Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Sat June 19 2021 12:03:54

PayPal Raises Rates and Offers Chargeback Protection for a Fee

By: Ina Steiner

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PayPal is raising rates in August and is offering an optional chargeback protection service for an additional fee. Sellers of low-priced goods will feel a greater impact from the rate hike. (A seller processing a $7 transaction will see a fee increase of 46%, while a seller processing a $100 transaction will see a fee increase of 24%.)

Sellers currently pay 2.9% plus 30 cents per transaction to process a payment through PayPal. The company announced on Friday it's raising rates in August to 3.49% plus 49 cents per transaction.

For a $25 item, sellers who currently pay PayPal 2.9% plus 30 cents, or $1.03, would pay $1.36 under the new fee structure - a difference of 33 cents, which in this case, is a rate increase of 32%. 

This directly impacts sellers' profit margin. Another way of looking at the impact of the higher rates on a $25 sale - currently sellers pay a fee equal to 4.1% of the item's selling price; in August, that will rise to 5.4%.

As sellers understand all too well, the sale of a $25 item generally incurs higher payment-processing fees since companies like PayPal charge fees on the *total* transaction amount - including sales tax and shipping charges. 

To see how the impact of the new fees varies depending on the transaction amount: 

- A $7 transaction now costs a seller 50 cents in PayPal fees, in August they will pay 73 cents, a difference of 23 cents, which is a 46% increase in payment processing costs.

- A $100 transaction now costs a seller $3.20 in PayPal fees. In August, they will pay $3.98, an extra 78 cents, which is an increase of 24%.

That's our back-of-the-envelope jottings - we'd like to hear from sellers about the impact it will have on their business.

Could PayPal's decision to raise rates be part of its risk mitigation strategy as the pandemic increases online buying and selling - and as PayPal forays into cryptocurrency? (Generally speaking, buyers choose which method they fund their payments, but sellers pay the payment processing fees.)

PayPal didn't say that in its announcement: it said it was better aligning its pricing with the value that its products and services provide, and stated the following:

"By investing in our data analytics capabilities, the improvement of our fraud tools, and the new consumer experiences we are delivering with products like Buy Now and Pay Later, Pay with Rewards Points, and Checkout with crypto."

The announcement also describes other fees that are changing, and sellers will want to delve into the details for themselves.

As far as the chargeback protection, here's a section from the PayPal FAQs:

What is Chargeback Protection and how can I get it?
Chargeback Protection is a fully managed risk solution that helps to reduce loss liability by offloading fraud analysis to PayPal. Starting August 2, 2021, merchants will be able to enroll* from within their account through the Manage Risk tab. After you enroll, if a chargeback occurs, PayPal will refund the disputed amount on eligible transactions. (Subject to additional fees). 

*Merchants can enroll in Chargeback Protection from within their PayPal account. Merchants simply need to click on the 'Manage Risk' tab at the top of the page and select Chargeback Protection. Terms apply.

Will you consider enrolling in Chargeback Protection?

And, will you be raising prices, or will you absorb the higher fees?



Comments (23) | Leave Comment | Permalink

Readers Comments

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Silver Ice King This user has validated their user name.

Sat Jun 19 13:30:57 2021

I already have a stripe account and can seem myself moving more and more of my business to that option as I feel this increase is truly being made because of losing Ebays business and getting into the cryptocurrency business.  I will admit I have truly enjoyed the ease of using Paypal but personally I feel that is to hefty of an increase to shove on Sellers all at once, especially the increase of almost 50% on the transaction fees.  If I have to use Paypal I will definitely pass the increased cost on to the customer, but will now offer the use of Stripe as my first payment option.

Any ideas how soon Ebay suddenly matches or comes very close to matching this price increase?  They never have an original idea, at least not any that are worth their weight in salt, but with desperation having set in with them I look for Mangled Payments to have a similar announcement very shortly.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

This user has validated their user name. by: Rexford

Sat Jun 19 13:55:21 2021

Looks like a certain company is trying to make up for the losses that they encountered when eBay moved to Managed Payments.

ALWAYS on the backs of sellers.

I will not pay PayPal one red time for chargeback protection and I will raise my fees for any transaction associated with PayPal.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

This user has validated their user name. by: The End

Sat Jun 19 14:24:50 2021

Dump PayPal IMMEDIATELY !
NO EXCUSES. (WAH, I have PayPal money to spend, BLAH BLAH BLAH....)
BAIL OUT.
It is a wholey UNnecessary third wheel.
The credit card company is the chief arbitrator.
Can't peddle on Ebay without PayPal ?
LEAVE EBAY.
My business is Through the ROOF > NO PAYPAL !
My own website is SMOKIN' .
Never had a Summer so good  :o)

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: ShortSeller This user has validated their user name.

