PayPal charges different fees depending on how you use it, and credit card companies charge PayPal a percentage of every transaction
PayPal's fee structure depends on whether you are sending money to friends, receiving payment for goods or services, or using PayPal as a payment method at checkout. When you use a credit card to fund a PayPal payment, you pay PayPal's transaction fee plus the credit card company's processing fee — which means the total cost is higher than if you funded PayPal from a bank account. The person receiving the money also pays a fee in most cases, which comes out of what they get.
Understanding which fee applies to your situation matters because the difference between sending money one way versus another can be several dollars on a single transaction. A $100 payment can cost you $3.20 or $0.30 depending on the method you choose.
Key Takeaways
- Sending money to friends through PayPal costs nothing if you use a bank account or PayPal balance, but costs 2.2% plus $0.30 if you use a credit or debit card.
- Receiving payment for goods or services costs the recipient 2.29% plus $0.30 when paid by credit card, or 1.49% plus $0.30 when paid by bank transfer.
- Using PayPal at online checkout typically costs the merchant 2.99% plus $0.30 per transaction, which they may pass to you as a higher price.
- Credit card companies charge PayPal an interchange fee (usually 1.5% to 3%) for processing card payments, which PayPal includes in its fees to you.
- The cheapest way to move money through PayPal is from bank account to bank account, which has no fee for the sender.
PayPal fees when you send money to someone
The fee you pay depends on whether you are sending money as a personal transfer or as a payment for goods and services. Personal transfers — sending money to a friend or family member — cost nothing if you use your PayPal balance or a linked bank account. If you use a credit card or debit card to fund the transfer, PayPal charges 2.2% of the amount plus $0.30.
Payments for goods or services cost the sender nothing, but the person receiving the money pays a fee. That fee is 2.29% plus $0.30 if they were paid by credit card, or 1.49% plus $0.30 if they were paid by bank transfer. The recipient sees the fee deducted from what lands in their account.
This structure means that if you send $100 to a friend using a credit card, you pay $2.50 out of pocket. If your friend receives $100 as payment for something they sold you, they receive $97.71 if you paid by credit card, or $98.51 if you paid by bank transfer.
Credit card fees PayPal pays and passes to you
Every time someone pays PayPal with a credit card, the credit card company (Visa, Mastercard, American Express, or Discover) charges PayPal an interchange fee. This fee is a percentage of the transaction, typically between 1.5% and 3%, depending on the card type and the merchant category. PayPal includes this cost in the fees it charges you.
When you use a credit card to send money through PayPal, you are paying for both PayPal's processing cost and the credit card company's interchange fee. That is why credit card funding costs more than bank account funding — the bank transfer does not trigger an interchange fee because it is not a credit card transaction.
Merchants who accept PayPal at checkout also pay these interchange fees as part of their transaction cost. Some merchants build this cost into their prices, so you may be paying the fee indirectly even if you do not see it labeled separately.
PayPal checkout fees for online purchases
When you use PayPal as a payment method at an online store, the merchant pays a fee, not you directly. The standard PayPal Checkout fee is 2.99% plus $0.30 per transaction. Some merchants negotiate lower rates if they process high volume, but most small businesses pay close to this amount.
Because merchants pay this fee, they often factor it into their prices. A store might charge $5 more for an item if customers pay with PayPal than if they pay with a debit card, because the PayPal fee costs them money. You do not see the fee on your receipt, but you may see it reflected in the price you pay.
PayPal also offers a PayPal Credit option at checkout, which is a line of credit separate from your PayPal account. If you use PayPal Credit, the merchant still pays the standard checkout fee, and you may pay interest on the credit line depending on the promotional offer.
How credit card rewards interact with PayPal fees
If you use a credit card to fund a PayPal transfer, you may earn rewards on that transaction — but the fee you pay to PayPal is usually larger than the rewards you earn back. A credit card that gives 1% cash back on all purchases would earn you $1 on a $100 transfer, but PayPal would charge you $2.50, leaving you $1.50 in the negative.
The math works differently if you use PayPal at checkout with a rewards credit card. The merchant pays PayPal's fee, not you, so you only earn the rewards on the purchase price. A 2% cash back card would earn you $2 on a $100 purchase, and you would not pay PayPal's fee directly. However, the merchant may have raised the price to cover their PayPal costs, so the rewards may not fully offset the hidden fee.
If your goal is to move money between people or accounts, using a credit card through PayPal is almost never the cheapest option, even with rewards. Bank account transfers or direct transfers between accounts cost less.
Comparing PayPal to other payment methods
PayPal is not the only way to send money or pay online, and the fees vary significantly by method. A bank transfer through your own bank costs nothing and takes one to three business days. A wire transfer costs $15 to $30 and arrives the same day. Venmo, which is owned by PayPal, charges no fee for bank transfers but charges 1.75% plus $0.25 for credit card transfers — slightly less than PayPal's 2.2% plus $0.30.
Square Cash and other peer-to-peer payment apps have similar structures: free for bank transfers, a percentage fee for card transfers. For online checkout, Stripe and Square charge merchants 2.9% plus $0.30, which is close to PayPal's rate. The difference between payment processors is usually small enough that merchant choice, not fee comparison, determines which one you use at checkout.
If you are sending money to someone you trust and both of you have bank accounts, a direct bank transfer or ACH transfer costs nothing and avoids all fees. PayPal is most useful when the other person does not have a bank account linked to a payment app, or when you need the transaction recorded and documented.
Reducing PayPal fees in your business or personal use
If you receive money through PayPal regularly, you can reduce fees by asking people to pay you through bank transfer instead of credit card. A $1,000 payment by credit card costs you $23.90 in fees; the same payment by bank transfer costs you $14.90. Over a year, this difference adds up.
For personal transfers, always use your PayPal balance or a linked bank account rather than a credit card. The fee difference is 2.2% plus $0.30 versus nothing, which is significant on amounts over $50.
If you run a small business and accept PayPal, you have limited control over the fee rate unless you process very high volume. You can, however, pass the fee to customers by charging a small surcharge for PayPal payments, or by offering a discount for bank transfer or other lower-cost methods. Some businesses absorb the fee as a cost of doing business and include it in their prices.
Frequently Asked Questions
Do I pay a fee if I send money to a friend through PayPal?
No fee if you use your PayPal balance or a linked bank account. If you use a credit or debit card, PayPal charges 2.2% plus $0.30. Your friend receives the full amount with no fee deducted.
Why does PayPal charge more for credit card transfers than bank transfers?
Credit card companies charge PayPal an interchange fee (1.5% to 3%) for processing the card. PayPal includes this cost in what it charges you. Bank transfers do not trigger an interchange fee, so PayPal's cost is lower and it passes that savings to you.
If I use PayPal at checkout, do I pay the fee?
No, the merchant pays PayPal's fee directly. However, merchants often factor this cost into their prices, so you may pay it indirectly through a higher purchase price compared to other payment methods.
Can I avoid PayPal fees by using a rewards credit card?
Not usually. A 1% rewards card earns $1 on a $100 transfer, but PayPal charges $2.50, leaving you $1.50 worse off. Rewards only offset fees if the merchant is paying the fee, not you.
What is the cheapest way to send money through PayPal?
Bank account to bank account with no fee for the sender. The recipient pays 1.49% plus $0.30 if they receive it as a goods-and-services payment, or nothing if it is a personal transfer to their PayPal balance.