£5000 over 9 years overpaid to PayPal

By Chris Dawson November 2, 2012 - 12:42 am

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.

  • Simon Harris
    5 years ago

    Thanks for that, I had never heard of it – just did it and they approved me right away for a slightly lower rate! 🙂

  • superhands
    5 years ago

    I signed up for the merchant rate 2 years ago, only recently have I found that they did apply it for the 1st month but they removed the discount for the following 23 months,

    I didn’t think to check until recently, only to find they had been charging the 3.4% not the 2.9% as advertised, I have never dropped below the £1500.00 since May 2011, so have been overcharged by 0.5%, they have overcharged around £10 per month,

    Is there any point in chasing this up with paypal or am I wasting my time ?,

  • Dan
    5 years ago

    I think this is shocking!
    Just applied after two years trading & being charged 3.4% – Now down to 2.9%…

    This is terrible business ethics from a monopoly holder…

    Paypal should be legally obliged to implement their own rules

    A few people ‘in the know’ should not benefit by being ‘in the know’ at the expense of everyone else being ‘out of the know’!

  • 5 years ago

    Earlier in my career I was an Accountant in Industry. In Industry responsibilities are divided between various people. In most Businesses the Chief Accountant or more likely the Company Secretary would be responsible for ensuring that every Agreement and Contract was not only read but actioned. So if there were discounts available under a contract it was applied for.

    But most of our businesses are relatively small and probably do not have a Specialist “Company Secretary” or if we have a “Company Secretary” its nominally the wife. She is happy to sign things but does not have the Accountancy or Legal Training to do the job properly. Everybody else is working flat out on other jobs such as selling, packing, obtaining new stock etc. They just do not have the time to read through dozens of pages of “small print”. Yet if somebody did they would find these discounts or even the responsibilities the company has which it is not doing.

    It is to be regretted but the real answer is to employ a Company Secretary and they do not come cheap) with the right training and not just give the job title to the wife.

  • 5 years ago

    I remember being a naive bronze power seller in 2004 having just made $1K in sales the previous month and wondering why I was still being charged 2.9%. A few days later I figured it out and was only paying 2.2%.

    I guess things were different back then though since I clearly remember eBay and PayPal both making a huge deal about how their debit card’s 1.5% cash back made your PayPal fees only 0.7%. Completely misleading advertising but I guess it spread awareness of the merchant rate.

  • Toby
    5 years ago

    It makes you wonder when they’ve read the T&C’s & updates, which reference the Merchant rates

    • 5 years ago

      Perhaps Toby (whoever he is) should understand the subject before making wild statements.

      The fact that ALL the relevant factors were not shown in the original posting of this subject may encourage someone to jump in feet first with an uneducated comment, but it does them no credit whatsoever.

  • 5 years ago

    Since raising this issue, I feel I should make clear that it was not a case of ‘not checking’ the rates.

    Paypal showed clearly in their fees section what the various rates were for the different volumes of business processed each month. They clearly showed, as a statement of fact, that the rates charged were pre-set and and no point on that list of charges did it say the YOU had to apply once you went through any of the qualification levels.

    They did however point out that if your level dropped below any current level, they had the right to increase your fee level.

    For the more sophisticated thinker this clearly means that they are always monitoring these volumes in order to be aware of that downturn in your monthly volume, but have clearly also decided not to take the appropriate action when your volumes go above any threshold.

    Whilst I can understand the business logic in not ‘volunteering’ to point out that your fee paying clients are overpaying, it is (in the least) ethically wrong, and may even be legally wrong as an ‘unfair’ practice.

    I shall be testing this in a small claims court yo see if this kind of practice is still tolerated in these days of poor banking practices.

    • JD
      5 years ago

      @ Terry why not use the UK Financial Ombudsman Service?

    • 5 years ago

      thanks for that but I have tried that route and like most government bodies they really are toothless and could only suggest that I contact Luxembourg to raise the issue.

