PayPal 101: How Paypal Works 2 of 10

http://netforbeginners.about.com/od/ebay101/ss/paypal101_2.htm

posted 2009 september

Part 2: How does PayPal make money?

Answer: as a middleman financial broker, PayPal makes its profit by charging a percentage of the money it transfers for you.

• PayPal is Free for Buyers. Once a buyer sets up a Paypal account, then it costs nothing to send money to other PayPal users. The funds are withdrawn from the user's credit card or bank account, or both. PayPal does not charge buyers to send money.
  
  
• PayPal Charges Sellers 1.9% to 2.9%. PayPal will only charge you to receive funds. Using a special surcharge formula, PayPal will bill you whenever you receive a payment from a buyer.

Paypal Fee Table:

1. For receiving transfers under $3000 USD: the fee is 2.9% + $0.30 USD.
2. For receiving transfers $3000.01 to $10,000: the fee is 2.5% + $0.30 USD.
3. For receiving transfers $10,000.01 to $100,000: the fee is 2.2% + $0.30 USD.
4. Receiving transfers over $100,000: Paypal charges 1.9% + $0.30 USD.

As you might guess, smart sellers will increase their prices to offset this charge on their side of PayPal.

Next: "What Can I Use PayPal For?"