Why does PayPal charge so much

PayPal charges so much because one payment can carry a transaction fee, a cross-border surcharge, a currency conversion markup and sometimes tax on the fee. Its fees also help pay for buyer and seller protection.

Each layer looks small by itself, but they stack on the same payment. Looking at PayPal pricing layer by layer shows where the money goes.

• Transaction fee: For standard commercial and online sales, merchants typically pay about 2.99% to 3.49% of the amount, plus a fixed fee of around $0.49 per transaction.
• Cross-border surcharge: Payments that come from another country attract a higher percentage, reaching up to 4.4% for sellers in India.
• Currency conversion markup: When PayPal converts one currency into another, it applies its own exchange rate instead of the mid-market rate, which adds roughly 3% to 4% to the cost.
• GST in India: Indian sellers pay 18% GST on PayPal's fees, so the combined cost of an international invoice can come close to 7% or 8%.
• Protection and fraud costs: Part of the fee pays for PayPal Purchase Protection and seller protection, which cover chargebacks and fraud losses.

To see what a specific payment will really cost, check three things: whether the payment is domestic or international, whether a currency conversion happens, and whether local tax is added to the fee. The conversion markup is easy to miss because it sits inside the exchange rate rather than showing up as a separate line.