Update August 2020: I now prefer Stripe over 2Checkout or Braintree. After moving to Stripe I saw a drastic reduction in abandoned carts (from 10% to 1.46%) and a corresponding rise in revenue.

Update Mar 2019: The pricing for Braintree is now cheaper, they charge 1.9% and 2.9% instead of the 2.9% and 3.9% mentioned below, which is a significant difference. I’ll probably try them again at some point soon.

Update June 2018: I have now switched to 2Checkout instead of Braintree. Unfortunately, I had a negative experience with Braintree. They decided to ban our account after receiving just 2 refund requests from a 100 sales, which seems nonsensical to me.

This week I’ve been implementing BrainTree card payments for our WordPress plugin WP RSS Aggregator. We had several reasons for making this move. Here’s a few of them:

• Some people didn’t have money in their PayPal account and it took 3 days to make the transfer from their debit card to PayPal, hence it was much more likely that they would look for another plugin that can be bought via a debit card rather than wait out the 3 days.
• PayPal payments cannot be done from all countries in the world. We’ve had potential clients from Pakistan and other countries in that region who had no way of paying us since they cannot use PayPal.
• Others just don’t like PayPal and prefer using the traditional way of purchasing by entering their debit/credit card information directly on our site rather than create a PayPal account.

Why BrainTree?

Initially I wanted to go with Stripe, however they are not available yet in Malta, so I had to find an alternative solution. Braintree fit the bill perfectly. On September 26, 2013 Braintree was acquired by PayPal, an eBay subsidiary, in a deal worth $800 million. Since we’re already using PayPal successfully, it also made sense to use Braintree.

The process was relatively painless. After a few to and fro emails to get us approved into the BrainTree system, I completed the implementation on the site in less than an hour. Since we are using Easy Digital Downloads as our e-commerce platform, I just had to buy the EDD Braintree add-on, fill in a few fields and activate everything.

Some Important Things to Note

• You can also take PayPal transactions through Braintree. They will cost whatever they cost through PayPal.
• With PayPal whenever you give a full or partial refund, PayPal refunds their commission to you too (excluding the fixed fee which they keep). In Braintree’s case, whether you issue a full refund, or a partial refund, they keep all the fees they originally collected on that transaction. So if you give out full or partial refunds on a frequent basis, you have to be careful with Braintree.

European pricing for Braintree is 2,9% + €,30 per transaction. There are no monthly fees, and you only pay for what you use — there’s no minimum transaction processing amount.The only fee you might see is if you incur any chargebacks (i.e. a customer disputes a charge). In that case you will be charged €15 for each chargeback incident. With PayPal there are no chargeback fees.

Braintree does not charge foreign exchange fees and European card transactions are not charged cross-border fees. Transactions on cards issued outside of these European countries will be billed at 3.9%. That is in addition to the standard €,30 fixed fee per transaction.

Now lets take a look at European PayPal fees (cross-border, taking a common example where most buyers are in the US and the seller is in the EU):

Here’s a practical example. If your product retails at $15.00 and a US customer bought a copy you will see this in your PayPal account:

Now the price per transaction varies as per the table above, but lets assume that your shop is clearing more than 10,000 EUR but less than 50,000 EUR per month, meaning that it will fall in the category of 3.2% + $0.30 USD.

3.2% of $15.00 = $0.48

Then lets add the $0.30 and we get $0.48 + $0.30 – $0.78 USD in total fees from PayPal. You take home $14.22 USD.

So for many vendors, I suspect that Braintree will work out cheaper, as their fee is the equivalent of PayPal’s 50,000+ EUR tier which is hard to reach for small businesses and individual freelancers.

All funds processed through Braintree are settled in daily batches (Monday-Friday) and are automatically sent to your business bank account within 48 hours. For European businesses Braintree require that this bank account is a European bank account.

You are able to choose the funds you would like to charge your customers in and receive funds in. If you would like to have a USD set-up and settle funds into your bank account in USD Braintree can do this without conversion. If you would like funds to be in EUR they can do this as well! It is more or less up to you how you would like it set-up.

Reconciliation Process for Braintree

An important thing you or your accountant will be doing at least every month is a full reconciliation of the transactions that have gone through Braintree and the debits and credits to your associated bank account.

