This transcript was generated from the episode audio and may contain minor errors.
[Music]
A crafty listener has found a way to avoid PayPal fees when accepting payments. So basically this guy's found a way to not pay any merchant fees at all. Usually if you use PayPal or Stripe or any other means of taking payments online, you have to pay typically two to three, up to 5%, sometimes 10% depending on the platform. The point is there are always fees and a lot of people use PayPal, more than 300 million people in fact around the world have PayPal. You can use it I think in more than 150 countries.
You can also receive personal payments. A lot of us use PayPal for personal stuff, but you can in fact make business payments, use it for e-commerce. So this listener wants to know if he's really onto something here. Has he found this cool hack or is it unethical in some way? I've actually known about this trick for years.
It definitely works. It still works. We first mentioned it on the show a number of years ago and it still in fact works. You just need to be aware of a couple of things before you use it. So I'll tell you exactly how it works, then you can decide for yourself if you wanna do it.
Basically we're gonna talk today about accepting PayPal payments with no fees. Detailed question and the answer coming right up. [Music]
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 use the 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. [Music]
So first things first, this absolutely does work, especially with US to US transfers.
If you're in the United States paying somebody else in the US, I discovered it myself many years ago. Basically if you choose friends and family as opposed to making a payment for a business, then they don't charge you any fees, at least as long as you have some money in your PayPal account. I'm not sure how it works if you're trying to use a credit card. And so it does work and sometimes it can be helpful if you're paying somebody that you know fairly well and they're doing a business service, probably not a problem to do this. That said, I wouldn't ask all of my customers to do it because ultimately you're trying to run a business.
And so I kind of think of it as the equivalent of like the taxi driver asking you to pay in cash. You know, it's like, I want the taxi driver to be able to take credit cards. Like there's a certain professionalism. So you want to avoid anything that looks shady. So I wouldn't go out to all my customers and be like, hey, I need you to do this little hack for me, use the friends and family option.
In the end, having to pay what is usually a relatively small percentage of your sales for merchant processing is just a normal part of doing business. These fees enable you to take payments from people everywhere who trust that the transaction is secure. And just think about it, if these systems didn't exist, you wouldn't be able to do that. Everything would be so much more difficult. So I tend to think it's worth it.
And if you're really getting killed, like our caller said, like they're getting killed with PayPal fees, then I think you need to raise your prices. Like you need to kind of account for the fact that this is part of doing business. It is harder when you're taking a lot of small payments, as they mentioned, but I still think you have to kind of build it in somehow. So I don't believe this is a great practice to adapt or adopt on a wholesale basis. But if you're sending funds to another person at some point, well, now you have the knowledge you need to decide for yourself, and it can help you save money.
So just remember to choose friends and family and not business when you're sending a PayPal payment. Listeners, if you have a question, a comment, sidehustleschool.com/questions. You can also download or stream every single episode in the archives, all completely free at sidehustleschool.com. New episodes coming out seven days a week, listen on Spotify, Apple Music, or wherever you get your podcasts. My name's Chris Guillebeau, this is "Side Hustle School." [Music]
