How to Avoid PayPal Fees & Maximize Income – Side Hustling 101

At the end of every year, I like to conduct a financial review for the past 12 months to see how my spending habits, side hustles, and general net worth have developed.

I believe it is important to take a granular look at personal finance matters alongside more general month-to-month tracking for 2 reasons:

  • You can analyze broad changes in financial well-being (positive or negative).
  • Tracking the income you generate from your work or various side hustles is a valuable source of encouragement.

Anyway, after looking back on the past 12 months of side hustling endeavors, I found one shockingly stupid mistake: I spent about $90 in PayPal fees in 2018…There’s just no need for this and I don’t want these fees to get worse each year!

This might not seem like a big deal, but if you frequently send or receive money through PayPal, you need to know how to avoid PayPal fees to maximize your income and efforts.

This post will contain:

  • A breakdown of how PayPal fees work.
  • How to avoid PayPal fees.
  • Alternative payment platforms to PayPal that you can consider.

Let’s get to it!

PayPal Fees, Explained:

PayPal Business Account Fees:

PayPal fees will vary based on variety of factors such as the type of PayPal account you have, the purpose of the transaction (personal versus business), the currency you are dealing with, and other conditions.

If you have an online business that offers PayPal as a payment option, you will have to open a PayPal Business Account.

PayPal business accounts also have a variety of merchant fees or monthly cost associated with them, and are divided into Standard and Pro plans:

PayPal merchant fees
These plans are for Canadian PayPal Business Accounts

As a merchant, if the funds you receive come from a PayPal account in Canada, you pay a fee of 2.9% of the transaction plus $0.30 CAD.

If the funds you receive come from a PayPal account in the United States, you pay a fee of 3.7% of the transaction plus $0.30 USD.

Finally, if your customer is from outside the U.S. or Canada, you will pay a fee of 3.9% of the transaction plus a fixed fee based on the currency.

PayPal Personal Account Fees:

Now, if you’re a side hustler who simply uses a personal PayPal account to receive payment for your work, there are also PayPal fees you should be aware of.

Personal PayPal accounts have different fee structures based on your country of residence, but I am going to cite U.S. PayPal fee information for this section.

For U.S. personal PayPal accounts:

  • Buying is free within the United States (also the case in Canada).
  • Sending money is free if the transfer is funded by your PayPal balance or bank account linked to your PayPal account (you are charged 2.9% plus a fixed fee if funded by a credit/debit card or PayPal credit).
  • Transferring money from your PayPal account to your linked bank account is free, but instant transfers charge 1% of the amount transferred up to a maximum of $10.

PayPal also charges a currency conversion fee in scenarios such as:

  • When you purchase goods sold in a currency you do not personally have in your account.
  • When you send money in a currency you do not have in your account.
  • When you receive money in a currency your PayPal account is not configured to accept.
  • When you withdraw money to your linked bank account that is in a different currency than your bank holds.

PayPal’s currency conversion fee is 3.0% for Canadian or U.S. dollars and 3.5% for all other currencies. The actual base exchange rate is based on rates from wholesale currency markets on the given day or prior business day depending on the time of transaction.

How to Avoid PayPal Fees:

The strategies you use to avoid PayPal fees will vary depending on the type of account you have, so I will outline some tips for business and personal accounts.

Tip 1 – Change Payment Structure/Frequency:

If you operate an online business or something like a dropshipping business that sells one-time products to consumers, this strategy won’t help you avoid PayPal fees.

However, if you operate a business model that charges your customers for recurring services (i.e. consulting work, subscriptions, coaching), you can save a lot of money simply by altering your payment model.

For example, if you have customers who are paying you through PayPal on a bi-weekly or even weekly basis for your services, switching to a monthly payment schedule will reduce the number of times you are charged a $0.30 transaction fee.

Granted, this isn’t much, but if you have a high amount of transactions it can add up to some decent savings.

Tip 2 – Utilize PayPal Friends and Family:

PayPal friends and family payments work slightly differently than normal transactions.

According to PayPal: “If the request is for goods and services, invoice fees are only 2.9% + $0.30 per paid request.* If you’re requesting money from friends & family on our app or using PayPal online, it’s free to receive money.”

If you’re a freelancer or business owner you really need to ensure your clients are completely comfortable with this option and that you have been doing business together for a while.

Buyers lose their payment protection if they send money through the friend and family option, so using this trick to avoid PayPal fees might take some convincing. However, you could opt to split the 2.9% in fee savings with the client to incentivize them to use PayPal friends and family.

