Something that isn't that widely known is that you can apply to PayPal for reduced rates if you meet certain criteria on your sales.

If you have been in business for more than 3 months and have made at least $3000 USD / £1500 GBP worth of sales in the last month then you should be eligible to apply for a better rate from PayPal.

The best part is that this is an instant approval process - just click a link in your PayPal account and if you are successful, you'll be on the new rates immediately.

The usual PayPal rate for US merchants is 2.9%. Once approved for merchant rates, you'll be paying 2.5%. It might not sound like a huge difference, but this little point of a percentage sure can add up to big savings over the course of a year.

As your business grows, you'll continue to get a better deal with PayPal: just keep an eye on your monthly sales and once you make the next threshold of $10,000 make sure you apply again via the same process to receive 2.2%.

To apply, just follow these steps:

  1. Log into your PayPal account
  2. Click on Profile and Settings (under your Profile link in the top right hand corner of the page)
  3. Click on My Money in the left hand menu
  4. Click Merchant fees under the More Financial Settings area
  5. Click Apply now on the page that appears
  6. Complete the application form and then click the Submit button. Approval will be immediately granted if you are successful.

Remember: This PayPal fee reduction is not automatically applied when you hit these limits, so if you have been waiting for PayPal to give you these rates, stop what you are doing and apply right now!

Jan 16 Update: as of October 2015, tiered rates based on volume were unfortunately removed for US merchants in favour of a simplified pricing system, however they continue to apply for non US merchants for the meantime. It currently appears that merchants approved for merchant rates before October 2015 retain their preferential rate, so the new pricing structure applies only to new applicants.