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A few days ago I did a post on how to keep your credit card information safe when shopping online, in the spirit of the upcoming holidays and increased online shopping. When buying online most people either use a credit card or their Paypal account, both of which can have certain fees associated with them in certain situations. Although these fees may seem minimal at first glance, they can quickly add up especially if you are a merchant (selling goods). But I’ll explain more about that later.
Generally if you’re buying anything online with a credit card, there are no immediate fees on the consumer end. However every time you buy something with a credit card the merchant is hit with an interchange fee, which is a charge to the merchants bank from your card company for the transaction. To give you an idea of how much these fees cost merchants, on average $2 of every $100 you spend a year goes directly to credit card companies via interchange fees every year.
Although there are no immediate fees on purchases on your end, if you don’t pay your balance off in full each month obviously you are going to be hit with interest on the purchase. Remembering to pay on time is also important because a late payment fee can really kill you especially on little things.
An example of this would be someone that doesn’t use their credit card too often decides to use it online to buy a $10 book on Amazon, forgets to pay their bill time, and then is hit with a $40 late fee. That $10 book has now become a $50 purchase. Ouch.
If you are buying from an online store, Paypal doesn’t have any fees on the consumer end either. When funding your account, however, ALWAYS make sure you are transferring the money directly from your bank account, because there is a 2.9% + $0.30 USD fee if you transfer funds into your Paypal account from a debit card, credit card, or Paypal credit. Paypal also hits you with a fee when you receive a money from someone else (1.9% to 2.9% + $0.30 USD).
Cross Border Payments with Paypal
Also it’s important to note that if someone is sending you money via Paypal from another country there is an additional 1% tacked on to the existing fee.
You can find more info on the Paypal fee structure for consumers. The fees for receiving money with Premier and Business accounts differ so you may want to check on the exact fees for your account type before you request money.
If someone is sending you money through Paypal and you would like them to cover the fee on their end, you can use this handy calculator that will figure out the amount that needs to be sent so that the fees are covered as well.