Decrease PayPal Fees: 5 Ways to Lower Invoicing Fees

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Article Approved By Banking Expert

This article has been reviewed and deemed factual by our content auditor with 8 years of banking experience.

No one likes paying PayPal fees to receive money they’ve rightfully earned. I know I don’t!

But this seems inevitable, and not something you can change. Right?

NO, true!

When it comes to accepting payments virtually, why do we let online payment systems rob us of our hard-earned income? 

After being tired of giving up my freelance income on PayPal transaction fees, I started looking for other options.

Here are 5 simple ways (plus, a bonus tip!) to decrease PayPal fees. This applies to receiving payments from small business clients online, or when using PayPal for eBay or Etsy transactions.

1. Accept ACH bank transfers and echecks

If you use a traditional invoicing software like QuickBooks Online, you can accept ACH bank transfers and echecks for no fee at all!

Seriously, ACH transfers and echecks are a completely free option for service providers who send invoices and accept payments online.

While accepting credit cards virtually can cost 2.9% plus an additional $0.25 fee, encouraging clients and customers to pay with a bank transfer is totally free (for everyone!).

QuickBooks Online ACH bank transfers payment

2. Use the PayPal business payment options

Several accounting programs have a deal worked out with PayPal that can save you quite a bit of money on PayPal fees.

For example, for loyal customers who use FreshBooks Invoicing you get access to the PayPal Business Payments option. This only costs you $0.50 per bank transfer payment received from clients.

In order for this to work clients must choose the “PayPal Transfer” option and have the funds taken out of their bank account.

This process takes 3-4 business days longer than being paid via standard PayPal or credit card. But in most cases this added savings is totally worth it.

I mean, who doesn’t want to keep more of their hard-earned money? Here’s how it works.

Start by creating a new invoice

Click the “New Invoice” button to create a new invoice for a client, or you can replicate your template from a past invoice.

On the right-hand side of your new invoice, look under the Online Payment Options section and you’ll see the different payment options you currently offer your clients.

Choose the PayPal Business Payment option

Be sure to check the “business” PayPal Business Payment box under the PayPal tab when creating an invoice, and you’ll only be charged $0.50 per transaction — no matter how large your invoice.

Here’s a screenshot of what it looks inside FreshBooks. Please note, this is only available for older FreshBooks account holders.

freshbooks PP biz option example 2016

Here’s how it works in FreshBooks

The process looks like this –> New Invoice –> Accept Payments Online –> check boxes for different payment options, the PayPal Business Payments option is under the PayPal tab.

You can’t use it with credit cards, only a direct transfer from a bank account. But most of my clients use this option and I’ve never had an issue.

You can use FreshBooks to clock your time with client projects, bill for expenses and services, and then receive payments each month.

Yes, FreshBooks Classic charges a small monthly fee to use their services (about $20-30 a month), although they do have a free service with less features. But that’s small change compared to the fees PayPal charges, and how much money you could save using this invoicing hack.

Beware though, this does not include a credit payment option. In order to receive the $0.50 per invoice paid option your clients have to be willing to pay via this method only.

However, it can be worth the savings (in my opinion and experience) and most clients don’t mind using this payment process at all.

This is mostly only available for U.S. currency but if your clients pay you using this method, it could potentially save you hundreds of dollars each year.

3. Apply for lower merchant fees with PayPal

There is a simple hack that only takes a minute or two to help you pay lower PayPal fees. If your PayPal account processes $3,000 or more transactions per month, you can apply for lower merchant transaction fees.

This could take the normal 2.9% fee to 2.5% or even 2.2% if you qualify.paypal merchant fee schedule

Follow these steps to apply for lower merchant fees with PayPal.

  • Log into your PayPal account
  • Access the Merchant Rate Application form
  • Fill in your details on the short form
  • Check the box to indicate you have read the User Agreement
  • Click “Submit”

You’ll immediately find out whether or not you PayPal account is approved for a lower percentage rate.

4. Request direct deposit as a preferred method

Avoid paying PayPal invoicing fees by requesting direct deposit instead. Not only will the funds be deposited into your account much faster than a 2-day transfer request from PayPal, but you will save money on transaction fees.

