How To Avoid PayPal Invoicing Fees

No one likes paying fees to receive the money they’ve rightfully earned, but PayPal fees aren’t something you can change, right?
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 to PayPal transaction fees, I started looking for other options.

6 Ways to Avoid PayPal Fees

Here are some proven ways to decrease or eliminate PayPal transaction fees:

  1. Include any Fees in Your Invoice
  2. ACH Bank Transfers & e-checks
  3. Direct Deposit
  4. Online Wire Transfers
  5. Get PayPal Business Discounts
  6. Apply for Lower Merchant Fees

1. 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 fees directly on client invoices as a small percentage business fee.

PayPal charges anywhere from 2%–4% 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.

2. Accept ACH Bank Transfers and e-checks

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

Seriously, ACH transfers and e-checks 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!).

3. 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, a Chase Company, has an online payment portal that’s completely customizable. It works with invoicing services 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.

4. 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 a currency conversion (like most banks do).

Wise, formerly TransferWise, is cheaper and faster than traditional wire transfers!

5. Get PayPal Business Discounts

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, 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, these 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 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.

6. 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.

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.

Remember, PayPal fees are Tax-Deductible

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 the 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!

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  • Comment Author image blank
    I have looked high and low in my PayPal account and cannot find the Merchant Rate Application form. Any advice to find it?