PayPal is updating its Terms of Service in a move that primarily affects the fees associated with various transactions. We'll look at the trends here and the full text, so that you can explore the details yourself.
Overall, the trends mean that things are getting less expensive for charities, but more expensive for businesses and those who move money across borders.
Reading the Notices
Even if you use PayPal regularly, you'd be forgiven for having missed these changes, which come into effect on August 2, 2021.
The update was included in a June 26 email to PayPal users that probably went to spam, or just never got opened. Even for those who did open the email, the actual changes were a few clicks away from the notice.
Following the Policy Updates page link in the email brings users to a page explaining, "We are increasing some of the fees that apply to our services," with another link provided. This link takes users to the details of the update.
Exploring the Policy Changes
The full update is a solid 32 pages, but we've distilled out some major themes and takeaways.
Decreasing Rates and Fees for Charities
A number of fees impacting charitable donations and charitable organizations that use PayPal are going down. These include decreasing rates for receiving domestic donations and donation transaction rates (both 2.89 percent plus a fixed fee).
These changes make sense because PayPal has a record of treating charities well. This to the extent of including buttons for finding charities in the Send page of PayPal account dashboards.
Related: How to Send Money on PayPal: Different Methods
This page already says that donations have "no deductions, no fees," so we reached out to PayPal for clarification. According to PayPal, only donations made through the PayPal Giving Fund are exempt from fees. Other charities that accept donations through PayPal still have fees, which can be paid by the charity or by the donor.
There is one area where rates are increasing, even for charities. That is, transactions across currencies.
Increasing Fees Across Currencies, Decreasing Rates for Micropayments
The flat rate for transactions in most currencies is increasing, not just for charities, but for just about all users. While this is likely a measure to account for inflation across those currencies, it may have a seemingly disproportionate impact on people using some currencies or on PayPal users who regularly transact in different currencies.
The flat fee on micropayments is also increasing ($.09), however, the percentage of micropayments that PayPal charges is decreasing (4.99 percent). This is likely an attempt to make micropayments more appealing, given their increasing use-cases, particularly within apps and online services.
Increasing Rates for Business Accounts and Invoices
A number of commercial transaction rates are increasing, including the rates associated with invoicing. However, the rates and fees associated with sending and receiving money for goods and services are decreasing.
This will potentially have a disproportionate effect on the increasing number of people who are using PayPal to launch a small business or go into business for themselves. However, in PayPal's defense, these groups receive a lot of support and resources from PayPal beyond simply transacting, and these increases may be a reflection of that.
Rates on instant withdrawals from PayPal accounts and withdrawals from cards are also increasing slightly (both 1.5 percent), but standard withdrawls that may take longer remain free provided those withdrawls don't require currency conversion.
How Does This Impact You?
How, or indeed whether, this will impact you directly depends on how you use PayPal. However, because a number of these Terms of Use changes impact merchants, just about everyone may see an indirect impact if merchants that use PayPal increase their own rates to compensate.
For more information on these changes, read the document yourself. We also have a deeper dive into changes to merchant accounts and PayPal's explanation for the changes.
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