The best way to reconcile your debits and deposits is to look at the Settlement Batch Summary and your monthly statement. The Settlement Batch Summary will show the net settlement for that day. This amount, minus fees, will be deposited or debited from your bank account, however fee totals are not available in the gateway.

For merchants on flat rate pricing, fees can be easily calculated using the Settlement Batch Summary totals. Merchants on interchange pricing models can view their fees on their monthly statement. The monthly statement will show the total aggregate fees for that month and the amount funded to your bank account. A statement guide is available here.

I’ll keep updating this post with more insights as I go along.

Update: 25/12/14

It’s been a few weeks since I’ve started using Braintree on my site and the results have been good. Here is some insight on these first few purchases that have gone through.

Visa card payments are exactly double those from Mastercard. These are the two cards I can accept at the moment through Braintree.

Around 40% of payments are now coming through Braintree and the rest come through Paypal. Before introducing Braintree all my transactions were processed by Paypal. This change has not brought about an increase in total sales yet, but I will have to revisit this at a later stage since December is traditionally a slow month. January and February should give us a better indication on whether introducing credit card payments actually boosted sales or not (which was mostly the whole point of introducing this facility).

I’ve already written about how to avoid losing money from PayPal’s disadvantageous exchange rates when withdrawing money from your PayPal account to your local bank account, but in this post, I will be showing the exact process that is used at this point in time (June 2014) for anyone who wants to do the same. Unfortunately, you won’t find this information anywhere on PayPal’s website, so I had to figure things out myself by contacting their support staff.

By the way, did you know that you can now buy Bitcoin and cryptos with your PayPal account on eToro?

First of all, a quick explanation of why I wanted to change my withdrawal currency. My local bank accounts are in Euro and since my business is based in Malta I am only allowed to withdraw money to the credit card issued by my bank or to a Euro bank account.

Sadly there is no option to have a credit card account in USD. Therefore what was happening was that whenever I withdraw from PayPal (where most of my funds are in USD), the PayPal system would automatically convert from USD to EUR to match my local bank account. The problem is that the rates PayPal uses are much worse than the conversion rates at my local bank. So I wanted the conversion to happen on the bank’s side rather than PayPal’s.

Luckily it turns out to be easy to do. All you need to do is notify PayPal manually that you want that particular credit card to receive USD rather than EUR, and you can do this by opening a support ticket from PayPal’s website. Below I am reproducing the reply I got from PayPal when I asked them to change my withdrawal currency:

Thank you for contacting PayPal regarding questions about the withdrawal options for your Business account in Malta.

For bank withdrawals, you can only add a US bank account to your Business account, and then withdraw your PayPal USD balance to there.

For credit card withdrawals into USD, we can change the currency for your cards added to your account into USD on your request. If you wish to do this, please confirm the last 4 digits of the card that you want to be changed to USD and we will then update this in our system. This will also resolve any currency conversion loss for you when making withdrawals.

Another annoying thing for me is the $2,500 limit for every withdrawal. There is a charge for every transaction, so it is not only inconvenient to be limited in this way, but I am also getting charged for multiple transactions when I could have more easily done one. Sadly there isn’t a solution to this latter issue. This is what the PayPal support rep had to say about my query in this regard:

Regarding your question about the 2500 USD withdrawal limit per transaction, I confirm that all withdrawal limits are overridden on your account from PayPal´s side. The 2500 USD withdrawal limit is a worldwide regulation on VISA´s side, so I regret that we cannot lift this limit. However, you can make as many withdrawals per day as you want, as long as they don´t exceed 2500 USD per transaction.

I hope this post helps clear things further for those of you who have asked me how to perform this little trick and save money on your withdrawals.

Note: If you have any questions after reading this and the several other articles relating to PayPal on this site, please leave a comment or contact PayPal directly. Unfortunately, due to time constraints, I am unable to offer any advice over email so all emails related to PayPal will remain unanswered.

Note: If you have any questions after reading this and the several other articles relating to PayPal on this site, please leave a comment or contact PayPal directly. Unfortunately, due to time constraints, I am unable to offer any advice over email so all emails I receive that are related to PayPal will remain unanswered.

