Are PayPal fees really a simple $0.30 plus 2.9%?
In practice, when donations are small, at least with my account, PayPal shows that PayPal takes between 3.5% and 29% of each transaction. See:
Here’s the math on that table.
| date | gross | fee | net | overhead as % |
|---|---|---|---|---|
| 6/16/24 | 5 | 0.71 | 4.29 | 14.20% |
| 6/15/24 | 50 | 1.94 | 48.06 | 3.88% |
| 6/15/24 | 2 | 0.58 | 1.42 | 29.00% |
| 6/12/24 | 37 | 2.11 | 34.89 | 5.70% |
| 6/11/24 | 4.88 | 0.70 | 4.18 | 14.34% |
| 6/2/24 | 10 | 0.93 | 9.07 | 9.30% |
Only one of those transactions had a fee under 5.7%. And 2/3 of them had fees of 9% or higher.
How can that be? Extra fees! International payments have a whole nother set of fees that almost nobody pays attention to, other than PayPal of course. PayPal certainly doesn’t advertize this when you decide to make a donation via a PayPal button and the receiver is in another country.
Would you like 10-15% of your donations to go to supporting PayPal rather than the entity you are actually trying to give money to?
Imagine the entity you give money to also uses PayPal to make donations to others, and similar fees apply there. If the payments are of similar sizes, one can estimate the total PayPal cut by simply doubling all the numbers in the table above. In reality, it isn’t that simple, because PayPal’s cut will go down with each future transaction because the amount of money PayPal does not already have has gone down, so you might think doubling is unfair. But it turns out, because part of PayPal’s fees are fixed and not proportional to the transaction, doubling is actually not as severe as what actually happens.
Further, imagine the second entity also uses PayPal to donate to a yet third entity. If you repeat this process a handful of times, at the real-life rates shown in the above table, nearly all of the money ends up with PayPal, and almost none of it will remains for any of those outside of PayPal.
The only way to avoid this financial death spiral is to not use PayPal for “small” (say, less than $100 USD) transactions, and not to make the payments across national borders.
The other way to avoid the financial drain is to avoid using PayPal and instead use something like https://venmo.com/ or https://www.zellepay.com/ , which have literally zero fees on most transactions. Can you imagine? If you want to give $5 to your friend electronically, if you use such services, the friend receives 100% of your $5! Of course, there are a lot more restrictions with who you can give money to, but if you can use these services, you can give a full 100% to your friends. Imagine that! You can slip your buddy a fiver without some Bogey popping up, reaching over and saying, “Not so fast, I’ll take $0.65 of that, thank you very much.”