Handling PayPal fees

[Archie123]

Hi,

I have been charged a PayPal ‘fee’ of 5% of a payment made by a customer from the US. I charged the customer my service fee plus a 7% ‘Card handling charge’. The fee charged by PayPal is 5% of my service fee + my card handling fee of 7%.

In simple terms, it looks like whatever I charge my customers including a card handling fee, PayPal will take 5% of the total from whatever I’m paid?!!

Is there a way to ensure that when using PayPal my customers rather than me pay the 5% PayPal fee? -

Or if this is a price I have to pay, what’s the best way to use QF to account for the difference between what my merchant account says I’ve been paid and what I’ve actually been paid? -

Is this a business expense I can set against my income for tax purposes for example?

Many Thanks

Mike

[Lurch]

Accounting for income from a payment service provider

Introduction This guide will help you to reconcile payments from the likes of PayPal, GoCardless, Stripe along with any credit card PDQ service provider and more broadly any payment provider that collects income on your behalf and pays you the net amount, minus their fee. It’s a very common scenario in accounting and it’s very useful to know how to account for these types of transactions. The Basics Obviously the key thing here is that the amounts received don’t exactly match your invoices, and…

[ian_roberts]

@Archie123

Is there a way to ensure that when using PayPal my customers rather than me pay the 5% PayPal fee?

You’d have to calculate your surcharge each time to counteract the PayPal fee - PayPal are charging 5% of gross, so you receive 95% of whatever the customer paid via PayPal. So for a given net value the question you ask yourself is “what gross would this be 95% of?”. Mathematically the answer is to divide the net amount by 0.95, so if you want to receive £100 then you need to charge 100 ÷ 0.95 = £105.26.

However PayPal’s own terms say you’re not supposed to impose a surcharge on your customers for choosing to use PayPal.

[Archie123]

Many Thanks - That’s a really helpful signpost

[Archie123]

Thanks for explaining that in such easy to follow terms