Choosing a PayPal account structure is not straightforward fare for most people, so in this post, I’ll attempt to demystify the whole process of signing up with PayPal and choosing an account type.

Before we start, a quick note:

If you are looking to send money as cheaply as possible then Wise is usually going to be cheaper than PayPal.

Wise does not make money off the exchange rate and only charges a small percentage of the overall transfer as its fee.

Have a look at my comparison between PayPal and Wise Borderless as well as my full review of Wise Borderless. N26 and Revolut might also be good options depending on your needs.

Send money using Wise

Now back to PayPal accounts.

You start out with a Personal account, but you can then upgrade to Premier or Business accounts.

PayPal offers two different account types; PayPal for your personal use (Personal and Premier), and PayPal for your business (Business). It’s free to sign up and each account type offers different features and capabilities. To decide which one is right for you, read on.

An account for personal use is ideal if you shop online. You can:

• Shop on eBay and merchant websites using your credit card, debit card or bank account
• Send and receive money from friends and family
• Accept debit card, credit card and bank account payments for a low fee when you sell on eBay and/or on your own website

Make the right choice for your online business. With a Business account you can:

• Accept debit card, credit card and bank account payments for a low fee
• Operate in your company or business name
• Manage Users, allowing you to give separate access rights to each of your employees
• Consult the Business Setup guide

If you decide to go ahead with the upgrade, you’ll get this confirmation screen:

There is no good reason to have a Premier account if you are going to use PayPal for business. The fees are similar to or same as Business but some of the features not available.

• You don’t need to have a properly registered “business” to have a Business account. It can be a DBA (“doing business as”).

• You can have several Business accounts (just remember that each one should be linked to a different bank account/credit card).

• There are no monthly fees for any of the accounts.

• Additional services cost $35/month for all of them. You need to get approved to get them. You may get approved for one but not the other.

• Additional services include:
  – Website Payment Pro (allows you to link PayPal to a shopping cart and charge credit cards without taking your customer to PayPal).
  – Recurring Payments
  – Virtual terminal (may be handy if you run live events or work with offline clients).

• If you have various ventures and want to have a separate PayPal account for each one, now you can set up a “child” account that is linked to your main one. The benefit is that the money will be swiped from it daily and put into your parent one automatically and with no fees involved. Also, you don’t need to link a child account to a bank account. To set up a child account, create a new PayPal account then call PayPal on the phone and ask them to link the new account to your main PayPal account.

The concise comparison:

• Personal: Recommended for individuals who shop and pay online.
• Premier: Recommended for casual sellers or non-businesses who wish to get paid online, and who also make online purchases.
• Business: Recommended for merchants who operate under a company/group name. It offers additional features such as allowing up to 200 employees limited access to your account and customer service email alias for customer issues to be routed for faster follow-ups.

Since my business is based in Malta, I’ll be describing the PayPal fees for this situation. Other European countries should have similar fees, but do check the PayPal website for your country for more accurate details.

Click this link to check the standard rates for receiving and sending money with PayPal.

The standard rate for receiving payments for goods and services is 3.4% + 0.35 EUR.

If you receive more than 2,500.00 EUR per month, you’re eligible to apply for PayPal’s Merchant Rate – which lowers your fees as your sales volume increases. Your fees can be as low as 1.9% + 0.35 EUR, based on your previous month’s sales volume. For receiving money for product or service sales at the merchant rate, these are the prices:

Here’s the e-mail you get after you apply (manually) for the Merchant Rate:

Note that the rates in the table above are for domestic transactions. If you have customers offshore then you will incur what is known as a cross-border payment charge.

See also: Understanding PayPal Cross Border Fees

Click here to view the higher cross-border transaction fees. You will still benefit from lower rate bands with cross-border payments once you apply successfully for the Merchant Rate.

The accounts we’ve mentioned till now don’t have any monthly fee, but PayPal also offers the PayPal Pro solution, which costs $30 per month.

See also: Should you withdraw from PayPal to a credit card or to a bank account?

The Pro solution is for heavy PayPal users, and allows you to benefit from lower rates among other services. Click this link for more information about Pro. Go for Pro if you need full payment gateway functionality, as this system will allow you to create a fully customized checkout process that will enable customers to complete the purchase from your site rather than being transferred to PayPal as is the standard procedure.

