How to set up a PayPal business account: fees & requirements

Wise
13.02.18
5 minute read

PayPal offers several different account types, depending on whether you want to buy and sell using PayPal as a registered business, or just need an account for personal use. PayPal personal and business accounts offer different services - and come with different fees and charges. If you’re thinking of creating a PayPal business account, it’s worth understanding the terms and conditions - particularly if you intend to use your account to buy and sell overseas.

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Now, back to what you came here to read.


Here’s all you need to know about PayPal’s business accounts based in the US.

How to set up and create a PayPal business account

This article uses information relating to US-based PayPal business accounts. Although the way PayPal works is fairly uniform across different markets, if you’re located elsewhere, it’s worth checking the details and small print for your particular country.

You can set up your PayPal business account quite quickly, as long as you have some basic information available. You’ll need to select the type of business account that suits your needs first - different levels of account come with different features and charges.

Here’s how you can create your PayPal business account:

  • Click on ‘Sign up’ and then select the option to create a business account
  • Choose the business account package that suits your needs
  • Enter the email address you want your PayPal business account to be linked to
  • You’ll be asked to choose a login and password, and enter the basic details of your business including the registered address
  • Enter some information about the type of business you run, and the actual or anticipated turnover
  • Add your Employer Identification Number (EIN), also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number
  • You’ll be asked to enter your social security number and date of birth, so that PayPal can confirm your identity

Once you’ve entered all your details, your account can be approved, and will be ready to use.

(Source 5 February 2018)

How much is a PayPal business account? What are the fees? Are they free or do they cost?

There are different fees levied for different services - check out the merchant fees page in the source section below for full details. Here’s a round-up of some of the most important costs you need to know about:

PayPal business serviceCost
Opening a PayPal business accountThere is no fee to open a PayPal account
Selling with PayPal business
  • For US based sales - 2.89% of the transaction value + $0.30
  • International sales - 5% of the transaction value + a fixed fee based on the currency you receive + a 4% charge for any currency conversion
  • Fees might be different if your volumes are higher, you choose card as a payment method, you run a charity, or if you qualify for ‘micropayments’
International payments
  • Fees for international payments are higher, including both a percentage fee and in some cases a fixed cost, too. Check out the details below.
  • For international sales, PayPal notes that there’s a 1.5% international transaction fee to receive payments from another country + 3% currency conversion fee if it’s needed
Withdrawing money
  • Withdraw to your linked US-based bank account for free
  • Withdraw using a check - $1.50
  • Move money to your bank account using a linked debit card - $0.25-$15 per transfer
Making personal payments to friends and family
  • Local transfers are free of charge, if you use your PayPal balance or a linked bank account to fund the payment
  • Using a debit or credit card to fund the payment within the US - 2.9% of the transaction fee + a fixed fee of $0.30
  • International payments cost more, with a 5% fee + an additional one that varies depending on your payment method + depending on your payment method + a fixed fee of $0.30 (for transfers from the US) + 4% currency conversion if it’s needed - see sources below for details
Receiving personal payments from friends and family
  • Free within the US, if the sender uses their PayPal balance or a linked bank account to fund the payment
  • Other charges may apply for payments funded using a credit or debit card or for international payments. For this kind of operation there’s a 5% fee + 2.9% fee alongside the $0.30 flat fee for receiving money from another country + 5% currency conversion charge if it’s necessary

(Source 1, Source 2, Source 3, Source 4, 9 August 2021)

Sending money to or receiving money from another country? You’ll want to be aware of PayPal’s international transfer fees and currency conversion.

If you’re using PayPal for any international transaction, you’ll want to really make sure you know the costs involved, because they add up. Probably a lot more than you realize.

The international fees themselves are split in many categories, and depend on where your account is based, where the recipient’s account is based, and what method is used to pay for the transfer. Transfers funded only by a linked bank account or with a PayPal balance are cheaper. But the moment you add in a payment in part or whole with a credit or debit card, you’ll find yourself facing fees from 3-4% of the sending amount.

Check out our guides on US-based PayPal international fees or UK-based PayPal international fees for more information.

But it’s not just the fees you need to pay attention to.

For example, in regards to PayPal’s currency conversion rates, did you know PayPal adds a spread of 2.5% or 3% on top of the wholesale exchange rate it uses? That price often surpasses the fees stated upfront.

You’ll want to know what you’re getting into before you commit.

(Source 1, Source 2, Source 3, 9 August 2021)

Benefits of PayPal business accounts

Make sure you weigh up the pros and cons when you’re considering whether or not to open a PayPal business account.

PayPal business debit cards

If you have a PayPal business account, you can also activate a PayPal business debit card, to withdraw cash from ATMs, make payments and earn points. To activate your card, you’ll need to log into your business account and follow the steps set out there.

Though there’s no annual fees for using your PayPal debit card and you can earn rewards, it’s good to keep in mind that there still are a few fees involved.

  • $1.50 fee for ATM domestic and international withdrawals
  • $3.00 for over the counter withdrawals
  • 1% fee for foreign transactions

(Source 9 August 2021)

PayPal personal vs business accounts

There are various different types of PayPal account you can choose from, depending on your needs.

  • PayPal personal accounts are ideal if you want to shop online, and send or receive personal payments to friends and family
  • PayPal premier accounts are for people who may be casual sellers but are not registered as official businesses.
  • PayPal business accounts are for registered businesses and offer additional features like giving your employees limited access to your account.

(Source 6 February 2018)

Deactivating, closing and deleting your PayPal business account

Before you close your PayPal business account, you’ll need to transfer out all the balance held in it, either electronically or by requesting a check. Then take the following steps:

  • Log in to your account
  • Click ‘Profile and settings’
  • Click ‘My settings’
  • Click ‘close account’

(Source 6 February 2018)

Whatever your reason for choosing a PayPal business account, it’s important that you understand the fees and charges involved with various different types of transactions.

Make sure, especially, if you have customers or suppliers overseas, that you’re familiar with the charges for international transactions, and the markup applied to the currency conversion rate. Compare the service PayPal offers with other providers like Wise, to make sure you’re getting the best possible deal, and protect yourself from nasty surprises.


This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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