Saturday, February 26, 2011

PayPal Micropayments

I just heard about PayPal Micropayments for the first time, and I wanted to pass along the info. to anyone else who hasn't heard of it and who might benefit from it.

As you know, you are charged fees by PayPal every time you collect money from a customer. (This is in addition to Etsy and eBay listing and final value fees, etc.). Normally PayPal charges you 2.9% of the total amount of money you collect per transaction (including money you collect for shipping) + 30 cents per transaction. That can really add up if you do a lot of volume, and while it doesn't seem too outrageous, it can hurt if you sell a lot of low-dollar items (like I do)!

With Micropayment fees, you are charged 5% of the total amount of money you collect plus only 5 cents for every transaction. That's quite a bit of savings when you have a lot of transactions under $10.00...but not so great when you are selling more expensive items.

I took a look at my sales and found that 70% of my transactions this year have been under $10.00. After doing some math, I decided that Micropayments might be worth a try for me. I do have situations where people buy 7 or 8 listings of yarn from me at once, and in that case, the old PayPal fee schedule is best, but you have to choose one or the other. Besides, if someone buys $50.00 worth of stuff from me at once, I won't fret over the extra couple bucks (give or take) that I might lose on that transaction. I'll make up for it with all the 20-30 cent savings on my lower priced sales.

It's my understanding that once you switch over to the Micropayment fee schedule, that you are stuck with it for 6 months, so if you decide to try it, do the math and make sure you can live with it for that long!

Note: (added March 4th) - I signed up and PayPal informed that I could go back to the old fee schedule anytime, but I'd check to make sure if you decide to do this...

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