Sat Jun 19 17:17:30 2021

Paypal has always offloaded fraud analysis to themselves for any transaction where you are using their payment gateway. What a crock of shit.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Vigilant Eye On eBay This user has validated their user name.

Sat Jun 19 18:09:39 2021

The impact will be negligible because I no longer sell products on eBay, the majority of my customer orders are over $100.00, and my domestic orders are shipped for free, once the aforementioned figure has been reached.

As long as my average selling costs for sales do not exceed fifteen percent, I have nothing to gripe about.

On the other hand, once the cost of PayPal's rate increase is passed down to eBay sellers (i.e., whether or not buyers use PayPal as their payment method), they are certainly going to feel the pain.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Vigilant Eye On eBay This user has validated their user name.

Sat Jun 19 18:20:16 2021

Having established extremely strict risk management policies (i.e., in order to deal with troublesome eBay buyers) many moons ago, given that I have never had a charge-back in the twenty or so years that I have been using PayPal, there is no compelling reason for me to opt into their Charge-Back Protection Service.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Vigilant Eye On eBay This user has validated their user name.

Sat Jun 19 18:51:50 2021

Upon reviewing the June 18, 2021 Upcoming Changes for Some US Businesses posted in the PayPal Newsroom that Ina kindly provided a link to, I suddenly realized the my fees will actually decrease if not opted into Charge-Back Protection, or very negliably increase if opted in.

How is this possible?

''Credit and Debit Card payments:  Online credit and debit card transactions will be 2.59% + $0.491 per transaction without Chargeback Protection, or 2.99% + $0.49 with Chargeback Protection.''

Rather than signing up for, or using a PayPal account, with PayPal setup as my sole payment gateway, the majority of my customers checkout using a credit or debit card.

In addition, it appears that the in person payment rates might also be lower, or nearly unchanged.

''In-person Payments: For PayPal and Venmo QR code transactions over $10, the rate will be 1.90% + $0.10, and for such transactions $10 and under, the rate will be 2.40% + $0.05. For certain in-person debit and credit transactions the rate will be 2.29% + $0.09.''

The large fee increase is for PayPal Digital Payments (e.g., PayPal Checkout, Pay with Venmo, PayPal Credit, Pay in 4, PayPal Pay with Rewards, Checkout with crypto).

''PayPal Digital Payments: For PayPal payment products (such as PayPal Checkout, Pay with Venmo, PayPal Credit, Pay in 4, PayPal Pay with Rewards, Checkout with crypto), which include Seller Protection on eligible transactions, the rate for online transactions will be 3.49% + $0.491 per transaction.''

The rate increase includes Seller Protection, which apparently cannot be opted out of.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

This user has validated their user name. by: Covid-20

Sat Jun 19 21:31:31 2021

@THE END
i have to say, Everything you stated. . . .   is 100% accurate.  
Can't survive on Ebay without paypal? That's right.  Get off of it.  
Same thing with manged payments.  i wasn't submitting.  See ya.

As for a website, I am in the same situation.  Business is FAR beyond Ebay.  
IF YOU HAVE  A SALEABLE PRODUCT . . .  You will do just fine!

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: pace306 This user has validated their user name.

Sat Jun 19 22:00:46 2021

My question is - who needs Paypal in 2021?

Maybe someone who has their own website has a good answer ?

If you are on eBay - chances are you already are in MP - so you "dont need the pigs"

If you have your own site - you can get Stripe (not pigs ... yet)

So what does anyone need Paypal for?

I have an account still (goes back to 1998), and all its good for is eBay trying to pull money for shipping corrections - which all turn out to be in my favor (funny how when I argue/fight them suddenly Im right).

They are just using smaller sellers to fund their operations/eat losses from somewhere else ... DUMP THEM, they are the horse and buggy of the automobile era.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: shut1968 This user has validated their user name.

Sun Jun 20 04:27:22 2021

Seems more like another dig at Ebay for switching to managed payments since most people still use PayPal to pay for stuff on Ebay..

Wonder how long it will be before we get an announcement from Ebay that they are blocking PayPal from being a payment processor on the site and force credit/debit cards...

You know it's coming.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Shanna This user has validated their user name.

Sun Jun 20 09:36:25 2021

Please note large users, like Walmart and Home Depot, already pay less than the standard due to large volume, probably as low as 0.9%. Ebay has to still be Paypal largest user, so they are paying no more than the 0.9%. So when they charge sellers 2.9%, they are still making money on the transaction. For eBay to try and pass this increase onto sellers will be a sham.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: RL15 This user has validated their user name.

