This week I want to update you on PayPal Micropayments. This is not a new service provided by PayPal but it is a subject that I’ve recently received a large number of enquiries about and so if you are a high-volume, low-margin, low-value seller and unaware of this alternative PayPal program then this could help you gain a higher margin on all your sales.
I know that PayPal fees can take a large chunk out of your profits, especially if your products have very tight margins – typically these would be products you are selling very inexpensively. And I also know from your emails that you sometimes wonder how you can remain competitive when your margins are that tight!
Well, I’m afraid that transaction fees are all part of selling on eBay but Micropayments can help you claw back a little more profit!
What are PayPal Micropayments?
PayPal Micropayments are exactly what the name implies – small transactions – and are purely for payments that come through PayPal that fall below the £5.00 mark. That’s why this is much more advantageous for high-volume, low-margin, low-value items – I’m talking about small items such as stationary, CD’s, small electrical components such as plugs, cables and so on.
You will pay 5% + 5p on each payment using Micropayments, compared with 3.4% + 20p at the usual merchant rate. So, as an example, if you sell an item for £4.99, you’ll pay 30p in fees with Micropayments as opposed to 37p at the normal rate. That’s a saving of 7p. Okay, I know that doesn’t sound like much, but look at it this way; if you are selling in high volumes, let’s say 30 small items per day, then that’s a saving of £2.10 every day, or £14.70 a week. Over a year you’ll save £764.40! That’s a pretty big saving isn’t it!
Some sellers who have switched to Micropayments have managed to increase their profit margin by as much as 20% but obviously you should do the figures for your own products before switching to make sure that the fee structure will work for you! If a large amount of your transactions do fall under that £5.00 maximum then there’s a high chance that you will save money – and that’s always a good thing. There’s just one small fly in the ointment though…
Can anyone set up a Micropayments account?
There are no set-up or monthly fees to open a PayPal Micropayments account – anyone can get one. BUT, you can’t switch between Micropayments and Standard payments in one single account. So, you either need to create a separate PayPal Micropayments account or convert your existing PayPal account. I would suggest that you open a new account for Micropayments otherwise if you simply convert your standard account you will lose the ability to conduct business at non-micropayment rates.
Remember that you’ll need a separate email address and bank account to do this – you can’t use the same ones you have registered with your standard PayPal account – and you’ll also need to remember to choose the correct account when you add your listings to eBay. This way you get to keep your standard account for products you sell at over £5.00 and you can use your Micropayments account for all your transactions below £5.00.
You will also need to be signed up with one of PayPal’s business products to open a Micropayments account – so Business or Premier. You’ll then be able to have the best of both worlds and can easily sell your products at any price you choose – just remember to switch the PayPal accounts according to the product and your pricing!
And it’s as simple as that. The payments you receive into your Micropayments account will automatically be charged at the special rate so you don’t need to do anything else!
If you look after those little pennies then the pounds will look after themselves!