July 14, 2015 by Andrew Minalto - 10 Comments

How To Reduce Fees With PayPal Micropayments!

paypal-micropaymentsAs anyone who sells on eBay will know – the PayPal fees can make up a fairly large portion of your total selling fees, especially with certain products!

We saw this in our recent eBay vs Amazon Fees competition (check it out here if you missed that: eBay vs Amazon – Which Is Cheaper?).

But what do I mean by “especially for certain products”? After all PayPal fees are a set 3.4% + 20p right, so there shouldn’t be any difference…?

Well, yes and no, as while PayPal fees are the same for all products, that 20p can work out very differently. Let’s take a quick look at exactly what I mean:

Product 1 – £100

If I sell a product for £100, say a used mobile phone, then I’ll pay the following PayPal fees:

3.4% = £3.40
+ 20p
= £3.60

So total PayPal fees of £3.60

Product 2 – £4

Now looking at a different product, a Blu-ray movie for example, which I sell for £4:

3.4% = £0.14
+ 20p
= £0.34

So total PayPal fees of £0.34 for the cheaper item.

And that means for the cheaper £4 Blu-ray, I pay 8.5% in PayPal fees (0.34/4 x 100) compared to just 3.6% for the £100 item!!

That is a huge difference of nearly two and a half times higher fees, in effect, for the cheaper item!

And this is a problem that I am emailed about all the time! For low value items, the 20p per transaction charge from PayPal can completely destroy your margins!

After all, at 8.5%, you’re paying more to PayPal that you did to eBay to actually make the sale.

Thankfully though there is a simple and effective solution. But for some reason it’s something that very few people seem to know about or use.

It’s called – PayPal Micropayments.

Put simply, this is a special rate you get from PayPal when processing “low value transactions”.

It works in exactly the same way as regular PayPal, so there is change whatsoever for your customers. The only difference is the rate you pay.

Instead of the usual 3.4% + 20p, you’ll pay 5% + 5p.

Basically a higher percentage but lower fixed cost.

Let’s take a quick look at how that affects the total PayPal fee at a few different sale amounts:

micropayment-feesAs you can see, Micropayments actually works out cheaper for anything up to £9.

BUT – you can only apply for Micropayments if your average transaction amount is under £5.

It doesn’t matter if you only sell items worth £6 and therefore you’d be better off on Micropayments, as PayPal will only accept applications from businesses with an average order value of below £5. So bear that in mind when looking at the above table.

How to Apply for Micropayments

Now that we’ve gone over what Micropayments is and who it applies to, how can you actually use it for your business?

Well that’s incredibly easy as there are really only two requirements –

  1. That you’re signed up for a PayPal Business account &
  2. You have an average transaction amount of less than £5

As long as you meet these two requirements, then you can simply give PayPal a call to apply.

contact-paypalThere is one last thing I want to mention though and it’s something you should be aware of before deciding to switch to Micropayments.

There are no volume discounts/price breaks for Micropayment fees!

While you can get slight discounts on the regular PayPal percentage charge, depending on your monthly volume of sales, Micropayments are always charged at 5% + 5p.

paypal-discountsWell that brings us to the end of today’s post. I hope you found this useful and better yet, I hope it saves some of you a little money on your selling fees!

Until next time!

All the best,

Click Here to Leave a Comment

  1. Hi Andrew,
    Thanks for your great post.

    Say if I sell a item worth £10, and I include free shipping
    bringing the price up to £12.99

    does that mean I will get charge 5% including my free shipping?

    Many thanks

    1. Andrew Minalto

      Yes, of course.

      You pau PayPal fee on whole payment amount you receive.


  2. Hi Andrew
    Just a quick and simple query: In your EAB course, you say to take off 15% for eBay and Paypal fees. I switched to micro-payments. What ballpark percentage would that be…? I’m guessing around 12% total eBay and Paypal fee? Total guess 🙁
    Hope you can help as I am crap at this kind of math!

    1. Andrew Minalto

      Hi Jon,

      You should basically use same 15% (10% for eBay FVF and 5% for PayPal).

      If you have switched to micro payments, it means you’re selling low value items, right? With products like these, you really want to write down all costs in a spreadsheet and get accurate numbers as even 20p are important when product sells for just £3.


      1. Hi Andrew

        Thanks for the reply. I followed EAB and then your TRS status method. I made TRS in 7 weeks (cost me a lot more than £200 in losses though but I decided that I could then get moving with small products from 60p to £1 profit per item, using your £300 method. My aim is to build up 10 to 20 lines of these type of products and sell 5 – 10 of each line per day. Lots of wrapping and posting, but from there I build up £1000 + and get into stuff worth £10+ to consumer=less competition I hope.
        I used your Alibaba Wholesale £300 method which is great. Currently building a relationship with a supplier as a result of ordering through them. I’m still selling certain products at a loss though (I got into USB chargers at first and boy is that saturated!!). TRS should kick in around the 22nd. Don’t know if it will help me in the stickers market or the cables due to saturation?

        Thanks for your support – truly phenomenal. I don’t know how you manage it!

        1. Andrew Minalto

          Hi Jonathan,

          Great to hear that, well done! 🙂

          TRS ALWAYS helps! Especially in saturated markets. Not only it gives you improved search results but only when you’re TRS you can take advantage of eBay’s Premium Service. So it’s def. worth getting it.


          1. Hi Andrew

            Thanks for the encouragement. I’ll drop a post on my success using your system once I get into official profit. It gets discouraging sometimes, but if we stick at it, things start happening. I could not have done what I have done without your course – i would have quit.
            So thanks a million – your course is worth a hell of a lot more than you charge – but it is the right price for sellers like me with low starting capital. Really appreciate the massive work you put into it. Anyone reading this – don’t drag your feet – invest in EAB – It will repay you tenfold.


          2. Andrew Minalto

            Thanks very much Jonathan, I really appreciate it! 🙂


  3. Hi do you know if you can switch back to a regular account or are orders over £5 charged at the normal rate?

    Thanks Paul

    1. Andrew Minalto

      Not sure if you can switch back (I think you can’t) but you should ask PayPal about this to be sure.

      No, everything is charged as micro payments so even £100 payment will be charged @ 5%.


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