Paypal: Driving Inflation Higher

Now and Then Premium Subscribers ask which I prefer, credit cards or Paypal, with the intention of using whatever costs me less. I’ve always appreciated the thought, and always said to use whichever works best for you, since by some weird coincidence, Paypal charged the same fees that card processors do — 2.9 percent of the total charged plus a 30-cent processing fee.

Thus, for a $10 payment they skim 59 cents off the top and deposit (after a short waiting period) $9.41 into my bank account.

Until now. Paypal waited until struggling businesses were just starting to come out of Covid slowdowns to raise their fees, to 3.49 percent plus a 49-cent processing fee, so now they’ll deposit $9.15 after skimming 85 cents, or a 44 percent increase in fees on that same $10 charge. I do get a lot of $10 payments.

Paypal has eighteen fee categories for merchants alone. They want to skim off the top whether you’re coming or going.

But doesn’t Paypal also deserve an increase due to the same inflation that’s hitting us all? Well, as businesses are forced to raise their prices Paypal is already getting more fees; this is on top of that. They already had an essentially inflation-proof business model.

So My New Answer to your kind question is whatever works for you …but I do now prefer plastic (credit or debit cards), not Paypal, which is putting the wrong kind of pressure on inflation.

So, what to DO? Nothing, really, unless you’re really mad at this, and then vote with your dollars. You’ll be doing online businesses, or, really, any business, a favor when you make Paypal your last choice for payments.

Meanwhile, despite my having a “rep” at Paypal, he’s completely unresponsive, which is why I’m still having trouble getting my account upgraded to properly report the amounts of payments on “Legacy” auto-renewing subscriptions. (Paypal will collect $10 and report that correctly, but it’s not coded correctly and my shopping cart will send a receipt for $9.) There is a fix, but it’s on their end.

Yet that “rep” contacts me constantly to “set up a call” so he can do what he’s really there to do: convince me to take out a loan from them at very high interest rates, since they know they can just skim my account to make the payments. Not interested, and never have been. (And that’s on top of the interstitial full-screen ad for such loans every time I log in there!) Yep: Paypal is interested in money, not service. To hell with ’em without a GOOHF card!

November 2022 Update

Since posting this, Paypal has lost a lot of money on my fees.

  • This April through October, payments were 42.7% Paypal, 50.8% plastic, and 6.5% other.
  • The same date range from last year? 50.8% Paypal, 38% plastic, and 11.2% other. Paypal has lost more money from readers switching to plastic than they have gained by raising the price. May it be similar at other sites: I definitely continue to encourage you to help small businesses by paying with plastic instead of Paypal.
  • And in all this time they still haven’t fixed things on their end to report to my shopping cart the actual dollar amount charged. Slap … their … forehead!

(Other includes not just checks, but also Patreon, which has also seen a lot of readers switch out to other methods. Patreon only accepts plastic.)

If You Want to Switch from an auto-renewing subscription you set up on Paypal, simply go into Paypal and cancel, which switches you to a regular (vs autorenew) subscription, and then I’ll send a renewal notice in plenty of time to set up a new subscription using a card. Thanks!

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16 Comments on “Paypal: Driving Inflation Higher

  1. I have heard horror stories about paypal.
    Here’s one…

    I deleted the link. Every company has horror stories posted somewhere (even mine above!) The problem is, that doesn’t mean it’s a universal experience, so rather than contribute to the anecdotal complaints, I’ll be sticking to comments of what happened with the person who comments, not “someone” out there. Thanks. -rc

  2. Since it gets you more bang for the buck, switching from PayPal. Good timing, was about to renew automatically anyhow!

    I’ll be keeping a count. Thanks for starting the trend. -rc

  3. I use to sell on eBay using PayPal years ago but now if I have anything to sell I use local sales methods and cash only. It actually worked better and I actually got to meet new friends. I only sold one item to a person in Nashville TN who was a friend of a friend and she mailed me the cash.

  4. I’ll be happy to switch from Paypal… as soon as I can figure out how. My aging brain would much appreciate a link, unless I should just go to PP and cancel, then start a new Premium subscription with the link I see here? Please advise.

    The problem is, there are several scenarios and it’s often hard to say which one applies. But yes, your suggestion is the easiest way: go into Paypal and cancel, which switches you to a regular (vs autorenew) subscription, and then I’ll send a renewal notice in plenty of time to set up a new subscription. Thanks! -rc

  5. ​It has been quite a while, but I seem to recall that the first I heard of PayPal was from you. You were extolling its virtues, because there was not going to be a charge to either the buyer or the seller. It was going to be making all of its money from interest on the money held between receiving a payment from the buyer and paying the seller.

    If my memory is close to accurate, they sure have changed. I will certainly be looking for other ways of making online payments.

    ​I don’t recall discussing their revenue model, but especially at the time it WAS a clever and useful idea. But like many successful companies they’re now all about growing at the expense of service, and they need to get a slap from users — which pretty much has to be a reduction in usage by those paying attention. Thanks for paying attention.​ -rc

  6. Sigh. I use PayPal for *everything* anywhere possible, because it saves me from having to track dozens of different websites that store credit card information and update all of them when I get a replacement card. Instead, I just update PayPal and a small handful of sites that don’t offer PayPal as a payment method. It also has the bonus of drastically reducing the number of sites that have my credit card info, which means I’m less exposed to a potential data breach.

