PayPal Micropayments: Everything you need to know

Remay Villaester (May)

If you sell online, you understand just how vital a payment gateway is for your business. Without a way for your customers to make payments right on your website, you risk losing their attention and their business. This is why you need to select your payment platform carefully.

Another factor that you need to watch out for is the commissions and fees that you’ll pay on every transaction. Many payment platforms charge excessive commissions and fees on every transaction. This is especially true for international payments. If you are not careful, you might find out that you are losing a significant portion of your profit to bloated exchange rates and hidden charges.

This is worrisome if you charge micropayments, that is, payments of £10 and less. Costs can add up quickly and could amount to a significant fraction of a micropayment transaction.

In this article, we’ll take a look at PayPal’s micropayment structure, a special rate for small and micro-payments on the platform. We’ll also show you how to save money on sales using Wise Business.

Ready to find out more?

How does PayPal micropayments work?

PayPal micropayment is a method introduced by PayPal to eliminate the unequal fees on small transactions. For example, if you happen to sell products under £5, PayPal will charge up to 45p from your profit. This is because PayPal’s standard transaction fee for domestic transfers within the UK is 2.90% + 30p on every transaction. This percentage is unfair to small businesses. With this rate, on a £1 transaction, the fees are a whopping 23% of your sale.¹

This is where micropayments come in. It is PayPal’s attempt to reduce these unfair fees on small transactions. By applying PayPal’s micropayments option on your website, you’ll be paying less fees on small payments, which will save you money.

PayPal defines Micropayments as billing of anything under £5. But what exactly are the fees charged by PayPal on small payments?

What are the fees for micropayments?

Instead of the standard 2.90% + 30p per transaction that PayPal charges, you’ll be charged a 5% + £0.05 fee on every transaction. This would mean that on a £1 transaction, you will pay 10p as transaction fees, rather than 59p, and you save 41p. Ordinarily, this does not look much, but if you sell very high volumes at low prices, it quickly adds up to become a significant saving. After all, it’s a small leak that sinks great ships.

While PayPal does not charge any money for this service, it is almost hidden from customers. The plan is available to PayPal business account holders but is not included as standard. They’ll have to request it specially. It’s sort of hidden so that people don’t know about it, but we are aimed at helping you, so we’ll break it down for you in a table.

Domestic Micropayments

Cost of ProductStandard FeeMicro Fee

International Micropayments

Cost of ProductStandard FeeMicro Fee
€1€0.67€0.06 + flat fee based on currency
€2€1.01€0.12 + flat fee based on currency
€3€1.35€0.18 + flat fee based on currency
€4€1.69€0.24 + flat fee based on currency
€5€2.03€0.3 + flat fee based on currency

As you can see, micropayments can help you reduce the percentage of your profits that go into paying for commissions. Is PayPal really the best option for a payment platform when looking to save money?

Micropayment flat fee

AUD0.05TWD2.00 TWD
Keep in mind the additional costs for converting your money to your local currency. The fee usually varies depending on the currency which ranges from 2.5 to 4% of the amount you’re converting. When all of these fees added up, the sales cost increases, hence less profit for you - expenses that are not the most obvious.

To reduce the cost, withdraw your money to a Wise Multi-currency account from PayPal. You can take advantage of Wise's real exchange rate when converting your money to your local currency. This way you’d only be paying 0.75% on average.

Wise is a groundbreaking company with over 5 million customers globally taking an innovative, fresh approach to financial services.

Wise is known for offering one of the fairest exchange rates in the business instead of inflating them with hidden fees.

You can take advantage of the following additional benefits:

Start saving today with Wise


  1. PayPal website - merchant fees

Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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