Here are some of the best direct deposit services to use as a freelancer.


Dwolla makes it easy to transfer funds from one person to another and works with many of the best accounting services.

The best part? No matter how big or small the payment transaction is, Dwolla’s fee is only $0.25. And if the transaction is under $10 there’s no fee at all.


WePay has an online payment portal that’s completely customizable. It works with invoicing service such as FreshBooks, Zoho and more. WePay accepts all major credit cards and ACH payments.

But we’re going to focus on the direct deposit (ACH) payment processing as it’s only a 1% fee plus $0.30 per transaction.

This is quite a big savings over PayPal’s standard 2.9% fee.

Payroll deposit

Many business clients work with multiple freelance contractors so they may have a payroll system set up for paying invoices. Using a payroll service like Gusto you can have your monthly invoice payment direct deposited into your checking account.

There’s no fee for you to pay, as the client pays the fees to the payroll service.

I work with several clients who pay me via direct deposit using payroll services and it’s honestly my preferred payment method. I currently use Dwolla because it integrates with my GoDaddy Bookkeeping software.

But I’ve also used WePay in the past to avoid PayPal fees and still save money. Any of these are excellent options for decreasing PayPal invoicing fees.

multiple payment solutions

5. Consider wire transfers online

If you work with international freelance clients it might make more sense to set up wire transfers to receive invoicing payments. Otherwise you may have to pay currency conversion rates and other fees to access your money.

The only thing is that this can cost your clients $20-40 per international wire transfer so it’s a bit expensive. In addition, it can take several business days to process the payment into your bank account.

One way to avoid the expense of a wire transfer is to use a service like TransferWise. They are fully transparent with their fees and don’t hike up the cost for currency conversion (like most banks do).

TransferWise is cheaper and faster than traditional wire transfers!

Bonus: Include the processing fee in your invoice

The best way to avoid PayPal fees is to have clients pay the fees for you! You can include the PayPal directly on client invoices as a small percentage business fee.

PayPal charges anywhere from 2%–6% to accept payments from clients, so this could save you a lot of money. And since this is the most widely accepted form of online payment, most clients request it.

This is why it’s totally okay to include a standard PayPal percentage fee on invoices sent to clients.

Remember, PayPal fees are tax deductible

In the end you may do what you can to avoid PayPal fees but it’s not full proof. Transaction fees are just part of doing business online. The good news though, is that PayPal fees are totally tax deductible as a business expense.

It’s true!

At the end of the year, simply calculate PayPal fees that you paid. Then include the total amount of fees on your self-employed tax return, Schedule C.

At the very least, paying PayPal fees can help reduce your tax bill at the end of the year!

If you’re still losing your hard-earned money to PayPal fees, try these tips to decrease your PayPal fees.

It will only take a few minutes to apply these money-saving tips so you can keep more of your hard-earned money!


Stop paying PayPal fees and start keeping more of your hard-earned money! Here are 5 proven ways to lower PayPal invoicing fees every month.</div >

stop paying invoicing fees</div >
No one likes paying PayPal fees to receive money they've rightfully earned. I know I don't! Here are 5 ways to decrease PayPal fees every month.
How to Stop Paying Super High PayPal Fees For Good -- Learn the top ways you can reduce PayPal fees and invoicing fees for your freelance invoices and online payments. These are proven tips to decrease business expenses and keep more of your money!
Carrie Smith Nicholson
Hi there! My name is Carrie Smith Nicholson. I'm an executive virtual assistant, systems consultant, and business blogger. Over the past 7+ years I've worked with online biz owners and bloggers to find the best tools, apps, and systems so they can grow their business without hiring a large team and scale without stress! After paying off $14,000 of debt and quitting my accounting day job, I started this blog, I was tired of being overworked and burned out trying to chase money -- I knew there had to be a better way! Sign up to get my FREE guide and learn THE TOP 10 BUSINESS TOOLS I use to get massive amounts of stuff done!

