Paypal difference between friends and family and business

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Upcoming Changes to Goods & Services Payments on PayPal

• PayPal will be rolling out two changes in the coming weeks to our peer-to-peer Goods & Services fee for U.S. businesses and consumers and updating the ways U.S. business accounts can receive payments.
• These changes will be effective for PayPal customers in the U.S. on July 28, 2022.

In the coming weeks, we will be rolling out two changes to our peer-to-peer pricing structure in the U.S., specifically for Goods & Services payments. We will be simplifying our goods & services fee structure and changing the ways U.S. business accounts can receive payments, effective for PayPal customers in the U.S. on July 28, 2022.

Updated Peer-to-Peer Goods & Services Pricing Structure  

We will be simplifying the Goods & Services seller fee to 2.99%, with no fixed fee, for customers in the U.S. PayPal’s current Goods & Services fee is 2.89% + $0.49 USD. 

As an example, if a customer is buying a piece of furniture for $225.00 USD, the seller will now pay $6.73 USD under the new simplified fee structure, versus $6.99 USD under the previous structure. In addition, Goods and Services transactions may be eligible for Purchase Protection which can be beneficial for both buyers and sellers.

Purchase Protection gives customers peace of mind, helping a buyer if they don't receive the item that they ordered, or if it shows up significantly different from its description, for eligible purchases. PayPal will reimburse the buyer for the full purchase price plus any original shipping costs, subject to terms and limitations. For sellers, PayPal’s Seller Protection Policy can protect online sales, minimize claims and chargebacks and help prevent fraudulent purchases.

Transition of Friends and Family Payments for Business Accounts

PayPal is also evolving the ways customers send money to Friends & Family and make payments for Goods & Services. In the coming weeks, U.S. customers will now only be able to send Friends and Family peer-to-peer payments to consumer PayPal accounts.

This update helps ensure that eligible purchases of Goods and Services will be protected for both parties and will drive consistency on our platform, while also removing confusion around which payments are eligible for buyer and seller protections. This will also enable PayPal to help businesses properly reconcile data-keeping and organize personal and business income. Business account holders can continue to access business-only features like automated reporting, invoicing, multi-employee access, and more. Business account holders who currently use PayPal to receive non-business-related payments can use or create a personal account to receive personal payments without seller fees, while using their business account to receive commercial payments.

Related Articles

PayPal is already the most widely-used payment processor for businesses and individuals, but the Friends and Family (PPFF) service adds features that make it more useful. As long as users know how to take advantage of it, the service can be a great way to send and receive money to and from anyone, anywhere in the world, any time of the day.

This article will cover all features that PayPal Friends and Family has to offer, and also show how Wise can be helpful for you.

What’s PayPal Friends and Family?

As the name suggests, PPFF was created in order to be used specifically as a way to transfer money between friends and family members. It allows close networks of people to send and receive funds for personal use, as opposed to using PayPal for payment by businesses or for business-related transactions. However, the Friends and Family method is attractive because of the benefits it offers for personal transfers.

How does PayPal Friends And Family work?

Using PPFF doesn’t require PayPal users to change how they interact with the payment platform. When preparing to send money to friends or family, PayPal asks the user to choose the purpose of the transaction, either “Sending to a friend” or “Paying for an item or service,” and the selection made determines whether the PPFF option is used or not. Based on that, the payment solution will automatically adjust the transaction to correspond to the correct transfer protocols.

How to send PayPal Friends and Family

You don’t need any special configurations, therefore sending funds using PayPal Friends and Family should be simple if you follow the steps:

1. Log into the PayPal account
2. Select “Send & Request”
3. Input the recipient’s details using either the name, email address or phone number in the “Send money” section
4. Choose “Sending to a friend” when prompted
5. Enter the payment amount and add a note, if desired
6. Click Submit

Fees for international transactions

If money is going to be sent outside the US though, the fee is 5% of the amount sent (+2.90% + fixed fee in case of card payment). However, PayPal sets a limit on that 5% fee, which is currently $4.99¹. Be aware, though, that you’ll also have a 4% spread on the exchange rate. Let’s make a comparison between PayPal and Wise to send, for example, $1000 to EUR:

With Wise, you can send money to +50 currencies, without a mark up on the exchange rate. You pay just a small upfront fee, knowing exactly how much you send and receive.

