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We celebrated today a small business milestone -- our first full payment through PayPal from a buyer of services \o/!!!
However, we encountered one issue (as I will describe below) and we thank you in advance for your insight!
- Because our client preferred to pay by credit card (in lieu of cheque or electronic money transfer), we offered PayPal as a payment platform as long as they were aware that they will be responsible for the merchant fees. Here in Canada, it is 2.9% of the total amount + $0.30 transaction fee.
- Based on $500, the merchant fee we calculated was $14.80 for a total of $514.80
- Upon payment by the client, PayPal deducted $15.23 merchant fees and our balance then was $499.57.
- When we spoke to PayPal's customer service, they mentioned that if we wanted to receive the amount closest to $500, we would have had to charge the client a higher amount. For example, we calculated that if we charged the client $516, we would receive $500.74. And herein lies the issue that we don't want to overcharge as $15+ in merchant fees is already a lot of money.
- We felt is unfair for us and for the Buyer being overcharged, albeit the fact that we are talking about cents here. Is there not a simpler way on the platform to prepare an invoice so that upon payment, Merchant received the exact amount ($500) and Buyer pays the exact amount ($500 + $14.80)?
As per the User Agreement, what is not permitted is to apply a Surcharge - meaning the client or customer pays the transaction processing fees. Note, outside of PayPal, some credit card issuers do permit you to apply a Surcharge however, you're required to share that info upfront with the customer before they pay. As for PayPal, there is a work around - you can charge the customer a "handling" fee - best example I can think of is purchasing tickets for a show or event - some agencies will charge a handling fee in addition to the cost of ticket. Per PayPal: You may charge a handling fee in connection with the sale of goods or services as long as the handling fee does not operate as a surcharge and is not higher than the handling fee you charge for non-PayPal transactions. And from experience, you should have an explanation of your fees outlined for your customers upfront so they understand their costs for your services.