Here’s Pro in a nutshell:

• $30.00 USD monthly
• No set-up fees
• No cancellation fees

Transaction fees 1.9% to 3.4% + 0.35 EUR

Choosing a Checkout Service

If you are using PayPal to collect payments for products and services that you are selling online, you will also need to choose a checkout service. All e-commerce solutions such as Shopify, WooCommerce, and Easy Digital Downloads will allow you to select one out of several e-commerce checkout business solutions offered by PayPal.

See also: Should you open separate PayPal accounts for each of your e-commerce stores?

The choice is between the following:

• PayPal Website Payments Standard
• PayPal Express Checkout
• PayPal Payments Pro

Read my separate post about the pros and cons of each and then decide accordingly

Managing Multiple Currencies

You can choose what currencies to accept and how you would like to accept them. When a buyer sends a payment in a currency you hold, the money will automatically appear in your account in that currency. When a buyer sends a payment in a currency you don’t hold, you can:

• Open a new currency balance to accept the payment.
• Convert the payment to a currency you do accept.
• Block the payment.

You can choose a primary currency as the one you use most often for sending and requesting payments. It’s also the currency that is used for your withdrawal limits.

If you convert a payment into your primary currency, PayPal offers conversion rates that are pretty bad. You can read my guide on PayPal currency conversions for more information about that. You can always preview conversion rates on currencies you don’t hold before accepting payments.

You might also want to change your PayPal withdrawal currency before you withdraw money to your credit card.

An Example

So how do PayPal transactions look? Let’s say I have a client from the US and charged him $600 for some web services I rendered. When he pays me via PayPal here’s what I see in my account:

Now what’s important here is to know exactly what that $29.70 fee stands for. Since this is a cross-border payment (US to Malta), it can be broken down as follows:

• Base fee (3.40% + $0.30 USD) = $20.70 USD.
• Cross-border fee consisting of a fixed (0.50% and 1.00% depending on between which countries the transfer is made) = $3.00 USD and $6.00 USD respectively.

As an average, be prepared to pay around 5% in transaction fees for every offshore payment you receive via PayPal.

If I remember correctly, with a Personal account you can accept or deny payments. Before you accept the payment, you can see the estimated transaction fee on the ‘Transaction Details’ page. If you deny the payment, the fee is not charged. With a Premier or Business account, there is no such option to accept or deny payments.

Refunds

When you issue a refund, you don’t lose any money and the purchaser gets all his money back. Click here to see the full refund policy together with a worked-out example of how refunds work.

PayPal has recently changed its policy, stiffing sellers, unfortunately.

Withdrawing funds from PayPal

Not all countries offer the same facilities for withdrawing funds from Paypal. For example, in my home country Malta, we used to be able to withdraw money only to a credit, debit, or prepaid card as well as a US bank account, but no local accounts.

This was then changed to allow withdrawals to EUR based local accounts, but unlike with other payment providers, we are not able to withdraw to local accounts in other currencies. This is a big disadvantage if you are making most of your sales in another currency such as USD.

So right now I have to accept all USD being converted automatically by my bank to my card’s currency which is always EUR by default since we’re based in Malta.

Read the following posts on this topic as it is critical that you get this right:

• Withdrawing from PayPal to online bank accounts like Wise or Revolut
• How to change PayPal’s withdrawal currency for credit cards

Paypal provides a handy checker where you can select your country and see which withdrawal options are available for that country.

What about PayPal Alternatives?

There are many PayPal alternatives, two of which are Payoneer and Stripe.

Payoneer

It’s worth looking at some PayPal alternatives that might be better suited to your needs. I’ve already mentioned Wise earlier in this article, but Payoneer is another widely used PayPal alternative, especially in India.

Launched in 2005 and headquartered in New York, Payoneer is a payment services provider that allows users to send and receive money online. The platform currently services more than 4 million customers located in more 200 countries.

Cross-currency transactions cost in the region of 2% above the mid-market rate, although this can be lowered if you hold a VIP account. If you obtain the Payoneer pre-paid debit card, then you’ll pay $3.15 per ATM withdrawal.

