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PayPal Raises Fees 32 Percent for Some Merchants

PayPal is raising fees by up to 32% with the elimination of volume discounts. Sellers on eBay are particularly hit hard as the marketplace limits which payment methods they can offer for eBay transactions – and eBay just revealed yesterday it will no longer accept ProPay or Skrill, leaving many sellers in a tight spot.

In a letter to merchants on Thursday, PayPal called the elimination of discounts a “simplification” of fees, but sellers don’t see it that way. One seller wrote, “”Simplifying” fees=”increasing” prices. PayPal and eBay are great at redefining the meanings of words.” That seller believes it’s only the beginning – “This increase will be the precursor to “simplifying” the rates for us common folk,” they wrote.

Currently PayPal charges 2.9% + $0.30 per transaction; those with over $3,000 in monthly sales volume receive a rate of 2.5% plus 30 cents per transaction, and those with monthly sales over $10,000 receive a rate of 2.2% plus 30 cents per transaction.

Those rates have been in place since 2004.

To put it into perspective, the move will cost sellers who process $10,000/month through PayPal an extra $70 a month (and the more they process, the more extra fees it will cost them). Those who process exactly $3,000/month will pay an extra $12/month in fees.

The surprise move by PayPal would be comparable to UPS or FedEx eliminating volume discounts. We’ve asked PayPal if any companies would be exempt – for example, we asked, “To be clear, a company like The Home Depot (or other very large merchants) will have to pay the 2.9% plus 30-cent fees?” (We’ll update the story when we receive an answer.)

Sellers are discussing the change on the eBay boards, such as this thread, and EcommerceBytes is receiving many emails from sellers who say the PayPal fee increase along with the elimination of PayPal competitors will have a severe impact on their business.

One seller wrote, “Since PayPal is branching off and becoming a separate company, Paymate shut down some time ago also. Can’t do checks or money orders any more like we used to. Propay and Skrill are being discontinued by eBay. And now with this shocker what are we supposed to do for payments on eBay??”

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.