How to Set Up Recurring Payments On Paypal: A Guide

Mike Renaldi

10.04.23 (updated more than 1 year ago)

4 minute read

In this article, we will guide you through the steps of setting up recurring payments on PayPal, and how Wise Business might be the PayPal alternative to help you save.

In particular, we are going to talk about payments from customers to you.

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Overview of PayPal Recurring Payments

**PayPal automatic billing lets businesses automatically charge their customers on a recurring basis for products or services.**¹ This can be a convenient way for businesses to collect payments, as they don't have to manually process transactions every time a payment is due. With streaming services, gyms, food delivery services, media services, and more offering subscriptions, the subscription economy is booming.

Any business can set up a recurring payment on PayPal through PayPal Checkout. They can choose between three different recurring payment types, which differ in terms of the amount to be charged, the frequency of the payments (e.g., weekly, monthly, annually), and the duration of the subscription (e.g., ongoing or for a set number of payments).²

For businesses, PayPal recurring payments can be a reliable and cost-effective way to manage subscriptions and automate billing. For customers, it can provide a hassle-free way to pay for ongoing services or products they regularly use.

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Pros and Cons of Recurring Payments on PayPal

Are you curious about how scheduling payments on PayPal can benefit your business? Let's take a closer look!³

Pros for Businesses

Predictable revenue: Recurring payments ensure a consistent and predictable cash flow for businesses, which can help with financial planning and budgeting.
Integrated API: For businesses with their own product UI, the Subscriptions API can be built into your product.
Customer retention: Automatic payments can encourage customers to continue using a business's products or services, as they don't have to remember to make manual payments each month.
Reduced administrative tasks: Automating payments means businesses don't have to manually invoice customers or process payments each month, freeing up time and reducing admin tasks.
Buffer to payment failures: Recurring payments can fail if the customer's payment method has expired, been canceled, or there are insufficient funds, which can create issues with cash flow and customer satisfaction. Luckily, PayPal will automatically suspend the customer’s subscription after a few tries, or outstanding amounts can be applied to the next bill.
Reports and status updates: The subscription payments PayPal dashboard helps you gain valuable insights and track KPIs, allowing you to view a full picture of your financial performance.

Cons for Businesses

Lack of flexibility: Customers may feel locked into a payment plan and unable to change it, which could lead to frustration and potentially lost business.
Additional fees: PayPal has no monthly or setup fees, but they do charge an additional 3.49% + $0.49 fee per USD transaction (fixed fee varies by currency) for processing automatic payments, which could eat into a business's profits.³

How do recurring PayPal payments work?

With recurring payments, customers authorize PayPal to charge their payment method (such as a credit card or bank account) on a regular schedule, such as weekly or monthly, for the cost of the subscription.

Once a customer signs up for the subscription, PayPal will automatically charge their payment method at the specified intervals until the subscription is canceled. Businesses can view and manage their subscribers, track payment history, and customize the subscription plan at any time in their PayPal accounts.

What’s more, you can choose between quantity or fixed pricing models, engage with subscribers throughout the customer lifecycle through messages, and even offer promotions for new subscribers with free or discounted trials.

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How to Set Up Recurring Payments on PayPal

Convinced and want to set up recurring payments on PayPal? Here's a step-by-step guide on how to do it:⁴ ⁵

Before you start setting up recurring payments in PayPal, you’ll need a PayPal business account, your account username and password handy, and the HTML code for your site.
Log in to your PayPal business account and navigate to the Manage Subscriptions page.
Click “Create Plan” and fill out all the details about your product or service, including the name, a description, and product ID. You’ll also need to select the product type, whether it’s physical goods, digital goods, or something else.
Now you’ll start curating your subscription plan. You can choose between fixed, quantity, volume-based, or tiered-based pricing.

Fixed: Fixed price at a fixed frequency - e.g., $10 for a streaming service every month.

Quantity: Charged based on the quantity of goods/services - e.g., $6 for a bag of dog treats every week, and the subscriber wants 10 bags when they sign up. 6 x 10 = 60.

Volume-based: Charged based on the amount of usage or volume of services they consume - e.g., a cloud storage service might charge customers based on the amount of data they store in the cloud.

Tiered-based: Charged based on the tier customers choose - e.g., basic plan at $10/month, standard at $20/month, or premium at $30/month.
You’ll then provide some details for the customer and work through pricing for your plan. This includes the currency, price, and taxes (if applicable).
Set the length of time for each billing cycle and the length of the plan, as well as the number of times customers can have outstanding payments before PayPal cancels their subscription.
Review the details of your plan and make sure everything is correct, and make sure to click “Turn On Plan” to get everything in motion! You can even add the subscription payment button to your website.

A one-time fee means you can receive without any transactions or currency conversion charges!

What Fees Does PayPal Take on Recurring Payments?

PayPal charges fees on automatic payments for businesses, depending on the payment method used by the customer and the country your business operates in.

If the customer pays using a debit or credit card, the fee is 2.9% of the transaction amount plus a fixed fee based on the currency used.⁵ For example, in the United States, the fixed fee is $0.30 per transaction.⁵ For PayPal checkout, the fee is higher at 3.49% of the transaction amount plus the fixed fee based on the currency used.⁶

Same Currency

When a business processes recurring payments in the same currency as their PayPal account, PayPal charges the standard transaction fee and a fixed fee for recurring payments in the same currency.

Different Currency

For recurring payments processed in a different currency than their PayPal account, you should expect higher fees. PayPal charges a higher transaction fee for currency conversion in addition to the standard transaction fee.

The currency conversion fee varies depending on the currency being converted, but it’s typically around 3.5% above the exchange rate.⁵ There’s also the additional percentage-based fee for international commercial transactions at 0.8% - 1%.⁵

Looking for a better solution? Send Cross-currency transfers for as low as 0.43%

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Wise Business: Save on Incoming Payments

With Wise Business, businesses can process recurring payments in over 40 currencies using the mid-market exchange rate, which is the fairest exchange rate possible, with no markups.

You can receive in USD, GBP, EUR, CAD, and more with Wise Business free after paying a one-time fee. The savings will really start to add up.

This means that businesses can save a significant amount of money compared to using PayPal for automatic payments, especially if they are processing payments in different currencies.

Lastly, Wise Business offers ways to send payments overseas at low cost. If you're looking for the whole package, check out Wise for your business needs.

Learn more:

How to cancel recurring payments on PayPal in the United States
The 15 Best Recurring Payment Systems (2023)

Sources:

*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.