Check how much you can save with Wise

Need to send money abroad? Avoid the expensive exchange rates.

With Wise, you can send money overseas to friends, family or businesses only paying a small upfront fee. You don't pay the mark up charged by PayPal to convert your money, and you don't pay the Swift fees charged by banks to send money internationally.

This is how you can save with Wise:

1. Register for free
2. Choose an amount to send
3. Add the recipient details
4. Pay for your transfer (with ACH debit, wire transfer or card)

And that's it! The exact amount you were told will be sent to the receiving bank account in the destination country.

Fees for domestic transactions

If you’re using PayPal Friends and Family to send money within the US, you should have fees only when you pay with your card (or if you send in different currencies)¹:

• Paying with PayPal balance or a bank account: no fee
• With Card: 2.9% + fixed fee
• With Amex Send Account: no fee

Limits

If your account on PayPal has been verified already, then you only have a limit per transaction, which can go up to $60,000 but may be limited to $10,000.² PayPal doesn’t place a limit on the total amount of money, or the number of transactions, that can be sent using the PPFF service on a daily, weekly or monthly basis.

This means that for transactions within the US, it’s possible to send two $10,000 transactions to the same recipient in a single day. However, this implies that the sender has a verified PayPal account. Sending money to international recipients will have different limitations, which depend on the destination country and the status of the recipient account (verified or unverified) on PayPal. Before trying to send large amounts, it’s suggested that you determine these limits and, with all transactions, to only send money to those who are legitimately friends or family.

In case you don’t have a PayPal account, you’re able to do a one-time transfer of up to $4,000².

PayPal Friends and Family vs Goods and Services

PayPal Friends and Family

PPFF is PayPal’s option for sending money or gift cards for all non-commercial activity between friends and family. Nonetheless, to pay for goods or services, it’s not the best option. It could lead to the loss of money and/or goods. Just before you pay finish the payment, you can choose whether to pay it or to change the payment to a Goods and Services payment, therefore passing the fee onto the recipient.³

PayPal Goods and Services

The Goods and Services option is used to buy services or items, and includes payment protection from PayPal. It charges the seller a fee to receive your money, and therefore the payments are automatically covered by PayPal protection policy in case anything goes wrong.³

Does PayPal report to the IRS on Friends and Family?

In theory, only commercial transactions will be reported to the IRS, so this shouldn’t happen with Friends and Family operations. However, as a payments processor, PayPal monitors all of its transactions in order to comply with government financial regulations, and it has the ability to determine if users are taking advantage of the PPFF option to circumvent required tax reporting obligations.

For buying goods and services, PayPal reports transactions from sellers who receive more than $20,000 in gross payments and more than 200 separate payments within the tax year⁴.

Is it possible to get scammed with PayPal Friends and Family?

Yes. As with any other payment processor, or anything else dealing with sending or receiving money, it is always important to be hyper-vigilant with the details when using PPFF. The service is safe, but there might be someone willing to try to take advantage of others. Learning to recognize and avoid them will make transactions with PayPal safer and more pleasant.

Sellers might ask consumers to choose the personal payment option when making a purchase online. This is because of the absence of fees, as well as the possibility of circumventing tax reporting guidelines. Apart from being in violation of PayPal’s Terms and Conditions, in such cases the seller might try to scam buyers too.

Are those transactions protected?
PPFF transactions aren’t inherently protected by PayPal (the option has to be chosen when sending money), therefore buyers do not have any recourse if something goes wrong when purchasing something using the PPFF option.

PayPal’s Purchase Protection keeps most financial information private and prevents it from being shared with sellers. All transactions are encrypted and monitored, and are covered under this protection, regardless of the origin and destination of the goods being purchased. This protection is not a basic component of PPFF transactions, which means that unless you are sending to a verified and legitimate friend or family member, you won’t be covered if something goes wrong.

PPFF is meant to be used for the user’s family and friends – not the family and friends of other PayPal users. There can be cases where a user makes contact with someone and asks that they use the PPFF option and request an item being purchased be sent to “a friend” at a different address as a gift. However, the buyer can submit a claim to PayPal saying that the item was never received and a refund can be provided.

Check how much you can save with Wise

Sources used:

1. PayPal fees
2. PayPal limits
3. PayPal: What's the difference between Friends and Family or Goods and Services
4. PayPal - Tax information reporting for online sellers

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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