Fees at a glance
| Friends and Family | Goods and Services | |
|---|---|---|
| US payment, funded by balance or bank | Free | 2.99%, no fixed fee |
| US payment, funded by credit or debit card | Fee applies (card rate) | 2.99% + $0.49 |
| PayPal Checkout payment | Not applicable | 3.49% + $0.49 |
| International personal payment | Typically 5%, with minimum and maximum caps | Commercial rate + 1.50% international fee |
| Who pays the fee | Sender (on card-funded or international) | Seller (deducted from what they receive) |
| Purchase protection | None | Yes, for buyer and eligible sellers |
| Chargebacks and disputes | No dispute process | Buyer can dispute; $20 chargeback fee, $15 dispute fee ($30 high volume) |
What Friends and Family is for
Splitting a restaurant bill, paying back a roommate, sending birthday money. When both sides trust each other completely, the free transfer is the cheapest way to move money. There is no buyer protection, no seller protection, and no dispute process: once the money is sent, it is gone. That is fine between friends and dangerous with strangers.
What Goods and Services buys you
The fee funds PayPal's Purchase Protection. If the item never arrives or is significantly not as described, the buyer can open a dispute and get a refund. Eligible sellers get protection against unauthorized payments and item-not-received claims. For marketplace sales, freelance work, and anything bought from someone you do not know personally, that protection is worth far more than 2.99%.
Why sellers ask for Friends and Family
To dodge the fee. It is also against PayPal's terms when the payment is for goods or services, and it is the single most common setup for marketplace scams: a seller who insists on Friends and Family keeps your money and you have no recourse. Legitimate sellers absorb the fee as a cost of doing business; some add it to the price openly, which is the honest version.
Tax reporting
Goods and Services payments count toward payment-card reporting thresholds (Form 1099-K) when you cross them; Friends and Family payments are personal transfers and are not reported as business income. Mislabeling business income as Friends and Family to dodge reporting is tax evasion, not a loophole.
How to choose
- Paying someone you trust, no purchase involved: Friends and Family, funded from balance or bank, free.
- Buying anything from a stranger or a business: Goods and Services, always. The fee is the price of protection.
- Selling online: quote prices that include the fee, or state it openly. Never ask buyers to use Friends and Family.
- Sending money abroad to family: compare the 5% personal-payment fee against a dedicated remittance service; PayPal is rarely the cheapest route.
Fees change. Check PayPal's current fee schedule before a large transaction, and confirm which funding source your payment uses, since card-funded personal payments are not free.
Calculate your exact fee
Work out the exact fee on any sale with our PayPal fee calculator.