How to Pay a Smaller Percentage to PayPal

1. Tell people who send you money to mark their payments as "Personal." To receive money without a fee, the recipient has to specify to the sender that when they complete Paypal's "Send Money" form, the funds should be sent under the tab marked "Personal." Once they click the "Personal" tab, the sender has five options: "Gift," "Living Expense," "Payment Owed," "Cash Advance" (from a credit card) and "Other." Payments made under these options are free.
2. Ask clients making a one-time purchase to make payments under the "Personal" tab and mark them "Payment Owed." For business use, the "Payment Owed" option is limited, but still a viable option for avoiding fees, particularly if it's for a payment for a service, not tangible goods. Services are not eligible for Paypal's buyer protection coverage anyway, so a client isn't jeopardizing their payment security by paying via the "Personal" tab--they're just saving the recipient from incurring any fees.To receive funds on PayPal without these options, as of January 2010, PayPal charges between 1.9 and 2.9 percent of the transaction amount plus 30 cents per transaction. When individual clients make one-time payments owed via the "Personal" tab, this can save the recipient hundreds, even thousands of dollars over time.
3. Avoid funding your Paypal transaction with a credit or debit card. Sending money via PayPal to anyone is free unless funded by a credit card, debit card or PayPal credit card. In this scenario, PayPal charges 2.9 percent of the transaction amount to send money, plus another 30 cents per transaction. The sender must decide if he will pay the fees, or if the recipient will be responsible for them. To avoid these types of sender's fees, fully fund the money transfer with either your PayPal balance or with a funds transfer from a bank checking account.
4. Time your payments to bump your monthly sales volume into a lower fee bracket. Paypal charges merchants based on the amount of money that flows into their accounts each month. Merchants who bring in more than $3,000 in a month can apply to have the percentage PayPal charges per transaction dropped from 2.9 to 2.5 percent for the next month. If they make more than $10,000 in a month it could drop to 2.2 percent and if receipts are more than $100,000 in a month the percentage falls to 1.9 percent. The additional 30-cent fee never decreases.