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Hi folks!
I don’t want this post to come across as “DOOM” or grumpy. It’s just a warning ’cause I don’t want to see anyone get burned.
I figured this might be the best place for this as it’s not necessarily Windstone Specific, though I do hope it reaches the right eyes. If you want to help this message along to someone that might need to see it, that’s awesome.
So, I wanted to touch briefly on Paypal’s policies and what they mean for us, here.
Paypal has the ability to send payments in several different formats. The first most of us are familiar with, that is “Goods”. This is a payment you pay or receive in exchange for buying at item. This transaction works very much like going to the store and using a card to pay for an item. The seller gets charged some processing fees for each transaction, and the buyer gets the goods. Pretty straightforward!
The second way is to send a payment as “personal payment”. This type of payment is defined by Paypal as:
“Personal Payment” means amounts sent between two individuals (not to or from a business) without a purchase. Examples of Personal Payments include sending a gift to a friend or paying a friend back for your share of a lunch bill.
If you’re sending a personal payment, payment types include:
Gift – Select this payment type when you’re sending money as a gift for a birthday or other special occasion.
Payment Owed – Use this payment type for things like reimbursing a friend for your share of a restaurant check, or repaying money that a family member loaned you.
Cash Advance – Select this payment type when the money you’re sending isn’t for the purchase of goods or services. (Remember that your card issuer may charge a fee for cash advances.)
Living Expense – Use this payment type when you need to pay regular, recurring expenses like rent or utilities.
So we see that Personal Payments are meant for fairly limited things. But what about sending Personal Payments to someone that is trying to avoid paypal’s fees?
In Paypal’s Terms of Service, there is this:
4.1 Receiving Personal Payments. If you are selling goods or services, you may not ask the buyer to send you a Personal Payment for the purchase. If you do so, PayPal may remove your ability to accept Personal Payments.So, a few things I must touch on:
IF YOU ARE A SELLER… and are requesting personal payments in exchange for goods, you are breaking the rules. Now, I understand entirely how much the fees eat into profit (please read below) but it’s the simple fact. If Paypal notices that you are doing this, they can not only take away your ability to recieve personal payments in the future, but may even close your account or hold your funds. This has happened to friends of mine before they understood what the personal payment tab is for! One of them was never able to recover her paypal funds, though thankfully it was not much money.
IF YOU ARE A BUYER… and a seller asks you to sent a payment as ‘personal’ for an item you are buying, please know that you have no recourse if the transaction goes sour. When you send a payment as ‘personal’, you are essentially donating that money and have no buyer protection, because you are saying that you’re NOT buying anything when you use personal payments. Only send personal payments to someone you trust entirely if you decide to go around the rules and use it to buy something.
That said, sometime next week when I have the time, I will go through and edit any Classified Ads that are asking for personal payments in exchange for goods. You have some time to edit them yourselves if you’d like, though. I am not doing this to be a pain in the butt, or to punish anyone (HONESTLY I want all of your transactions to be as easy and awesome as possible!) but because Windstone uses paypal and this is an open, public forum/adspace, it is not good to allow people to publicly say “send as personal payment to avoid fees”. I’m sorry!
Now, if you ask a buyer to use a personal payment in private (as opposed to our public ads), that is YOUR own business, wink wink, nudge nudge. I don’t care what you do in private emails, etc. Just use caution and know that if your account gets a lot of personal payments, it could get flagged.Please know that it’s also against Paypal’s user policy to ask the buyer to pay for your paypal fees!
SO JEN, what can I do to not spiral into a pit of Paypal fees?
I’m glad you asked. This is something that everyone that sells any amount of things online asks themselves.The best is to simply figure out how much you want for an item, then using a paypal fee calculator, figure out how much paypal will take. Add that amount onto your overall price. This is what retail vendors do, to cover their credit card merchant account fees. This way you are making what you want for the item, and you aren’t breakin’ the rules.
Remember, that though the fees really bite, Paypal is providing you a service that most other companies would charge quite a bit for. Paypal is essentially transferring money– think a credit card processor– and you can’t get that for free anywhere. Credit Card merchant accounts can be very expensive for someone that only sells a few things here and there, so this is a wonderful service for the low-volume seller.
Volunteer mod- I'm here to help! Email me for the best response: nambroth at gmail.com
My art: featherdust.comIt’s really easy to figure out how much you need to charge in PayPal fees too. Just go into your PayPal account and select “send money” and then set up a pretend “personal” payment (I put in my work account as the payee so I don’t have to worry about sending someone else money by mistake! LOL). PayPal will tell you right there what the fees are for that dollar amount. Then you can just add them to your sales amount.
Thanks, Jen. One question – I thought that after a person receives a certain number of payments for goods (has a certain number of sales), Paypal insists that the account be changed to a Merchant’s account. If this is true, what are the implications?
Thanks, Jen. One question – I thought that after a person receives a certain number of payments for goods (has a certain number of sales), Paypal insists that the account be changed to a Merchant’s account. If this is true, what are the implications?
You will be required to upgrade to a Premier account, not a merchant account.
As for the implications, there are none, really– you will simply be charged processing fees for all transactions. See here:https://www.paypal.com/webapps/mpp/paypal-fees
Supposedly Paypal only sends your income information to the IRS via form 1099 Iif you get at least $20,000 in gross payments in a single year AND 200 separate payments for goods or services in the same year. Otherwise all tax reporting from income is your responsibility, but be aware that a digital papertrail does exist….
Volunteer mod- I'm here to help! Email me for the best response: nambroth at gmail.com
My art: featherdust.comThank you for the information! 😀 Never knew this before. 🙂 (Paypal should really be more obvious about this.)
Check out my finished artwork at http://falcolf.deviantart.com/ and my sketch/studio blog at http://rosannapbrost.tumblr.com/
Excellent!
I didn’t even know there was such a thing as a personal payment. I always bill items as goods but I have a merchant account too so not sure if there’s even an option on there for that. That’s interesting and something to watch for if people mention that.
Looking for rainbow or pink & teal grab bags!
Thanks so much for this information, Jennifer! I had no idea about this, and I’ve considered making a purchase through PayPal as a “personal payment”. I didn’t go through with the purchase for other reasons, but I’m glad to have this information for any future transactions I might consider on this site and others. I really appreciate you taking the time to explain this to all of us. It reminds me what a great and caring place this forum really is!
I think everyone is missing the 😉 ;)….
If it is someone you trust….it’s a different story…..I know a couple people here I would be completely comfortable sending personal payments.
BUT…I never said this…especially on a public forum!!!
What folks do in private is none of my business. 😉
I just wanted to let you all know the ‘rules’, and why it’s a bad idea to do personal payments with someone that you don’t trust 100%. It’s a bad idea for sellers, too, because you can get your account frozen (etc) if they ‘catch’ you.
Volunteer mod- I'm here to help! Email me for the best response: nambroth at gmail.com
My art: featherdust.com
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