Payoneer is also a notable PayPal alternative due to its highly rated customer support. You have the option of contacting support via telephone, live chat or through a support ticket. However, response times are somewhat slow over the weekend, so you’re best off calling them if your query is of an urgent nature.

Check out Payoneer

Stripe

Stripe is recognized worldwide as the most painless way to accept credit cards online as a merchant, and it was created with developers in mind, making integrations easy. Fees are on the low side, and you can also get the first $20,000 of transactions with zero fees if you follow my method.

Further notes

Please be aware that there are two different types of payments that can be sent using PayPal – Purchase Payments and Personal Payments. With a Personal payment type, the sender of the payment can choose who pays the fee which is incurred. However, it is not free to send the payment. Either the sender or the receiver must pay. It is possible to receive personal payments to a Personal or Premier PayPal account.

If you are planning on receiving payments for a business you are running, you may need to upgrade your account type, as a Personal account is not suitable for receiving large amounts of payments. However, if you are only receiving a small number of payments, you are free to do so.

In case you are into gambling and want to make a deposit using Paypal, you should be aware that the payment platform has a strict policy about casino transactions.

See also: How to change ownership of a PayPal account

It is possible to have two PayPal accounts, however only one can be for personal use, and must be either Personal or Premier type. It’s not possible to have a Personal and Premier account at the same time.

You can downgrade from a Business account to a Premier account, but not back down to a Personal account.

PayPal users can have one Personal account and one Premier or Business account. Each account needs to have a unique email address, bank account and credit card.

Hopefully, that helps to make your choice easier. If you have any questions, fire them off in the comments section.

If you have a PayPal account that you regularly use for collecting payments, and your main home currency is not US dollars, you would do well to read on.

Not too long ago, I had written about biding your time to get the best exchange rate possible when transferring your money from PayPal to your bank account. Soon after that, I discovered that there is another area of optimization which we should be aware of.

My home currency is the Euro, so my bank account uses Euro by default. Online I collect payments in USD since that’s the de facto currency on the web. That means that when it’s time to get the gold home I am subject to conversion rates when changing from USD to Euro. This is precisely where many people lose a good chunk of money, so you have to be careful.

Since your bank account is in Euro and your PayPal account is in USD, a conversion needs to take place. Now it’s a well-known fact that PayPal currency conversion rates aren’t the best; they incorporate quite a healthy profit for themselves here. So it might actually be better for you to let your bank handle the conversion at their exchange rates.

All you need to do is check out your bank’s exchange rates, make your calculations on how much Euro they would give you for a given amount of USD, then compare it to what PayPal would give you via their currency converter.

Beware also that some banks charge an extra fee for currency conversions. My bank charges around 1 Euro each time there is a conversion.

If you establish that it would indeed be beneficial for the bank to handle the conversion, you can change your PayPal account from being Euro-based to USD-based via this link.

Setting the currency to use when withdrawing money

On a related note, you can check the net amount you will receive from a PayPal money transfer via this PayPal fee calculator. Sadly, it appears that the calculator’s formulae are a bit out of date as the net amounts didn’t exactly correspond when I tested it on my account.

Note that if you have a Europe-based USD bank account, you will not be able to send USD directly from PayPal to that USD bank account. There will always need to be a conversion happening on the bank’s side, and the money will then go to your Euro account. You can try your luck with linking a multi-currency account like Wise Borderless to go around this issue, but it doesn’t always work.

As a test, I made a few transfers of $2,500 to my Euro-based bank account just to test the difference in money between using PayPal’s exchange rates and those of the bank.

Here are the results:

• $2,500 converted to Euro by PayPal: €2,171.92
• $2,500 converted to Euro by my bank: €2,216.06

Crazy huh?

More than €44 difference on each transaction!! That’s around 2% more added cost on each transaction. Keep in mind that PayPal is already charging you $2.50 per transaction as a fixed fee.

It definitely works better for me to use USD as my PayPal account currency, then withdraw directly in USD to my credit card. Note that changing your withdrawal currency has to be done manually by following my guide.

Note: If you have any questions after reading this and the several other articles relating to PayPal on this site, please leave a comment or contact PayPal directly. Unfortunately, due to time constraints, I am unable to offer any advice over email so all emails related to PayPal will remain unanswered.