57 Responses to “PayPal Fees | Should You Charge Your Clients?”

1. SEan on Nov 13, 2008 said:

   Paypal TOS 4.3e

   Sellers may not charge a surcharge for accepting PayPal as a payment method.

   https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/UserAgreement/ua/USUA-outside#fees-policy

2. Marnie B on Nov 13, 2008 said:

   I don’t know that I entirely agree that a client may go elsewhere if you choose to charge them PayPal fees. I mean, I’m sure it’s a possibility, but I think it’d be an extreme act on behalf of the client when they have CHOSEN to pay via that method (assuming different methods are available, as is the case with my business).

   That aside, I think it’s perfectly acceptable to charge clients for using PayPal (or PayMate), particularly in the case where they can choose to pay via another method - EFT for example.

   For me, it’s more of a way of trying to deter them from using a CC rather than not wanting to pay the fees myself.

3. SEan on Nov 13, 2008 said:

   And Paypal TOS 4.6

   4.6 No Surcharges. You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. You may charge a handling fee in connection with the sale of goods or services, as long as the handling fee does not operate as a surcharge and is not higher than the handling fee you charge for non-PayPal transactions.

4. Michael on Nov 13, 2008 said:

   I’m in the boat of not line item charging for PayPal fees. Chalk it up to the cost of doing business.

   If you want to recoup those costs, then figure it into your total overhead and adjust your rates accordingly. This is something I’d reco everyone do on a, at a minimum, yearly basis.

5. Marnie B on Nov 13, 2008 said:

   A sidenote: I don’t actually use PayPal. I use PayMate… so I obviously wasn’t aware it was against the TOS. ;p

   With PayMate, you can simply untick ‘absorb buyer fees’ and the client then cops the fees.

6. David Horn on Nov 13, 2008 said:

   No - I don’t think it’s acceptable to charge people PayPal fees … asking people to pay via PayPal is a convenience to me: I get the money quicker, it’s all online, it’s generally beneficial to me - so, in my case, I don’t feel it’s appropriate to charge. The client would probably prefer to pay by cheque - that’s what’s easiest for them … so, getting them to do what’s easiest for me, and then charging them for it, just doesn’t seem right.

7. Nathan Beck (@redswish) on Nov 13, 2008 said:

   I never charged clients for anything like this. I’ve never put mark-up on hosting or domain fees but now I’ve had some more experience in the commercial world and I see what prices others are charging - it doesn’t sway me to slap a small percentage on top of everything.

8. Randa Clay on Nov 13, 2008 said:

   I agree with Nathan. PayPal is a convenient method for me to receive payments, and the fee is a cost of doing business. I write it off on my taxes actually.

9. James Chartrand - Men with Pens on Nov 13, 2008 said:

   We absorb the cost of PayPal expenses. We feel that it’s part of doing business, part of the cost of goods sold, and it’s really not a charge that should be tacked onto our normal rates.

   It’s a little foolish to say, “This will cost you $250… plus 3%.” Shouldn’t that $250 (or whatever) already take that 3% expense into consideration?

10. David Airey on Nov 13, 2008 said:

    I’m in agreement with those who absorb the cost into their quotes. It’s more efficient to factor all eventualities into your design rate than to specifically say, “Plus 3.5% for PayPal fees”. What do you reckon, Jacob?

11. George - LogoDesign.org on Nov 13, 2008 said:

    As pointed out in the comments before me, the PayPal TOS forbids charging buyers for the fees you incur. Above and beyond that I think charging fees is somewhat tacky and pretty unprofessional (just my opinion).

    Also, PayPal fees do drop once you do over a certain amount in sales (I think it’s over 15k a month for the past 3 months), so when you do a high volume of sales it can really make a difference.

    I personally feel that with all of the advantages PayPal offers, like their IPN feature, that it is more than worth the fee they charge. Although I do agree that those pennies add up!

12. Pat on Nov 13, 2008 said:

    Why not just charge 3% more and not bill it separately?

13. Eric Granata (@granata) on Nov 13, 2008 said:

    I absorb the fee and see it as a service to my customers and something that makes collecting easier for my business. I also write the fees off as a business expense.

14. drew on Nov 13, 2008 said:

    I absorb it, because I like to be giving my customers exact quotes along the way. They know what they’re getting charged through the entire project. I’d hate to try and tell them plus XX%, not only because it looks a little suspicious but because I think it looks a little amateur.

