If you’re running your own business and receiving a majority of your payments via PayPal (or if you make so much money that even a minority is a lot of cash), then you need to know about something called PayPal’s Merchant Rate.

I first learned about this from Andy Kim, who wrote to the macsb mailing list with a link to an article similar to this one, by Nathaniel Brown. The bottom line? If you bring in more than $3000/month via PayPal, then you’re probably getting charged more than you need to for your transactions.

The basic rate for PayPal transactions in the US is 2.9% + $0.30. If you bring in more than $3000/month, that rate goes down to 2.5%, and if you bring in $10,000/month (lucky you!) the rate goes down to 2.2%.

PayPal’s rates are publicly disclosed, and it’s pretty obvious that the rate gets lower as you make more money. So why am I posting this? Why did Nathaniel post about it? Why did Andy send the link out to the mailing list? Because there’s one extremely annoying, extremely important gotcha: you have to ask for the discount in order to get it.

Yep, even if you’re bringing in $95,000/month, earning PayPal thousands in commissions, they will patiently charge you the maximum rate until you go out of your way to apply for your discount. And when you do, it only affects transactions from that point forward.

So if you make more than $3000/month from PayPal, chances are you’ve been getting ripped off for months or years, and don’t know it.

To apply for the discount, follow these “simple” steps:

1. Login to your business PayPal account.
2. Click the “Fees” link at the very bottom of the page.
3. Click the link in the fees schedule that says “1.9%-2.9% + 0.30”.
4. Find and click the link to “Apply” for merchant pricing.

If your experience is like mine, your application will be automatically approved based on your PayPal revenues from the last calendar month. Since the rate you get is determined rather crudely from those revenues, if you expect this month to be much better than last month, then you might wait until next month to make the application.

In any case, if you make more than $3000/month from PayPal, this is a very easy step that will save you $12/month (or much, much more) in fees. Enjoy!

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