      As you will see in my follow up message about this post, there are many things that the original posting did not clarify so I have addressed at least some of them so people will have a clearer picture of how paypal operate.

      I imagine that the concept and design of displaying an unqualified rate of fees would result in at least tens of thousands of paypal users worldwide to assume that the varying rates displayed would be applied – and therefore generate potentially millions of pounds.

      They could of course avoided this ‘confusion’ if they had simply included a statement such as:

      Please note: these rates must be be applied for if your trading volumes exceed the band you are currently in

      but I expect they prefer not to!

  • Stuart
    5 years ago

    Interesting one this, I personally think it needs to something that is automatic, or at the very least an email to ask you to apply.

    I don’t know about anyone else but I don’t always have the time to check every detail of every form or invoice. Running your own business does take a lot of time, mainly on things that make no money! Things do get missed all the time and anyone that says otherwise must be lying!

    I think 9 years is pushing it a bit, for us it was about six months till we found out about this, from here if memory serves me!

  • 5 years ago

    And do remember that it applies to all transactions in an account so be sure to use the same account for all your websites/eBay shops. John

  • rick
    5 years ago

    DANS point of view is the only sensible and decent one, no excuse at all for Paypal, If there is a lower rate, it should automatically apply regardless. you dont need to do anything to pay the higher Rate?????

    • 5 years ago

      Perhaps for a Business account….

      … however playing devil’s advocate how about the private seller that is forced to upgrade to a premier account as someone pays them with a credit card funded source and doesn’t want the merchant rate as they’re a private seller and don’t want to become liable for tax?

      Admittedly I can’t see a private seller worrying about being classed as a “merchant” and thus being liable for tax, but it’s the only reason I can possibly think of for not wanting the lower rate.

  • rick
    5 years ago

    if your a private seller and you dont want the merchant rate Tough! stick to your day job

  • radroach
    5 years ago

    I suspect also that a significant number of sellers of lower value items are overpaying PayPal as a result of not being on the micropayments tariff.

  • fusion
    5 years ago

    What’s annoying is that I knew paypal offered discounts for higher turnover, but I never knew I had to apply for it. I seemed to be under the impression that having a business account constituted to a merchant account offering me this as a standard.

    Anyway, thanks for the info, I now save 1%

  • 5 years ago

    Please don’t slate me as I haven’t had time to read all the posts but when I read about this a year or two back the statement below led me to believe that once on the scheme you will AUTOMATICALLY be moved up or down the % scale without having to reapply to go up it.

    Maintaining your merchant rate
    After qualifying for merchant rate pricing, all members are expected to:

    Keep their PayPal account in good standing. Members may be downgraded to the Standard rate if a payment volume of more than £1,500.00 GBP is not maintained in the previous calendar month, or if they have unresolved chargebacks.

    Note: Members do not need to reapply for merchant rate pricing if payment volume drops below £1,500.00 GBP, unless their account is downgraded or if there are unresolved chargebacks.

  • JD
    5 years ago

    PayPal should be obliged to inform merchants whenever any rate change takes place, up or down.


  • elvis
    5 years ago

    Where can I actually see what paypal show my current rate as on their website?

    If I got a merchant rate previously, and then had a month off trading, would I need to re-apply for the merchant rate?

  • 5 years ago

    As the originator of this issue it is now beginning to become the GRAND issue that I always felt is should have been.

    Most commentators thought this was simply ‘daft’ that someone could have allowed this to happen. In my case is was any years, in most other hopefully it is much less – but in ALL cases it is an absolute disgrace that this seedy attitude to its fee paying customers was, and is still, allowed to continue without any ‘authority’ taking issue with it.

    Anyone wishing to examine what actions can be taken against this gross abuse, and the deliberate ‘overcharge’ to it’s customers when they clearly knew that a lower rate was applicable, should contact me directly.

    The sooner these type of companies are forced to act in a responsible manner towards their clients, the sooner this sleazy mentatlity will be eradicated.

