As a small business owner, every penny counts when it comes to financial management. However, PayPal, being the most commonly used online payment system, is an inevitable part of the payment process. Although PayPal provides a convenient way to accept online payments, it also comes with certain fees, which can be a burden for small businesses. To help you save money, we have compiled a list of five useful tips to avoid PayPal fees.
Introduction
PayPal charges anywhere from 2% to 4% to accept payments from clients, which can be significant for small business owners. However, there are various ways to reduce or eliminate these fees. In this article, we will discuss the five most effective ways that small businesses can adopt to avoid PayPal fees.
Add Processing Fees to Your Invoices
Including a processing fee in an invoice means that the seller or service provider is charging an additional fee to cover the costs associated with processing the payment. This fee is typically added to the total amount due on the invoice and is separate from any other fees or charges that may be included.
The processing fee can cover various costs such as credit card fees, transaction fees, and administrative costs. For example, if a seller accepts credit card payments, they may be charged a processing fee by the credit card company for each transaction. The seller can then pass on this cost to the customer by adding a processing fee to the invoice.
Including a processing fee in an invoice is a common practice among businesses, especially those that process a large number of transactions. It helps to ensure that the costs associated with payment processing are covered and can also help to offset the impact of fees on profit margins.
It is important to note that the inclusion of a processing fee in an invoice should be communicated clearly to the customer. This can be done by specifying the fee in the invoice and explaining what it covers. It is also a good idea to provide customers with alternative payment options that do not include a processing fee, such as paying with cash or a check.
For example, a small business that sells products online may choose to include a processing fee in their invoices to cover the cost of credit card processing fees. The processing fee might be 2% of the total invoice amount, and the seller would clearly communicate this to the customer in the invoice. The invoice might look something like this:
Total due: $100
Processing fee (2%): $2
Grand total: $102
By including the processing fee in the invoice, the seller ensures that the cost of payment processing is covered and can maintain their profit margins. At the same time, the customer is made aware of the fee and can choose whether to pay it or use an alternative payment method.
e-Checks and ACH Bank Transfers as Payment Options
Accepting e-checks as well as ACH bank transfers can be an effective way for small businesses to avoid PayPal fees. ACH stands for Automated Clearing House, which is an electronic network for financial transactions in the United States. These are two types of electronic payments that can be processed through the ACH network.
To accept these, a small business will need to set up an ACH merchant account with a payment processor that supports these payment types. Some popular payment processors that support ACH and e-check payments include Stripe, Square, and Authorize.net.
Once the merchant account is set up, customers can make payments by providing their bank account and routing number or by entering their checking account information. The payment will then be processed through the ACH network, which typically takes 2-3 business days to clear.
Accepting ACH bank transfers along with e-checks can be beneficial for small businesses as they typically come with lower processing fees compared to credit card payments. For example, PayPal charges a 2.9% + $0.30 fee for each transaction made with a credit or debit card, whereas ACH transfers and/or e-checks may only have a flat fee of around $0.25 per transaction.
However, it’s important to note that ACH and e-check payments may take longer to clear compared to credit card payments, so it’s important to set clear expectations with customers regarding payment processing times. Additionally, some customers may prefer to pay using credit cards for rewards points or other benefits, so it’s important to offer multiple payment options to accommodate different customer preferences.
Opt for Direct Deposit as Your Primary Payment Method
Requesting direct deposit as a preferred method of payment can be a great way for small businesses to avoid PayPal fees. Direct deposit is a simple and convenient way for businesses to receive payments directly into their bank account without the need for third-party payment processors like PayPal.
To request direct deposit as a preferred method of payment, small businesses should communicate this preference to their clients or customers. This can be done through email, phone, or even in person. It’s important to clearly state the preferred method of payment and provide any necessary instructions or account information needed for the direct deposit to be made.
Additionally, businesses may want to consider incentivizing their clients or customers to use direct deposit. For example, they could offer a small discount or other incentive for payments made via direct deposit. This can help encourage more clients or customers to use this payment method and help reduce the reliance on PayPal and other third-party processors.
It’s worth noting that direct deposit may not be feasible or desirable for all businesses. Some clients or customers may prefer to use PayPal or other payment processors, and in some cases, direct deposit may not be available or may require additional setup or maintenance. As such, it’s important for businesses to consider the unique needs and preferences of their clients or customers when deciding on a preferred method of payment.
Wire Transfers Online
Wire transfers online are another alternative payment method for small businesses looking to avoid PayPal fees. Wire transfers allow businesses to transfer funds electronically from one bank account to another. Unlike PayPal, which charges a percentage of the transaction amount as a fee, wire transfer fees are typically fixed and may be more cost-effective for larger transactions.
To use wire transfers, small businesses will need to have a bank account and the necessary information for the recipient’s bank account, including their routing number and account number. Many banks offer online wire transfer services that allow businesses to initiate and track transfers from their computer or mobile device.
While wire transfers are generally a reliable and secure way to transfer funds, they can take longer to process than other payment methods, such as credit cards or PayPal. This is because wire transfers must be manually verified by bank employees to prevent fraud and ensure that the funds are transferred to the correct recipient.
It’s important to note that some banks may charge fees for wire transfers, both for the sender and the recipient. Small businesses should check with their bank to determine the fees associated with wire transfers and factor those into their decision-making process.
Obtain Discounts for Your PayPal Business Account
Getting PayPal business discounts is another useful tip for small businesses to avoid PayPal fees. PayPal offers discounted transaction rates for businesses that process high volumes of sales.
To qualify for PayPal business discounts, you need to sign up for a PayPal Business account and process more than $10,000 in monthly sales. Once you reach this threshold, you can contact PayPal customer support and request discounted transaction rates.
PayPal offers different transaction rate discounts based on the volume of sales processed by your business. The more sales you process, the higher the discount rate you can receive. The discounts range from 2.9% + $0.30 per transaction to 2.2% + $0.30 per transaction.
To ensure you are getting the best discount rate possible, make sure to keep your PayPal account in good standing by regularly checking your account balance, resolving any disputes, and promptly responding to customer inquiries.
In addition to transaction rate discounts, PayPal also offers other discounts and benefits to businesses that use their platform, including discounted shipping rates through PayPal’s partnership with shipping carriers such as UPS and USPS.
Request Lower Merchant Fees for Your Business
One way for small businesses to avoid PayPal fees is to request for lesser merchant fees. This may be possible if your business is able to negotiate with PayPal or qualify for a lower rate based on your transaction volume or other factors.
To ask for lower fees, start by reviewing business PayPal account and transaction history to determine your current rate and volume of transactions. Then, reach out to PayPal’s customer service or sales team to inquire about any available discounts or promotions. You may be able to negotiate a lower rate based on your transaction volume or by agreeing to use PayPal exclusively for all online transactions.
Another option is to look for alternative payment processing providers that offer lower merchant fees. There are many providers available, and some may be better suited to your business needs than others. Before switching to a new provider, be sure to carefully review their fees and terms to ensure that they are a good fit for your business.
Conclusion
In conclusion, small business owners can save a significant amount of money on PayPal fees by implementing the tips we’ve discussed. By including fees in invoices, accepting ACH bank transfers or e-checks, requesting direct deposit, wire transfers online, and getting PayPal business discounts, small businesses can reduce transaction fees and improve their bottom line.
