PayPal Friends and Family vs Goods and Services: which one sellers should take

Friends and Family vs Goods and Services: the short version

PayPal's Send Money feature has two options. Friends and Family sends a personal transaction, which PayPal defines as a payment that is not for the purchase of goods or services or any other commercial transaction. Goods and Services sends a commercial transaction, the kind PayPal expects for any sale.

For a seller the answer is Goods and Services. PayPal's user agreement says buyers must not send money as a personal transaction when paying for goods or services, and that a seller receiving payment for a sale must not ask your buyer to send you money as a personal transaction. Goods and Services costs you a fee, but it is the option PayPal allows for a sale, and the only one that can be covered by Seller Protection.

What PayPal's rules say about payments for sales

The rule sits in PayPal's user agreement and applies to both sides of a sale. A buyer must not send money as a personal transaction when paying for goods or services. A seller who receives payment for goods or services must pay any applicable fees for receiving the funds and must not ask your buyer to send you money as a personal transaction.

The agreement also says what can happen to a seller who asks for Friends and Family: PayPal may remove your account's ability to accept payments from friends or family members. Asking a buyer to send money as Friends and Family to save the fee is the exact case the rule describes.

The rule covers in-person sales too. If you take PayPal at a market stall or in a shop with a QR code, you must use a QR code intended for goods and services transactions.

• If you sell regularly, a business account keeps sales apart from personal payments, and business accounts are not eligible to receive personal transactions.
• Goods and Services covers services as well as physical items, so a commission, a repair or a lesson is a sale under these rules.
• PayPal's own advice for avoiding buyer scams is to ask the buyer to mark the payment as a goods and services transaction.

PayPal Friends and Family fee vs the Goods and Services fee on one $30 payment

The PayPal Friends and Family fee depends on how the sender pays: it is free from a PayPal balance or bank account, and 2.90% + fixed fee by card, with a fixed fee of $0.30 (0.30 USD). The sender pays it. On Goods and Services the seller pays 2.99% and the buyer pays no transaction fee. The chart puts both next to a standard card checkout on Stripe.

Seller Protection only covers Goods and Services

PayPal's Seller Protection program covers claims that the buyer did not receive the item and claims that the buyer did not authorize the payment, when the sale meets its requirements. When it applies, PayPal says it may let you keep the full purchase amount. Personal payments are on the list of exclusions: Friends and Family payments are not eligible for Seller Protection.

That matters most when a payment turns out to be fraudulent or a buyer says the parcel never came. On a Goods and Services payment that meets PayPal's requirements, you can keep the money. On a Friends and Family payment you have no Seller Protection claim to make.

The buyer loses protection too. PayPal's Purchase Protection can cover the full purchase price of the item plus the original shipping costs on eligible purchases, but Friends and Family payments are not eligible for Purchase Protection.

How to get paid with Goods and Services

These steps apply to a one-off sale paid through PayPal's Send Money or Request Money features. A shop checkout or an invoice is already a commercial transaction.

1. Tell the buyer which option to choose

   Ask the buyer to send the payment as Goods and Services, or send a payment request for goods and services yourself. PayPal recommends that sellers ask the buyer to mark the payment as a goods and services transaction.

2. Price the fee in

   On Goods and Services you pay 2.99%, or $0.90 on a $30 payment. Set your price so it covers the fee rather than asking the buyer to switch to Friends and Family.

3. Check the payment type before you ship

   Open the transaction in your PayPal account and check that it is a goods and services payment. If a buyer sent Friends and Family for a sale, refund it and ask them to pay again as Goods and Services.

4. Ship to the address on the transaction

   For Seller Protection on a physical item, you must ship the item to the shipping address on the Transaction Details page. Proof of shipment or delivery means documentation from a shipping company with an online and verifiable tracking number, so keep it for every order.

When PayPal Friends and Family is the right choice

Friends and Family is for money between people with no purchase behind it: splitting a dinner bill, paying back a loan from a friend or sending a birthday gift. Receiving it is free when no currency conversion is involved, and sending it is free from a PayPal balance or bank account.

It stops being the right choice as soon as something is sold. That includes selling to a friend or a relative: the payment is for goods or services, so the user agreement treats it as a sale. Sending abroad also costs more: an international personal payment adds 5.00%, with a minimum of 0.99 USD and a maximum of 4.99 USD, on top of the domestic fee.

Where Nation fits

Questions about PayPal Friends and Family and Goods and Services