15. Bram Van der Sype (@Brammm) on Nov 13, 2008 said:

    It depends on how many methods of payment you have. If PayPal is your only means of getting payed, I think you should calculate that percentage allready in your price. That way, you know you’re not losing anything and your clients just that think that’s your rate.

    If you have several means of payment, I think you should keep your price as it is. If people can only pay through paypal, tough luck, take clients who can pay by other means where you don’t lose anything…

16. Briana on Nov 13, 2008 said:

    Well, if it’s a legitimate business expense, then of course the cost should be factored into your prices.

    Perhaps it only becomes an issue when you TELL your clients that you’re charging them this fee. I don’t see any reason why you should, just like you don’t tell them how much of what they’re paying you goes towards the cost of your software, or your internet service, or your phone line. It’s your job to figure out your expenses, calculate a profit margin, and charge accordingly.

17. tony on Nov 13, 2008 said:

    In establishing cost/price of products or services, consider ALL expenses/overhead (direct and indirect). That includes payment fees (PayPal, credit card, etc.), taxes paid on purchases, etc. In cost accounting, even the nails and paints are important factors in establishing a price of, say, furniture. The customer, however, need not know the details of the costing. The common practice is to impose upon customers only delivery fees and sales taxes (GST/VAT). In the Philippines, imposing Credit card fees and other payment fees to customers is against the law. Payment fees will fall under administrative expenses, not cost of sales/services. That means, the impact of these fees on the cost of your services is proportionately distributed. You earn more for those who do not use PayPal; you earn less for sales through PayPal. On an aggregate, however, you earn fairly. It does not sound fair for customers but thats how you do it in accounting. In a nutshell, consider PayPal fees in establishing the cost of your services but you do not have to show it explicitly to your customers. You know it is there, it is incorporated there but not necessarily the exact amount of the PayPal fee.

18. PublicRecordsGuy on Nov 13, 2008 said:

    I will say a couple things about this as a Licensed Private Investigator and the impact it has on me.

    Sears, Macy’s, Walmart, Home Depot doesn’t charge me extra to use my Credit Card or Debit Card (Visa Logo). In the same regard I think that people have become accustomed to using their Debit Cards which are actually cash backed, not credit based. There is a fee for the service. The fee is absorbed by the merchant. It’s merchant services.

    I don’t like Credit Cards because its too easy to get a “charge back” from someone unhappy, and in the service related industry it really hits hard. Let’s say I’m performing surveillance for a cheating spouse. I do the time and the spouse is never spotted cheating. The client ends up being unhappy paying the $2,000 for the services, so they charge it back claiming I didn’t prove the infidelity. I don’t prove anything, I provide a service, and sometimes that service proves something, other times not.

    I think any business wishing to avail themselves to the “plastic” market needs to be able to absorb the fees in their pricing.

19. modemlooper on Nov 13, 2008 said:

    No way its an overhead cost to a business. It’s not a clients fault you choose to use paypal. I do how ever think you should be adding these costs into your base rate.

20. Michael Martin (@problogdesign) on Nov 13, 2008 said:

    I agree that they’re a nuisance to have to pay, and they can mount up, but if you charge a client $2000 for a project, the one thing they’re going to remember afterwards is that you then charged them $40 on top.

    The fees are just another expense in the project. I’d just build it into the original quote and not highlight it as an extra, only so that I don’t annoy any of my clients come billing time.

21. Aetoric Design on Nov 13, 2008 said:

    I don’t have a paypal and I personally I prefer it that way. Mail me a check or money order. It’s slower but always more reliable.

22. Dave on Nov 13, 2008 said:

    I’m voting against charging your customers paypal fees. Like mentioned above, it’s a huge convenience, tax deductible and against Paypal’s TOS. Not to mention, if I was a customer, I’d be upset if I received an invoice that included paypal fees

23. Steven Clark on Nov 13, 2008 said:

    Irrelevant of whether or not you state the exact paypal surcharge, it’s a cost of doing business and needs to be factored into your price. Like petrol to attend meetings and travelling time, computer wear and tear, software replacement over the year, insurance and your downtime. The bottom line is if you’re working as a business you need to be receiving a wage.

