Recently Paypal once again announced they will raise transaction fees. They also changed their Terms of Service in a way that you as a merchant are more liable for your customers antics, making it easier for them to charge you when trouble arrises (which should occur rarely, if ever. But still, not cool!).
By my calculations many transactions will end up costing almost double compared to earlier this year.
If you use WordPress with WooCommerce as your sales platform not all is lost though. You can easily lessen this costly burden and keep your business afloat more easy. With a simple plugin I’ve created. Read on for more information!
Doubling fees and higher exchange rates
As a merchant, you are probably aware that Paypal divides the world in 4 general areas; Europe I (mainly EU countries), Europe II (rest of Europe), USA/Canada and “rest of the world”. Each of these areas have their own fees and restrictions set by PayPal.
This has always been the case. But recently Paypal raised a lot of those fees. For most of my transactions the 1% added fee doubled to 2%. And for some a 0.5% fee quadrupled to 2%. Which doesn’t sound like much. But ask any smaller E-commerce site or developer, and they will agree that those extra euros (or whatever your currency is) count and can make all the difference on their revenue.
PayPal also changed how their base fee works. In the old days merchants would pay €0.35 per transaction. That’s still there. But now when a customer wants a refund, you don’t get that 35 cents back. Paypal keeps it, because… Reasons.
This, on a yearly base, may significantly raise your transaction costs. In exchange for no extra gain from PayPal. This means that smaller businesses have less revenue, which ultimately may mean they can’t stay in business anymore.
Some math
Imagine you’re in the European Union, selling things online and you have Merchant rates at the 2nd tier (Like I usually have). Now also imagine you’re selling a €10 product to people from all over the world. Forget about shipping and such, just think about the PayPal side of things.
For same country transactions where the buyer pays in Euros:
€10 - (€0.35 + 2.9%)
Simple enough.
For Europe where the buyer pays in Euros:
€10 - (€0.35 + 2.9% + 0.5%)
Again, simple, this includes most European customers. But notice there is suddenly an extra 0,5%.
But now it gets a bit more tricky.
For the rest of the world – Including some parts of Europe where the buyer pays in their local currency, North American buyers paying in dollars and from “the rest of the world” using their local currency:
€10 - (€0.35 + 2.9% + 2% + (variable exchange rate + 2.5%))
And again higher fees – An extra 2% fee and exchange rate. It quickly adds up.
Notice how this sum strongly favours local buyers. But that aside. PayPal now adds a up-to 2% premium plus hefty exchange rates for everyone except people in the same country as you.
If you haven’t applied for Merchant Rates, do so right after reading this article. It’s free and gets you cheaper transaction fees the more you sell. Every merchant should use it!
How to lessen the burden of transaction fees
The simple solution as a merchant is to stop using Paypal. But if you think about it, it’s not all that simple. Signing up for competing services is a massive hassle. Bank transfers are slow and sometimes costly. Plus, in comparison, almost nobody uses competing payment services while many people use PayPal as their preferred method. This means that if you do not use PayPal you’re missing out on a huge chunk of sales. Making PayPal an essential tool for businesses.
Then, how to deal with this? You’ve probably guessed it from the title. Add a surcharge to PayPal transactions.
To do so I’ve created a handy plugin. This can be seen as a handling fee if you will. I’ve been using it on this website for a few weeks now – Everyone who wants to pay with PayPal, pays a 5% surcharge. Simple as that.
If you’re tired of paying for PayPal as well, or you simply don’t agree with their services. Why not let your customers pay for it. After-all, they insist on using it. With the plugin you can set up a fixed amount or a percentage amount from the WooCommerce dashboard in seconds.
Take a look at the plugin, including some screenshots, here: PayPal Surcharge for WooCommerce.
And don’t forget to apply for merchant rates from your account, lower transaction fees is always good!
* PayPal price charts, fees vary per region and account. The above examples are based on the Dutch user agreement my account adheres to. Your fees for PayPal may differ.