31 thoughts on “Decrease PayPal Fees: 5 Ways to Lower Invoicing Fees”

  1. This is my first time commenting, but I’ve been following your blog for a while and have found it HUGELY helpful!

    Just wanted to say thanks much for this explanation- I’ve heard about this method but wasn’t sure exactly how it worked. 2014 was my first year freelancing full time, so I wasn’t sure if something like Freshbooks would be worth the cost. But now that I’ve seen how much all those Paypal fees add up, it looks like Freshbooks would save me a ton of money!!

    May I ask why you recommend Freshbooks vs Harvest or Zoho?

    1. Hi KeriLynn,

      Thanks for the first comment! I really appreciate your thoughts and kind words.

      Congrats on freelancing full time in 2014, it was also my first full year being my own boss. In my experience, FreshBooks has definitely been worth the cost as it’s saved me a lot of money in fees. I tried Harvest, but didn’t like the software as much as FreshBooks, and I haven’t personally tried Zoho. But I was thinking of doing some research to compare the them all and see how they stack up. Maybe I’ll post a comparison on the blog soon. Great idea! Thanks. 🙂

  2. QuickBooks has a similar service. Intuit PaymentNetwork charges me $.50/transaction when someone pays through their service. Within Quickbooks I create the invoice and get a unique URL for that invoice. I email the URL to the client and they pay online. I don’t accept credit card payments because Intuit will charge me the typical 3% fee, so my clients must pay via checking account, but most of my client’s don’t mind typing in their bank information.

    1. Oh what a good tip, Carol. Thank you! I didn’t realize that QuickBooks offered this same type of thing, so I’ll be sure to include that in an upcoming article I’m writing about other types of payment systems. Mind if I quote you?

  3. When you use Freshbooks and a client pays with a credit card, aren’t you still charged the transaction fee from the credit card company? I am trying to figure out what the my best invoicing option is and I am just wondering if that was taken into account. Thank you!

    1. Hi Maggie! Yes you are correct about this, which is why I suggest using the PayPal business payment option as often as possible. But there will be some clients who prefer to use a credit card as payment, which means you have to pay a transaction fee. But at least it’s part of the cost of doing business and can be deducted on your tax return every year. Hope that helps!

  4. Hi Carrie,
    Thanks for this article. As I work in AUD it doesn’t work for me right now. Here’s hoping they extend it to other currencies soon. Until then, I just have to write the fee off as a business expense.

  5. I wrote about this a month or so ago – I finally switched to Freshbooks because I realized that I was losing money by not making the switch. I did the math and even with having to pay to use Freshbooks, I would still be ahead by having less fees each month.

  6. Hi Carrie! I just came across your website and am finding it really helpful. I do have a question regarding the option to check PayPal Business. WHERE do you find this?! On my current invoicing, it only gives me an option to check a box that says “accepts credit cards.” I don’t see a PayPal option at all, let alone the business option.

    1. Hey Kelly, great question! When you’re creating a new invoice it’s under the payment options box on the right-hand side.

      FreshBooks business payment example

      So the process looks like this –> New Invoice –> Accept Payments Online –> check boxes for different payment options, the PayPal Business Payments option is under the PayPal tab. You can’t use it with credit cards, only a direct transfer from a bank account. But most of my clients use this option and I’ve never had an issue. I still use this feature every month for my own invoicing!

  7. I think it’s worth noting that if you use Harvest, they make you wait 5 days to get your money after the client pays your invoice. It gets paid by Echeck for some reason so 5 business days. Do you know if the other services process your payments via Echeck? I would be willing to switch to Freshbooks if they process payments instantly instead of Echeck. I’ve had my verified business account for 5 years now so there’s no reason for them to be doing Echecks.

  8. Thanks for the advice, but has anyone got this to work outside of the US?

    I’m in the UK and don’t seem to have this option in Freshbooks, but do have a PayPal Business Account.


  9. The service seems to no longer do this PayPal option so I suggest you take it down.
    this post is completely irrelevant And I’m disappointed that after I signed up and sent out a few invoices I realize that my customers would still have to pay the exact same way with the 2.9% interest rate fee as PayPal in QuickBooks and every other service has.