    If you only ever charged for the exact working minutes in a day and didn’t factor in those extra costs then why freelance? You shouldn’t have to work a 16 hour day to get 8 hours pay.

    So my vote is for accomodating business fees into your business bills. I’m quite sure every other business has factored in the credit card fees to meet their pricing…

    just my 2 cents.

24. Steven Clark on Nov 13, 2008 said:

    At the end of the day its about being competitive and making money. Are you charging what you’re worth? Are you worth what they’re paying? The fee itself isn’t really the issue IMO.

25. Alex B. on Nov 13, 2008 said:

    I think if you’re going to charge Paypal fees, they should just be included in the quote.

26. Mark Fulton on Nov 13, 2008 said:

    My graphic designer makes me use mass-pay to him where I pay PayPal fees and it really bothers me.

27. Adam on Nov 13, 2008 said:

    Hey Jacob,

    I actually ran into that issue recently and I realized its just not worth it to use Paypal. Despite being more convenient, I just hate to charge my clients odd percentages extra. I would rather have a check for $500 than a check for $507.68, they just mentally feel better about nice round numbers, so I have them mail checks.

    A great tool I use is Intuit’s BillingManager, so I can keep track of invoices while using traditional money transferring mediums like the mail.

28. Anja on Nov 13, 2008 said:

    Yes, it’s part of my invoice. But most of my clients pay per check. The fee should be paid by the client as it is a convenience to him, like when they want their website up right away.

29. Peter Rivita on Nov 13, 2008 said:

    Open a separate bank account and have money transferred into that. It sounds like it would be a lot cheaper / free. You’d even get interest!

30. Leon Poole on Nov 13, 2008 said:

    I agree with you on passing on Paypal fees to the client/customer. If you don’t pass on Paypal fees, your profit margins decrease considerably, especially over time. Paypal does work wonderfully for small startups, but for larger businesses it may be better to look at other merchant facilities.

    I think you should offer your customers/clients an alternative payment option in addition to Paypal, one that does not include Paypal like fees. (ie- Direct Deposit/Wire transfers.)

31. Arif on Nov 13, 2008 said:

    We actually have a full on Merchant account and gateway processor setup. We also prefer some pay with a credit card because the client may not have the funds available to write a check.

    That’s dicey…kind of sucks to have clients that can’t pay up, but if they have to charge it - at least we get paid for the time we put in. Even if we do lose out on 2.5%

    So, we don’t use paypal but rather the CC processing service through Quickbooks. The CC integration makes it easy to bill for recurring hosting, etc.

32. Mark Obcena on Nov 13, 2008 said:

    I’ve never really gotten payments other check and cash from my clients. And even though Paypal hasn’t caught on yet here in the Philippines, I’d probably still stick to the cash or check modes should that time come.

    What really bothers me when it comes to transfers like this is the lack of personal interaction. I believe one of the biggest selling points of a freelance designer or developer is the intimacy a client can get from working with a freelancer rather than say, a large design firm. I don’t know about you guys, but I feel lucky enough to have a more personal relationship with many of my clients. Sometimes I even think that when we do meetings for projects, we’re just sticking in the technical things within really social gatherings.

    When it’s time for payments, I take the time to go to the office myself and pick up the checks or the cash. And I just don’t go to the accounting department and sign papers–I go to my clients themselves, the men who run the business. I usually stay and chat for a while about how their business is going, how their new system is running, about current trends in business and in technology and sometimes, we even talk about how well school is going for me or how their daughter’s piano recital went.

    Some may argue that getting too personal with clients is too much of a bad thing. I don’t think so. Freelancers need to build a strong relationship with their clients, and getting to a more friendly level with them is certainly something important. It builds real trust and real knowledge of the people you’re working with. And the best bonus is that when these people start to know you on a much deeper basis, they start thinking of you as close friends or good acquaintances. And believe me, most of these people love to brag about their designer and developer friends to their other business friends. I must have gotten around three-fourths of all my projects just through referrals. And yes, I have stopped looking for projects since last year–they just keep coming.

    So when the time comes that my clients ask me if I want my payment wired through Paypal or whether they should put in an extra amount to cover the transfer expense, I’d probably just say, “Let’s just do lunch. My treat.”