    So now I have to weigh whether it’s worth sacrificing all of that to save people like you a little bit of money. Damn you PayPal.

    Yep. I do use a password vault to fill in card info (I’m currently favoring Bitwarden). I’ve actually not had any recent breaches even though my biz card gets used on a LOT of different sites. -rc

  7. A bummer on so many levels! I like using PP for several reasons, but this change of theirs throws a wrench into the works; many of my regular PP vendors are “little guys”. Any rumblings from the cc processors of similar increases?

    No, not that I’ve seen. When PP first announced this, I thought it was probably their way of trying to push the market up. Now that they’re the only ones with their heads above the sandbags, I’m hoping the Ukrainian snipers teach them a lesson. -rc

  8. I believe that they also make quite a bit on foreign currency exchange rates, offering lower than the market. If correct, then they are making money from both ends of the transaction, e.g. anything I buy from a U.S. site (including TRUE subscription) overcharges me and underpays them.

    I think I’ll buy shares.

  9. Per your suggestion to Jean in Boston, I’m cancelling my PayPal autopay.

    I’ll be looking for your renewal notice.

    Here are the steps I took (might be helpful for others):
    Login to PayPal in a browser;
    Tap the Menu icon (3 horizontal lines) in the upper left hand corner of the window;
    Tap the Settings icon (gear) at the top middle of the window;
    Pull the page down to expose the tabs at the top of the page;
    Touch the word PAYMENTS;
    Tap the button “Manage automatic payments”;
    Use the cancel button.

    Hope this helps anyone needing it.

    Thanks, George. You’re good to mid-December. -rc

  10. Not that I think PayPal isn’t trying to profit from the circumstances, but there is something else to ponder. With more people opting to do online business rather than visit brick and mortar, there is probably an increase in fraud and other things that would cost PayPal more money. Even people who don’t make good on their payments to PayPal and PayPal’s administrative costs rise. My bet is that the raise in rates more than cover the additional expense, but I also think that their cost is rising because of the change in circumstances. No excuse to get excessive profits from it, but some of it may be justified. Like some companies charging a fuel surcharge when the order is drop shipped from the manufacturer.

    I like that you thought about it, but I actually think it’s likely PP’s fraud costs are significantly lower than for the plastic sector, which isn’t raising rates (that I’ve seen). -rc

  11. Years ago when I moved out of the States I had a nightmarish time with my PayPal account and finally just let it die — they’d already left me out to dry with a bad eBay purchase (I was ripped off) and general run-around afterwards.

    Since then I’ve avoided PayPal as much as possible. I won’t sign up for a new account with them and if there is another option, I don’t use PayPal. Their customer service is horrifically bad.

    Some folks have said, “Oh, but you haven’t used them in years, they might have improved!” Well, for several years I worked part-time for a tiny company (it was basically my boss’s family and me) doing customer service and billing… and we used PayPal. And it was just as bad to deal with from the company side as it was from the customer side. And the most common questions I got were all along the lines of, “Do I have to get a PayPal account to pay for this?” “Do you have any other option than PayPal?” “Can I pay a deposit and pay the rest in cash later? I really don’t want to use PayPal.” You can see where this went. And we had all sorts of problems and there were several times where my boss had to just handle the damage himself when PayPal screwed up.

    He finally got fed up because as the company grew PayPal was really chewing on his profits while giving him worse customer service and more pressure for “additional services.” This probably all sounds way too familiar to you, Randy!

    The pandemic made a mess of things and business shrank, and now I’m waiting and hoping I get a call from my old boss saying business has picked back up and I’ll be needed next winter. But right before that we had started looking into another service. PayPal got where it is because it was one of the first, definitely not one of the best. It’s too easy for things to go wrong and then the business or the customer, often BOTH, suffer for PayPal’s absolutely awful customer service. It’s almost shameful.

    And then they want more money. How about they invest some of that money into some REAL customer service first?

  12. It’s also worth noting that Ebay and Paypal got a divorce recently. What a shame that Paypal has decided to be greedy.

    Depends on what you mean by “recent”: eBay spun Paypal off in 2015 (after buying it in 2002). In 2018, eBay announced that they would replace PayPal as its primary payments provider with Netherlands-based start-up Adyen, though PayPal would remain an acceptable payment option. -rc

  13. Our local municipality offers the option of paying property taxes via PayPal, BUT they charge you 3% for doing so. Most property tax bills are in the thousands of dollars, so we just mail them a check. That postage stamp only costs 55 cents, thank you very much!

  14. I did pay with PayPal. I figured there was a fee somewhere. CC companys and PayPal don’t do if for love. Added $10 to help with expenses. My Plumber did a large job for me, over $1500. On jobs that large there is a fee based on the CC fee. Somebody has to pay and vendors cannot keep getting nailed. Thank you, glad to know this.

    I appreciate your thoughtfulness in adding extra to cover fees. -rc


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