Paypal Fee Change To 2.99%; Removes Ability To Send Free Personal-To-Business Transfers

Paypal sent out changes which are coming to their user agreement on July 28, 2022. A summary can be viewed here. Below are the changes, my commentary follows:

1. U.S. business accounts will not be able to receive personal transactions from U.S. PayPal accounts. U.S. PayPal accounts will not be able to send personal transactions to U.S. business accounts.
   • Seems like ‘Send Money’ transactions between personal and business accounts won’t have the option of being labeled ‘friends and family’ to avoid fees. If you want to send money from a personal account to a business account you’ll have to label it ‘goods and services’ and pay the transaction fee. Tangential note: by labeling it as ‘goods and services’ it’ll likely get added into the business 1099-K if they meet the $600 threshold for the year.
2. The rate for the “Send/Receive Money for Goods and Services” payment type will be 2.99% (with no fixed fee). This pricing change will result in fee increases for some transactions.
   • The fee for ‘Send Money’ has always been 2.90% + 30 cents. After July 28th it’ll be a flat 2.99%. That saves money on lower transactions but costs more for higher transactions, the changing point being around $333. Not a huge change unless you send large amounts.
   • When you Send Money to family and friends and pay with a credit card, the fee has always been the same as for ‘Send Money for Goods and Services’. I assume the fee for that will change to a flat 2.99% fee as well.

Related note: sometimes ‘family & friends’ transactions paid with credit card are considered a cash advance. We wrote about that and how it affects each bank in this post.