    ^_^

33. walter wimberly on Nov 14, 2008 said:

    While I mainly receive checks as payment, I do occasionally accept paypal. I do a lot of work with businesses, and checks are a norm, not a paypal for my clients.

    I don’t charge the paypal fee however. It is a standard cost of doing business, just like the paper I print the invoice (if they want it mailed) the electricity to run my computer, etc. Every credit card clearinghouse is going to charge a fee (generally 1 to 3%), and rarely do other companies charge you for the convenience of paying by credit card. Since my grocery store, restaurants, etc. don’t charge this fee - I would be viewed as petty if I charged it, and risk losing customers.

    Instead, build it into your pricing scheme as part of the cost of doing business and call it done.

34. Cristhian Bedon on Nov 14, 2008 said:

    Unless doing work for charity or even volunteer work, you shouldn’t charge them, but other than that you should, your spending time doing work, why not get paid for your efforts.

35. Adam on Nov 14, 2008 said:

    While both credit card contracts, and paypal contracts stipulate that you may not charge to cover the fees for receipt of payment, the reality is that every company, freelance or retail actively considers the cost of the fees and increases the price of the product or service accordingly. You never line item a fee for paypal on an invoice, but you note to yourself to quote a 2-4% increase over your normal billing estimate.

36. maritess on Nov 14, 2008 said:

    I think it’s wrong to charge customer PayPal fee because it’s the option that the seller has provided as a pay method. Could any one suggest another method?

37. Josiah Jost | Siah Design (@siahdesign) on Nov 14, 2008 said:

    I personally do not charge the client PayPal fees.

    But if I’m concerned about the fees I’ll just up the invoice a percent or two. Client doesn’t have to know its for the PayPal fees and at the same time it helps me absorb costs.

38. Dainis Graveris on Nov 14, 2008 said:

    Very detailed analyze, I read already David Airey’s article, this article is like continue For this article I’ just listend for now, because I have no big experience using Paypal.

39. weblizzer on Nov 14, 2008 said:

    for me, i have different payment method, which i can receive a payment for my clients, and paypal is only 1 of the option. With my experience i’ve been encounter difficulties. for every payment. If you think that the customers pay 50% upon the start of the project and it pay for paypal it will deduct 3.5% and then once it complete it will deduct if you paid $500 you will dedecut $17.5 and for $100 you will lose $35, as for our country it is already a huge amount.

40. Ricardo on Nov 14, 2008 said:

    I don’t charge the Paypal fees to my clients.
    For me it doesn’t sound good to suggest the client: “You have to pay more because you pay via Paypal”.
    I prefer to absorb the fee and offer that extra payment option to my clients if they like to pay that way.
    It’s the cost of doing business online.

41. Lawrence Anderson on Nov 16, 2008 said:

    I think it definitely comes off as unprofessional when you start charging for PayPal fees. Just charge a little more in general to where losing 2-3% isn’t a problem.

42. Jacob Cass (@justcreative) on Nov 16, 2008 said:

    Thank you everyone for your opinions, help and feedback… rather than reply to each individual with generally the same answer I will post my broad reply below.

    Originally, before posting this article I used to include 3.5% in the quote / invoice however after reading the feedback left in this article, I have chosen not to show this fee (as it is against PayPal’s TOS) but rather include it into the price as a ‘hidden’ cost - aka just another cost of doing business. I also agree that round numbers look better rather than say $2120.55.

    Sean,
    Thank you for the link and clarifying PayPal’s TOS.

43. Brad Clark on Nov 20, 2008 said:

    Hey,

    just thought I would throw my hat in and mention Google Checkout…..its much cheaper than paypal and only acts as a transaction handler, i.e the money goes straight from the clients account into yours. The fee starts at 1% (so you could easily absorb the cost) - I see no problem for charging this to the customer, however, its incredibly common amongst most medium to small businesses, heck, most resteraunts, corner shops etc charge for credit card transactions, I agree that the client can choose how to pay, and yes whilst its more convenient for us, its also convenient for them else they wouldnt choose to pay that way?, I gladly pay transaction fees if it means i will get product quicker or can settle a debt asap.

    Just a warning, paypal is not covered by full UK (and many other coutries) financial laws as it is not counted as a financial institution like a bank etc and so they can do what they want when the want with your money, even deduct huge sums without telling you why!

    check out http://www.paypalsucks.com to read horror stories! (not scare mongering but just want to let you guys know that paypal is far from being an ethical and morally sound company).

