£5000 over 9 years overpaid to PayPal

Last week we received an email at Tamebay HQ from a retailer claiming that PayPal had been overcharging them for nine years to the tune of some £5000 or so.

It would appear that it’s true, although “PayPal overcharging” might arguably be described as “oversight” on the part of the retailer. When you sign up to PayPal you’ll be on their standard rate for receiving payments for goods and services which is is 3.4% (plus 20p per transaction).

PayPal Merchant Rate

If you receive more than £1,500.00 GBP per month, you’re eligible to apply for PayPal’s Merchant Rate, which lowers your fees as your sales volume increases in fee tranches of 2.9%, 2.4%, 1.9% ending up at 1.4% if your payment volume is more than £55,000 per month.

The snag here is that you can’t qualify for PayPal’s lower Merchant Rates until you’ve traded £1500,00 in the last month. That means you’ve got to remember to go back to PayPal and click a button or you’ll remain on PayPal’s standard rates. Once you’ve applied for the Merchant Rate, even if you drop below, as soon as you rise above £1500 your fees will drop again.

Tamebay Opinion

Dan and I chatted about this and we had two differing opinions, though we both think the other has a point:

Chris’ thoughts

My first reaction was incredulity that someone could trade on PayPal for nine years and have never heard of the Merchant Discount Rate. I can understand not applying straight away, I recall kicking myself after three months of trading because I forgot to apply for it, but that was only two months after I was first eligible. However nine years not to have realised there was a discount to be had is a long time.

I’m a big believer in reading User Agreements and as a business I think it’s more incumbent of us to ensure we know what contracts we’ve agreed to. Certainly I like to keep an eye on costs, and PayPal have had plenty of fee changes over the years, albeit mainly for International transactions, but also recently in keeping the 20p when a transaction is refunded.

Whether it be eBay fees (when did you last check you’re on the best level eBay shop for your business?), PayPal fees, Courier Fees, Postage costs, bank fees, or simply the rent on your warehouse it’s hard to fathom a business running for nine years without bothering to check how much they were paying in PayPal fees.

Dan’s thoughts

Why don’t PayPal proactively help eBay merchants get the best PayPal rate they are eligible for? If it was greed, they wouldn’t have the rate at all. It’s just laziness. I think PayPal should let merchants know, in good faith, that a) the rate exists b) they should apply and c) what the benefits are. Yes, the seller in question here has shown a lack of curiosity, but that isn’t in itself a sin.

In my opinion, PayPal has been remiss though, maybe even deliberately concealing. I would encourage the merchant to contact the FSA and raise a complaint. It might not get anywhere, but it might publicise the issue

How many other sellers aren’t getting PayPal’s best rate, despite being eligible?

Check your own PayPal fees and apply for the discount

Dan and I are in 100% agreement here. It’s up to a business to check that they’re on the best deal. If you’re paying for any service it’s worth checking around to see if a better deal is available. We also agree PayPal make it harder than is necessary to qualify for the Merchant Fees. We can think of no reason why a merchant wouldn’t want to access merchant fees and get a discount.

If you’re not already on them you can apply to access PayPal’s Merchant Rate on the PayPal site. If you don’t qualify you’ll need to reapply in 30 days time.