This transcript was generated from the episode audio and may contain minor errors.
More than 300 million people have a PayPal account. You can use that account to receive business payments in addition to personal money transfers. By the way, in case this is sounding like a sponsor message, it's actually not. This relates to a listener question. In fact, this is something that PayPal doesn't want people to know about, so they most certainly wouldn't pay for us to share this information. So when it comes to taking money online, there are many alternatives,
including some good ones, but PayPal really is the easiest way to accept payments online. That's why I talk about it from time to time. But this question is from a crafty listener who's found a clever way to avoid PayPal fees when accepting payments. He wants to know if he's really onto something or if this is unethical in some way. Now, I've known about this trick for years. I kind of stumbled on it myself long, long ago,
and it absolutely does work. You just need to be aware of a couple of things before you use it. I think there are good cases to use it and not so good ones. So I'll tell you exactly how it all works. Then you can decide for yourself. So the question is, have I found a way to accept
PayPal payments with no fees? That question from our listener is coming up after this real sponsor message. Hey, Chris, this is Randall, and I'm getting killed with PayPal fees. We take a lot of small payments and they charge a transaction fee in addition to a percentage fee. However, I think I found a loophole. So for the past few months, I've asked our customers to pay
us by sending their payments directly to my email address. Then when I have to make payments to vendors, I used a friends and family option and there are zero fees. Brilliant. I wanted to pass this on to anyone looking for a similar solution and also ask you if you think there's anything wrong with it. Thanks for your time and help, Chris. Okay, so first things first, what Randall's
talking about, it absolutely works, especially with US to US transfers, specifically what you do when you send money. There's an option that says, I'm buying something, like I'm buying something on eBay or elsewhere, or I'm sending money to family and friends, which can of course be defined quite loosely. And when you choose family and friends, as long as you're not using a credit card, then there are no PayPal fees at all. It's completely free to transfer money. And there's no limit to this. It seems that people are able to use this for business transactions.
I discovered it myself, as I mentioned many years ago. And to be totally honest and transparent, I have occasionally used this myself when paying vendors, especially if it's a freelancer or something like I owe a freelancer some money. Oh, let me just send them the funds using this method. Now that said, I wouldn't ask my customers to do it. I wouldn't do it on the other side, because you're trying to run a business and it's a little bit awkward to go to your customers and be like, "Hey, actually, I need you to send the payment this way. I need you to say we're friends."
It's the equivalent of the taxi driver who asks you to pay in cash because the meter isn't working. It's not illegal necessarily, but it's a little bit shady. So I wouldn't do that. I think that the challenge that Randall has is he has all these small payments coming in. So he has the transaction fee, which is, I don't know, 25 cents or something in addition to the percentage fee. Normally,
if it wasn't for these microtransactions, having to pay a relatively small percentage of your sales for merchant processing is just how it works. This is the trade-off. These fees enable you to take payments from people everywhere, which is a huge benefit. And those people make those payments because they trust that the transaction is secure. So the fee that you pay is more than justified or worth it. So in short, I don't think this is a great practice to adopt on a whole cell
basis, especially when receiving payments. But PayPal doesn't seem to care. But if you're sending funds to someone at some point, well, now you have the knowledge you need to decide for yourself. And my last comment to Randall is, building a business on microtransactions, which is like a lot of transactions for a dollar or two, or I forget what the precise definition is, but like a really small amount, that can be tough. So more strategically, I would ask myself, what can I do to develop a higher cost product, even if it's just 5 or 10 dollars compared to 1 or 2 dollars? But Randall, you have indeed discovered a loophole. You are correct.
So good luck. And listeners, if you have a question or a comment or an update, your own experience, whatever it is, come to sidehustleschool.com/questions. We're going to keep rolling them out this year. Got a whole batch of stuff to share with you already. And I look forward to more. So do be sure you're subscribed. We got a new episode coming every
single day, 7 days a week. My name is Chris Guillebeau. This is Side Hustle School. From the Onward Project.
