Best PayPal Account Type for Freelancers (Complete Overview)

PayPal¹ is one of the longest established - and best known - digital payment platforms in the world. You may already use PayPal to send and receive personal payments, or to shop online - but what about PayPal for freelancers?

This guide looks at how to use PayPal to receive customer payments as a freelancer - and also touches on Wise Business as an alternative provider you may want to consider.

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Best PayPal Account Type for Freelancers

With an estimated 400 million+ global users, PayPal offers personal and merchant accounts which allow people to pay, and get paid, across borders and currencies. Personal and merchant accounts have their own features and are aimed at slightly different customer needs.

Probably the key differences to note are firstly that PayPal merchant accounts can not be used to receive family and friends transfers², while PayPal personal accounts can be used to accept occasional commercial payments. Secondly, PayPal US consumer fees³ are different in several important ways compared to PayPal US merchant fees⁴ - and merchant customers can access some features not available to personal account holders.

Join us as we explore the options on PayPal for freelancers, for US customers, including using your existing PayPal personal account, or opening a dedicated PayPal merchant account.

Can you use a PayPal personal account for business?

In some circumstances you could use a PayPal personal account for occasional business purposes - such as if you’re a casual eBay seller. However, you can’t use your PayPal personal accounts for frequent commercial transactions - and would risk having the account closed if you did.

It’s also worth noting that the rules regarding having a dedicated business account in the US depend to some extent on the business entity type you select. If you’re considered a sole proprietor - meaning you’ve not registered for any other type of business such as an LLC⁵ - you may not be legally obliged to have a dedicated business account. However, even if you’re not required to have a business account by law, you’ll probably find it’s a handy tool to have, to keep your personal and business finances separate and make tax reporting easier.

PayPal Business Account for Freelancers

PayPal merchant accounts allow users to operate under a business name, receive customer payments by card, and access a whole suite of extra features for businesses⁶ including higher transaction limits, seller protections and credit solutions.

This may mean that the PayPal merchant account suits you as a freelancer if you’re building your business and expect to be transacting frequently, or growing your turnover to a significant level.

As we've mentioned, the fees you pay with PayPal merchant accounts aren’t the same as when you have a personal account. Read through the fee schedule⁴ carefully before you sign up - paying particular attention to the commercial transaction rates, fees for currency conversion and withdrawal costs.

Commercial transaction fees vary depending on how you received payments, from around 2.29% to 3.49% of the transaction value. Currency conversion can cost 3% or 4% if you’re paid in foreign currencies, and while a standard withdrawal to your bank is free, fees apply if you need to get your funds out of PayPal in a hurry⁴.

Learn More: Is PayPal Business free?

PayPal Business Account Requirements

You can create a PayPal merchant account with your personal information, including your SSN, your business information and your bank account details.

Exactly what you’ll need to provide might vary depending on your business type - PayPal is obliged to check that your business is genuine, and so will ask for supporting information such as a website if you have it, and may also need to complete a credit check⁷.

PayPal Personal Account for Freelancers

PayPal personal accounts are recommended for customers who want to use PayPal to shop online, send payments to friends and family, receive personal transfers, or for occasional sellers receiving payments from others.

A PayPal personal account could be an option for freelancers who only occasionally sell goods or services, but the chances are that if you transact for your business more often you’ll need to upgrade to a merchant account.

PayPal personal accounts don’t have commercial transaction fees. They’re intended for receiving payments from friends and family only, and so no costs apply when you receive money to your account. Currency conversion fees of 3% or 4% apply if you need to switch from one currency to another, and there are withdrawal fees of 1.75% if you make an instant withdrawal from your account³.

PayPal Personal Account Requirements

To open a PayPal personal account you’ll need to provide your personal and contact information. If you want to send payments you’ll also need to link an eligible bank account or card.

Wise Business vs. PayPal Business

When it comes to PayPal for freelancers your options probably depend on how frequently you’ll transact for your business, and whether you’ve registered a business in the US or are working as a sole proprietor.

Before you decide, though, check out some PayPal alternatives - like Wise Business.

Wise Business for International Transactions

PayPal can be handy for businesses as you can receive payments in multiple currencies - but there are high currency conversion costs if you need to exchange currencies for any reason. This can hold you back if you want to work with customers, suppliers or contractors overseas - or eat into your profits unnecessarily.

Instead, consider Wise Business. Wise Business accounts support global currencies for holding and exchanging a broad range of currencies. And best of all, if you transact internationally, Wise uses the mid-market exchange rate with low conversion fees.

Pricing/fees: Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information

1. PayPal US
2. PayPal Help - family and friends payments to business accounts
3. PayPal US consumer fees
4. PayPal US merchant fees
5. US Small Business Administration - business entity types
6. PayPal Help - personal v business account
7. PayPal User Agreement