    Take it easy.

    Brad

44. Kyle on Nov 22, 2008 said:

    Use paypal as your last option, offer check first and if they prefer paypal charge them the fee. If they don’t like it, they can use a check.

45. Jacob Cass (@justcreative) on Nov 22, 2008 said:

    Thank you Brad for information and the link.

46. Nathan on Dec 21, 2008 said:

    Hi Jacob

    I know this is a slightly older post but I felt compelled to respond since I very recently found myself in the exact situation.

    I usually do not accept credit cards for payment. I have several reasons, but they are irrelevant to this post.

    But recently I had a client who was overdue for a payment. I had become more than a bit agitated and it was a large sum, which I was specifically counting on for the holidays to buy for my family.

    Upon giving her my ultimatum, I caved in and said I’d accept a PayPal payment because I thought this would be an incentive if she could just charge it to her credit card and get it taken care of. She agreed to do it.

    When I factored in PayPal’s fees, they were quite high, and that was going to come right out of the money I was already owed. It just didn’t seem right.

    So I told her I would need to charge a 3% fee if she wanted to pay by PayPal. Otherwise, she could just send a check, as I’d asked her to do originally.

    She actually paid the 3% fee and didn’t even say a word about it.

    So in my opinion, it’s completely fair to charge a fee for credit cards because I am providing a convenience to them. If clients want to avoid fees, they can send a check.

    Here is another way I’ve rationalized this:

    If you’ve ever tried to pay your mortgage with a debit card, or your electric bill with a credit card, you were probably hit with a “transaction fee” for using plastic. Why? Because these companies are doing a service for you and now you owe them money. The pressure is on you to pay up.

    On the flip side, if you go to a store and buy a new shirt, you can use plastic and they won’t charge a penny. Why? Because the ball is in your court and they’re trying to make a sell. Besides, the prices are already marked up and that covers the credit card fees. Come on, that shirt didn’t really cost $50 to make.

    So when you’re the one providing the service, the ball is in your court and it’s completely fair to charge a fee to accept credit card payments. Remember, you offered the chance to pay by check for free. It’s their choice if they want to use plastic.

    Thanks for letting me share my input on this. I’m glad you brought up this topic.

47. Jacob Cass (@justcreative) on Dec 21, 2008 said:

    Thank you for your opinions Nathan…

48. Peter Landt on Jan 15, 2009 said:

    I accept credit card by paypal as a convenience option for my clients and will use the paypal fees as a late fee charge. I waive the charges if the invoice is paid within 30 days.

    However, depending on the client and the project, I will calculate what the fee would be and if it is more than a certain amount then I will absorb the cost into my quote. I do not discourage clients from using paypal in any way, which is the point being made in the TOS.

49. Allison on Mar 21, 2009 said:

    I am having the same problem over here. I offer clients to pay by check or PayPal. I don’t like having to add 3% if they want to pay by PayPal, but I don’t want to factor it into the total estimate initially (most of my clients pay by check).

    What exactly can I call the fee to make it legal? Can I say a “processing fee” for all online payments? My partner seems to think factoring the percentage in would be “hiding” the fees from the client, but I really disagree. Insight anyone?

50. Jacob Cass (@justcreative) on Mar 21, 2009 said:

    Hello Allison,
    You could just incorporate the fee when you do your quote at the start, just like you do your other costs of doing business (overheads). That way you don’t have to explain the processing fee, just like you don’t have to explain your other overheads if you get what I mean?

51. Webbielady (@webbieladycont) on Jul 26, 2009 said:

    That is not a problem to absorb the cost if one has really a business account and is really earning good time. But for those with personal non-business account, such as us bloggers who earn marginal amount, to charge us from receiving such small amounts like a few dollars, that really sucks!

52. Carl on Sep 14, 2009 said:

    Paypal suck, I hate paying other charges after I have already paid ebay commision, it costs me about $70 pr sale through ebay and Paypal. Being forced to offer paypal as a payment method is a clever business move but why do Paypal penalise the seller, charge the purchaser not the seller just like a CC company would.
    If your in business and Pay pal is a convenient payment method thats great , It’s a business expence , but not a business expence I’m willing to wear I can do business easly with out it, Paypal for me, you suck!

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