Sun Jun 20 17:21:32 2021

@Shanna

"For eBay to try and pass this increase onto sellers will be a sham."

Everything the walmart dopes do is a sham. So, be prepared for the increase.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

This user has validated their user name. by: RKTOYS

Sun Jun 20 18:40:40 2021

PayPal is over for me as soon as eBay shuts me out.  I have only ever used it when I was forced to by eBay.  Any time I have a choice, there are better options including cash.  Considering the clowns in Congress were already planning to attack me in 2022, I already made the decision to avoid these middleman "services."

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Silver Ice King This user has validated their user name.

Sun Jun 20 22:39:38 2021

Since anything I buy on Ebay is paid for using Paypal I fully expect Ebay to either get rid of Paypal as a payment source (which they already found hurt big time when they first went to Mangled Payments and for some stupid reason could not accept Paypal payments) so I wonder how they will manage to pass on any fee adjustments that they wind up having to pay?  I still buy some on Ebay but will only use my Paypal account as there is no way in heck that Ebay is going to get any of my CC in their files to keep even when I say not to keep the information.

@Pace - I am shocked to see that you still use Ebay shipping program when there are so many others available that do not constantly have issues like Ebay does.  I use Stamps.com and just use my Paypal debit card to buy the postage since they do not accept Paypal and get the 1% refunded to my Paypal account for using the card.  There is no way in heck I would ever change back to using Ebay shipping after what they stole from their sellers back when there was that issue with overcharges happening on the first 4 ounces or under FCP and all of the other shipping programs adjusted their pricing but Ebay refused for 2 months until they saw how much their shipping revenue was dropping, then came the "You Spoke and We Listened" but as far as I was concerned it was 2 months to late and they didnt even offer to refund the overcharged amounts to Sellers who never changed.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: TiredJustTired This user has validated their user name.

Mon Jun 21 01:16:05 2021

During the pandemic, retailers and bricks & mortar stores felt the downturn  in in-person sales and ended up going out of business.  So now payment services are putting the squeeze on online selling sites that were able to survive?  If PayPal does this, other payment services will follow suit.  They always decide get on the bandwagon.  What's left?  Accepting personal checks?

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: Eagle This user has validated their user name.

Mon Jun 21 01:26:52 2021

So I guess applying refunds back to the customer will now cost the seller $.49 instead of $.30

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: cvsharkey This user has validated their user name.

Mon Jun 21 06:29:02 2021

Strike 3 for PP.
First they make changes unannounced and without explanation (invoicing changed significantly this past week.) They don't put anything in the HELP files about the changes.
Then, they make it nearly impossible to find the answer without the need to call them. They've set up a help robot who can only spew the information in the current HELP files, which you've already checked before reaching for help. I've gotten the root to let me send a message once--never rec'd a response. The service contacts are sympathetic, but no one above them is listening.
Now it's announced a hefty increase in fees?

Enough is enough.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: cvsharkey This user has validated their user name.

Mon Jun 21 06:39:28 2021

Must comment one more time.  These online selling venues & payment options seem to have unsustainable business plans. They completely lose focus on who their customers are.

A sustainable business plan would address increases to their customer, explain the need and offer some type of additional benefit to ease the pain.

As for PayPal, I never received notice of increases, I never received notice of the changes being made to invoicing, and they are non-responsive. When I attempted to email a message today--their bot told me they were closed & try again later.

These services act like an old aristocracy--they crush you under their boot & you seem to have no other place to go as they are in cahoots.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

by: pace306 This user has validated their user name.

Mon Jun 21 09:03:26 2021

Re: still using eBay shipping….

I use what ever service is cheapest/best for my buyer.

eBay has all my info from way back. It points to an account that gets emptied daily, and the cc used has strict controls.

I was just considering canceling Paypig altogether- I can’t see a personal use for them anymore….. my bzz as no does everything they do cheaper and better.

Perminate Link for PayPal Raises Rates and Offers Chargeback Protection for a Fee   PayPal Raises Rates and Offers Chargeback Protection for a Fee

This user has validated their user name. by: iheartjacksparrow

Mon Jun 21 10:53:51 2021

If PayPal is raising their fees, I wouldn't be surprised if all the other payment processors do the same. I use Stripe exclusively for my transactions on eCrater, and they charge the 2.9% plus 30 cents. I was looking at a comparison of the different payment processors, and almost all of them charged the same. The other companies are probably thinking, if PayPal can raise their fees, we should, too.

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