Increase Profits with PayPal Micropayments

Save cents on every small transaction you engage in

PayPal Micropayments can add up to a big difference for your bottom line. Photo: Kenneystudios / Dreamstime

Transaction fees are a part of life for eBay sellers, and PayPal fees can often take something of a bite out of profits. This can seem to be especially true for sellers with very tight margins, who usually happen also to be sellers of very inexpensive items. Margins can be so tight, in fact, that it can start to seem as though it’s not possible to be competitive.

If this sounds like you and you aren’t using PayPal Micropayments, now may be the time for you to learn more about the program and consider using it.

Different Fee Structure

PayPal Micropayments offers sellers a different fee structure that is more advantageous for high-volume, low-margin, low-value items. Some sellers increase their profit margin by as much as 20-30 percent upon switching, though your results may very (you should therefore run some numbers before you switch to make sure the alternate fee structure is better for your particular eBay business).

With PayPal Micropayments you’ll pay 5 percent plus 5 cents per transaction (for U.S. accounts) versus 2.9 percent plus 30 cents per transaction at the usual PayPal rate. If a sizable percentage of your transactions fall under the $12.00 mark, there’s a good chance you’ll find that PayPal Micropayments will save you money.

Caveats and Limitations

The catch is that any one PayPal account is either one thing or the other (a micropayments or a standard account) and there is no way to switch back and forth between the two on a per-transaction basis.

To use PayPal Micropayments, therefore, you’ll either need to:

 

  • create a brand separate PayPal Micropayments account (with a separate bank account, since PayPal won’t let you use the same bank account twice) and remember to carefully switch between your two accounts as you list items for sale, or
  • convert your existing PayPal account to micropayments rates entirely, losing the ability to conduct business at non-micropayments rates.

    Making it Work

    That’s all there is to it! Payments you receive in micropayments accounts are automatically charged at the alternate micropayments rate. If you’re having trouble making a high-volume, low-cost business model work, PayPal Micropayments can be one part of a strategy (along with things like good fee control) for getting back on your game.