.

One more P.S.: In case this isn't clear, I'm definitely not advocating lying to PayPal about what kind of transaction you're doing. When I use their fee services, I pay the fee. I'm just saying that most of my PayPal use is legitimately among the services they offer for free.

1 Comment

There was a point in the past year or two when a kind of transaction that had been free, started requiring a fee, and the way to avoid the fee was to characterize it as "money owed" rather than "payment", or something like that. They may have changed the UI since then, and I'm willing to believe that they claim that transfers between individuals for personal non-purchasing-related reasons are supposed to be free, but at least sometimes in the past, they haven't been very good about making it easy to use.

(That said, the recipient was able to decline the payment, which refunded the money to the sender, who could then try again with the correct transaction type. So another tip: If someone tries to send you money that shouldn't have a fee, and PayPal tries to charge a fee, just reject the transfer, figure out what went wrong, and try again.)


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