    1. Oh really? Sorry you haven’t been able to find this option, Cassandra. You can see from the screenshot in the comments above that the PayPal Business Payment option for $0.50 per transaction is STILL AVAILABLE. If you need additional help, shoot me an email.

    2. Cassandra, this didn’t work for me at first, either. But then I realized it was because I didn’t have my PayPal account associated with my FreshBooks account. Once I clicked the “activate PayPal” link (in FreshBooks Settings –> Accept Credit Cards tab, scroll to bottom), I was able to associate my PayPal Business account with FreshBooks. When I went back to the invoice creation, the PayPal Business Payments option showed up as Carrie’s screenshot shows above. Hope this helps!

  10. Thanks for the tip!
    Freshbooks IS stupid easy to use, the people there are super nice (picked-up the phone on the first ring!) AND they post bios of their office dogs (3 of ’em) under the “About Us” tab.
    One thing that initially scared me off the base version was the 5 client limit.
    Turns out that’s 5 “active” clients. It’s apparently pretty easy to deactivate and re-activate clients and you still can access any invoices you’ve already created.

  11. Is this option also available for recurring invoices for clients who are on a retainer, or is it only an option for individual invoices created and sent manually?

  12. FYI I was told just this week by a Freshbooks employee that Paypal Business Payments are not part of the new Freshbooks.

    “One thing to keep in mind is that we do not have PayPal as one of our payment processors within the new platform. We had a lot of feedback regarding the user experience with PayPal and found that most people preferred FreshBooks Payments (WePay) and Stripe.”

    I personally never had a problem with it and am pretty bummed to hear this. I was told for now I can stay with the old platform but who knows how long that’s going to last.

    1. Yes, this ticked me off. There is some sort of affiliation between Freshbooks and Wepay hence the removal of PayPal. They are doing it for their own financial reasons, not for customers. It causes me issues as I have many third party resell services that are paid via PayPal and I use my PayPal incoming payments to fund the account. Ugh! Wepay just doesn’t enjoy the global acceptance yet to do this.

  13. There are some great ideas in here – so glad you shared them! One of my favorite ways to avoid processing fees is to use Square. If you sign up via a referral link, you get your first $1000 of payments processed for free. You can then give your own referral link to others and when they use it to sign up and start processing, you both get $1k processed for free. (Shameless plug: I have a link, if anyone wants to use it. ?)

    Pro tip, though: if you include the processing fee on your invoice, be REALLY careful. In a lot of states in the US, it’s illegal to pass on processing fees to customers. It’s a cost of doing business and while we may not like it, that’s how it is. Check your state’s laws about this. You may be able to charge an “administration fee,” but it often CANNOT be specifically for card processing fees. Just a heads up to keep you out of potential hot legal waters. ?

    1. Great tip about using Square, Jenn! Also, thanks for the clarification about passing processing fees onto clients/customers. That’s great information to keep in mind depending on what state you live in. I always label the processing fees as an admin fee so that’s probably the best way to go about it. Thanks for the comment!

  14. I called Paypal to reduce my credit card merchant fees. They told me I had to have $250K in VT or $500K in general collections in order to qualify for 2.6.
    I also realized the Paypal is not FDIC insured so the balance will be swept into my bank asap.


  15. Hey, Carrie, I read multiple posts of yours on guidance with tips on how an individual freelancer can save his hard-earned earning plus how he/she can make their life comfortable via recommended. Your tips are like Bible for any freelancer.

    I am from India currently staying in UnitedStates and thinking to start eCommerce website where major of the client would be from India I am wondering if you can help with information about Paypal business charges 4.4% fee+$.30 what are the other means which can be used to reduce this charges.. looking at comments I am exploring Payoneer as one of the alternatives.
    Appreciate any kind of help with the information.

    Vamshi Gupta

  16. #3 is not so clear cut. The link leads to an error page that says, “MRA is not eligible for this account.” I have a standard business account and I do $6k+ per month. I called Paypal and they told me that I need to perform up to $500,000 per year or $41,667 in volume per month.

    That $3,000 per month only applies to PayPal pro, virtual terminal, etc. NOT standard personal or business.

    Please clarify that next time.

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