    • 5 years ago


      If it is of any consolation, since we sent the email out today (and indeed since we published the article), we have been contacted by numerous eBay traders of varying vintage who were unaware of the PayPal Merchant Rate. They are grateful for the spur to apply. And we are grateful for the reminder.

      I am firmly of the belief that PayPal should be offering their best rates proactively and without application.

      That they aren’t feels very shabby indeed to me.



    • 5 years ago

      I thank you for your comments and clear understanding of what exactly PayPal are doing – by design. As I stated previously, the do monitor sales to see if someones volume drops below one of their cut off points, in order for them to charge a HIGHER fee on future transactions.

      This clearly means that they have CHOSEN not to take any action when a trader qaulifies for a LOWER fee – and that is what is scandalous.

      It was unfortunate that your colleague Chris did not have sufficient understanding of what was, and is, going on with PayPal policy.

      Instead of making a rather pompous comment about his ‘incredulity’ that someone could not realise this in 9 years, he would have been better taking PayPal to task.

      It did rather look like he was more interested in excusing PayPal for their policy, rather than seeing what the majority of the British public already know about greedy banking practices – but some people are clearly more concerned about this than others.

    • 5 years ago

      Just because I don’t think you are without fault (and still do think you should have checked the rates you were paying) that doesn’t mean that I don’t PayPal could make it easier for sellers to get discounts. That’s not a lack of understanding, it’s simply my view of the situation.

      There are two sides to every story but nonetheless we’re happy to have highlighted available discounts to those readers who didn’t know that there are savings to be made.

  • 5 years ago


    Just seen this post and was concerned that I was being overcharged. Just checked my account (took me a while to find the info – it is buried) and I am on the middle rate. I cannot recollect ever requesting it, so it seems it was automatic for me….


    • 5 years ago

      You must have clicked the link at some point in the past… but not only is it very unnoticeable it’s also very forgettable 😀

  • Alex
    5 years ago


    Very misinformative and irresponsible article.

    MAYBE YOU FORGOT TO MAKE CLEAR what being on the Merchant Rate means. That is: the £0.20p transaction fee on every payment is in addition to the % fee per transaction.

    Put simply, for sellers with an average payment value of under £20 (which is most sellers) the Merchant Rate WILL NOT SAVE A PENNY unless their monthly payments exceed £6,000 (very few sellers).

    I’m suprised (not!!) that no one else has commented on this!!

    As regards PP auto applying discounts, are you nuts? Do eBay (who own PayPal) ever do anything that benefits sellers if it reduces their income? Wake up guys, smell the coffee, eBay and PP is rigged and they don’t give a toss about us. They have us all by the balls and slowly tighten their grip untill they have screwed the last penny out of us!!

    We have all basically contributed to creating a monster that is now so large they don’t need to care about what a few informed (or mis-informed) people think. Do you think they care if a few leave? Many already have but far more have joined so they are always quids in. If fact, I expect they want the complainer to leave, after all they never listen or give any meaningful response to our concerns.

    It is what is is and its far too late now. Nothing will ever change for the better and they certainly don’t care about us.

    Suck it up or leave!!

    • 5 years ago

      I think you’re mistaken in thinking that you don’t pay 20p per transaction on the non-merchant rate.

      You do. I’ve just checked my PayPal account from 2004 prior to being eligible to apply for the PayPal merchant rate and on a £22.77 transaction it was 77p (3.4%) plus 20p for a total fee charged of 97p!

Recent Comments

2 hours ago
ian: what a fabtastic message sums up how i feel 100% (on a smaller scale) but im...
11 hours ago
Nasir Kothia: A fantastic event !! Proud to be a sponsor and look forward to exhibiting again next...
15 hours ago
Northumbrian: Get real folks Suck it up or work round it EBay's been doing this for decades Many have...
16 hours ago
Pawel: So basically there is no way we can make our listing looking better by having...