PayPal charges a fee when you send money using a credit card, but not when you use a debit card or bank account
If you link a credit card to PayPal and use it to send money to someone else, PayPal charges you a fee. The fee is a percentage of the amount you send, plus a flat amount per transaction. If you use a debit card or bank account instead, there is no fee for sending money to friends and family.
The reason for this difference is that PayPal pays a processing fee to your credit card company every time you use a credit card. PayPal passes that cost to you. When you use a bank account or debit card, PayPal's costs are lower, so they do not charge you.
This matters because many people assume all payment methods cost the same. They do not. Choosing the right payment method can save you money on every transaction.
Key Takeaways
- Sending money via PayPal with a credit card costs 2.2% of the amount plus $0.30 per transaction for friends and family payments.
- Using a debit card or bank account to send money to friends and family through PayPal has no fee.
- Receiving money through PayPal is free regardless of which payment method the sender uses.
- Credit card fees apply only when you initiate a payment; they do not apply when someone sends you money.
- PayPal's fee structure varies depending on whether you are sending money domestically or internationally.
Credit card fees for sending money to friends and family
When you send money to a friend or family member using a credit card linked to your PayPal account, you pay 2.2% of the amount plus $0.30. This is PayPal's standard fee for credit card transfers within the United States.
The fee is deducted from the amount you send, not added on top. If you send $100 using a credit card, the recipient gets $100, but you pay $2.30 out of your own pocket. This is different from some other payment services, where the fee is added to what you owe.
International transfers using a credit card cost more. The percentage increases, and there may be additional currency conversion fees depending on which country you are sending to. PayPal's website shows the exact fee before you confirm the payment, so you can see the total cost before you commit.
Why debit cards and bank accounts have no fee
PayPal does not charge a fee when you send money using a debit card or bank account because PayPal's costs are lower with these payment methods. Credit card companies charge PayPal a processing fee every time a credit card is used. PayPal passes that fee to you. Debit cards and bank accounts do not have the same processing costs, so PayPal does not charge you.
This is why PayPal encourages you to link a bank account or debit card instead of a credit card. It costs them less to process, and they pass the savings to you by not charging a fee.
If you have a choice between payment methods, using your bank account or debit card will always be cheaper for sending money through PayPal.
Fees for receiving money through PayPal
You do not pay a fee when someone sends you money through PayPal, no matter which payment method they use. The sender pays any applicable fee; you receive the full amount.
This is true for both domestic and international transfers. If a friend in another country sends you money via PayPal using a credit card, they pay the fee, not you.
How credit card fees compare to other payment services
PayPal's credit card fee of 2.2% plus $0.30 is similar to what other peer-to-peer payment services charge, though some services charge nothing at all. Venmo, which is owned by PayPal, charges no fee for transfers between Venmo users, but charges a fee if you use a credit card. Square Cash and other services have their own fee structures.
The key difference is that most services charge no fee for debit card or bank account transfers, just like PayPal. If you are choosing between services based on cost, the deciding factor is usually whether you are using a credit card. If you use a bank account or debit card, most services cost the same.
When you might pay a credit card fee without realizing it
Many people link a credit card to PayPal and forget about it. Later, they send money and assume it is free because they are using PayPal. The fee appears as a separate line item in your transaction history, so it is easy to miss if you do not look carefully.
Another common situation is paying for something on a website that uses PayPal as the payment processor. If you choose to pay with a credit card through that website, you may be charged a fee depending on how the merchant set up their account. Some merchants absorb the fee themselves; others pass it to you. The website should show you the fee before you complete the purchase.
The safest approach is to check your PayPal transaction history after each payment. You will see exactly what you paid and what fee, if any, was charged.
How to avoid credit card fees on PayPal
The simplest way to avoid the fee is to link a bank account or debit card to your PayPal account and use that instead of a credit card. You will pay nothing for sending money to friends and family.
If you do not have a bank account or debit card, or if you prefer to use a credit card for other reasons, you have two options. First, you can accept the fee as a cost of using your credit card. Second, you can use a different payment service that does not charge a credit card fee, though most services do charge something.
Before you link a credit card to PayPal, think about whether you will actually use it. If you only send money occasionally and have a bank account, there is no reason to link a credit card at all.
Frequently Asked Questions
Does PayPal charge a fee if I use a credit card to pay a merchant?
That depends on the merchant's PayPal settings. Some merchants choose to absorb PayPal's processing fee themselves. Others pass it to you. The website should show you the total cost, including any fees, before you complete the purchase. You can see the exact amount you are paying before you confirm.
Can I use a credit card to send money without paying a fee?
No. PayPal charges 2.2% plus $0.30 whenever you send money using a credit card. The only way to avoid the fee is to use a debit card or bank account instead. If you do not have either of those, you will have to pay the fee or use a different payment service.
What if I send money internationally with a credit card?
International transfers cost more than domestic ones. PayPal charges a higher percentage and may add a currency conversion fee. The exact cost depends on which country you are sending to. PayPal shows you the total fee before you confirm the payment, so you can see what you will pay.
Do I pay a fee if someone sends me money using their credit card?
No. You receive the full amount with no fee. The person sending the money pays any applicable fee. This is true whether they use a credit card, debit card, or bank account.
Is PayPal's credit card fee the same as other payment apps?
Most peer-to-peer payment services charge a fee for credit card transfers, though the percentage varies. Most services charge no fee for bank account or debit card transfers, just like PayPal. If you are comparing services, the fee structure for credit cards is usually similar across the board.