How to use PayPal properly
For the TLDR crowd ("Too Long Didn't Read), just note the formula in bold below. That calculates a total PayPal payment you need (for US sellers to US buyers) to clear x dollars when shipping is going to cost you s dollars. That said, on with the show...
Sometimes a For Sale ad will show up with a person asking for PayPal payments to be made as Personal payments (gifts) rather than Purchases in order to avoid fees. Sometimes you also see PayPal accepted, but the person asks you to add 3% or more. Both of these practices violate PayPal's User Agreement:
https://www.paypal.com/webapps/mpp/u...reement-full#4
Specifically sections 4.1 and 4.5
4.1 Receiving Personal Payments. If you are selling goods or services, you may not ask the buyer to send you a Personal Payment for the purchase. If you do so, PayPal may remove your ability to accept Personal Payments.Section 4.1 is a little tricky. You can accept a Personal Payment for goods or services, but you are not permitted to ask for this form of payment. We'll leave some of the edge cases to the lawyer types, but there's a very easy and ethical way out that just involves you setting your asking price correctly according to what your rock bottom price is. Since PayPal is the primary way that people pay for pens bought from private parties these days, simply assume that PayPal will be used and factor the fee of 2.9% plus $0.30 into your asking price (or whatever your PayPal fees are in your country). Generally you'll want to ask for more than the amount that nets your rock bottom price, but at some point you need to know what that amount is. It's maybe not the sort of math most people do every day, but I thought I'd just give you the formula so you can plug in with your calculator. In what follows, I'm going to do all the calculations assuming it's at your rock bottom price. What you're going to want to do in practice is do the calculations this way and then add in however much you see fit to bring the price up to the going rate. If your rock bottom price is at or above the going rate, there's probably not going to be a sale, anyway, so all calculations are moot.4.5 No Surcharges. You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. 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.
Let's suppose that you have a pen that's worth $100 to you. Anything less than $100 and you don't want to sell it. If you ask for $100 plus shipping, and let's say shipping is $5.25, then you end up with less than $100. Your buyer will send you $105.25. PayPal will extract $0.30 and 2.9% of $105.25, which is $3.05. You have to pay the $5.25 for shipping, so you net $105.25 - 0.30 - 3.05 - 5.25 = $96.65, which was less than you wanted. I guess this phenomenon is behind people asking for more than the PayPal fees as a surcharge, but here's how you work it. Let's calculate the TOTAL payment you want the buyer to make:
Let x be the amount of money you want to have after all is said and done.
Let s be the amount of money you must pay for shipping.
Then the the total payment a buyer makes should be:
TOTAL = (x + s + 0.3)/(1 - 0.029)
The "magic numbers" in this formula are 0.3, the fixed fee of $0.30 per transaction, and 0.029, the 2.9% fee rate. These are the charges for a US seller selling to a US buyer. In general, it goes like
TOTAL = (x + shipping + fixed)/(1 - rate)
where you plug in your fixed fee per transaction, and rate is PayPal's fee rate.
To evaluate the formula, you might want to precompute the denominator to make it less likely that you'll make a mistake when plugging into the calculator. In the US to US case it is 0.971. Also, depending on what calculator you use, make sure you get a total after x + s + 0.3 before doing the division, or use parentheses if your calculator has them. So, returning to our example of wanting to net $100 and shipping is $5.25, we want the buyer to pay
TOTAL = (100 + 5.25 + 0.3)/0.971 = $108.70
If you want to say "shipped", you ask for at least $108.70. If you say "plus shipping", you ask for at least 108.70 - 5.25 = $103.45 and say that shipping will be $5.25 . Now, supposing you sell at your rock bottom price, this time the buyer makes a payment of $108.70, PayPal takes out $0.30 and 2.9% of $108.70, which is $3.15, and you pay for shipping, so that's $108.70 - 0.30 - 3.15 - 5.25 = $100. Viola!
Now what if you end up with an international buyer for whom shipping costs you, say, $12.50. How do we fix this up? Go back through the formula and compute it for $12.50 shipping. Unfortunately, the rate changes from 2.9% to 3.9%, and the fixed fee of 30 cents varies by currency. You can look that up, but we're talking less than fifty cents US, so let's fudge it at that. Now the denominator is 1 - 0.039 = 0.961.
TOTAL = (100 + 12.50 + 0.50)/0.961 = $117.59 .
So that's what you want the buyer to pay. If you are asking for a "shipped" price, then you're done. If you originally quoted $103.45 "plus shipping", you calculate your "international shipping and handling charge" as $117.59 - $103.45 = $14.14.
The key point here is that, although we're factoring in PayPal's fees, it is the same asking price for both PayPal and cash. That keeps you on the straight and narrow with respect to PayPal's user agreement. The buyer with cash can still offer you less if they want to. However they say they'll pay, just do the math and see whether it works out.
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