Tip 3 – Claim PayPal Fees on your Tax Return:

If you incur PayPal fees as a business, you can actually include these on your tax return because they are an inevitable cost of your business operations.

You’ll have to document the amount of money you pay in PayPal fees throughout the year to accomplish this, but this could be worth your while if you process a lot of PayPal transactions.

Tip 4 – Plan your Cash Flow Needs in Advance:

You can withdraw your PayPal funds to your linked bank account without incurring any fees. However, if you opt for an instant transfer, you will pay 1% of the total transaction up to $10.

One of the simplest ways to avoid PayPal fees is to just have patience. Plan your cash flow needs in advance, and never use instant transfers to withdraw money to your linked bank account (just use the normal withdrawal method).

Tip 5 – Open a New Bank Account (Especially if you’re Canadian):

The main way I incurred PayPal fees in 2018 was when I transferred U.S. dollars from my PayPal account to my linked Canadian bank account.

Freelancing or making money online can be an international affair. Chances are, if you work online you will eventually have to deal with a currency that is not used in your native country.

For residents outside the United States this tip is a particularly useful way to avoid PayPal fees (since a great deal of online transactions usually use $USD).

There are plenty of low-fee or zero-fee bank account options for Canadians looking to open a U.S. bank account, and I plan on opening one in a few months so I can connect my PayPal account to a bank that handles U.S. dollars (since this is generally what I get paid in).

If you receive a lot of $USD for your online work, I highly suggest looking into opening a U.S. bank account if you can to avoid paying PayPal fees on currency conversions.

Tip 6 – Plan Ahead with Pricing:

If you receive PayPal payments for most of your online work, you should definitely consider this when determining how you price your services.

I’m against the idea of making clients cover PayPal fees, and I don’t suggest setting wonky pricing like $52.43 or anything like that, but just calculate PayPal fees in the back of your mind when setting your prices.

This is especially useful if you are going to start a side hustle like flipping items on eBay where you will have to consider both eBay and PayPal fees in your margin calculations.

Alternative PayPal Options to PayPal:

avoid paypal feesThere are plenty of other payment platforms besides PayPal, and you can also consider them if you think they will suit your needs better.

Some useful PayPal alternatives include:

  • TransferWire: Especially useful for sending international transfers in different currencies (done through bank transfers).
  • Payoneer: Useful because you get a Payoneer debit card, but you also have to pay a monthly fee and fees when you withdraw money to another bank account.
  • Skrill: Very similar to PayPal, except Skrill offers users a debit card and money can be sent or transferred incredibly quickly to this debit card account.
  • Dwolla: Dwolla charges a $0.25 transaction fee on any amount over $10, but making bank transfers with Dwolla is fast and simple. Dwolla only works in the United States and both sender and receiver need to both be on Dwolla for transactions to work, so keep this in mind!
  • Stripe: I had to open a Stripe account when I started making money on Medium, and I actually like Stripe! Stripe is definitely the most popular alternative to PayPal, and the platform is handy because it automatically deposits money to your bank account. Fees are pretty similar to PayPal fees, and setup is very simple.

Some Final Thoughts:

At the end of the day, losing $50-$100 a year on PayPal fees might not seem like the end of the world. After all, as long as you are running a profitable online business or making money with a blog, should you really care?

Well…I think the answer is yes: you should care.

Learning how to avoid PayPal fees in the early stages of your side hustling can help you save thousands of dollars in the long run, and you can use your savings to invest back into your business or simply grow your savings.

None of these strategies are rocket science, but hopefully you can use some of the ideas in my list to stop paying PayPal fees and maximize the effectiveness of your side hustles.

Catch you guys in the next post!


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I used both Paypal and Payoneer. My PP is personal account and luckily most of my employers did cover the fee for my payment. lol. Payoneer is also working nicely when you’re living outside of the States. Additionally, PayPal also offered another nice payment method service that allowed your payers/buyers/customers/clients/employers to easily transfer the money directly to your bank account at low cost. The service is called “Xoom Service”. Some of my employers who’s living in the States did use that Xoom to transfer the money directly to my bank account. Usually the transfer is done immediately if the senders… Read more »

Wish I could avoid PayPal fees when selling on eBay! I did hear that eBay is introducing a new payment method. Hopefully it’s cheaper than PayPal.

Thanks for the tips though! I’ll have to keep this in mind if an opportunity comes up that requires PayPal.

Such a good article, I didn’t most of these PayPal charges, I think I will consider some of your advice to reduce on my PayPal fees. Thanks