Update 26 February 2013 - Fortunately some stories have a happy ending and I'm pleased to report that this is one.
Just before I wrote the original article, I put in a request for a refund of lost fees. At first Paypal offered me just a quarter of the lost fees. I sent in a detailed analysis of the last two years (the information available online) as well as a rough projection for a previous year. Paypal's merchant support were gracious enough to offer about 50% of the lost fees as compensation. While Paypal should stop doing this - blocking clients automatic access to better rates - their customer support was efficient and polite. If you made the same mistake I did of not applying for merchant rates, I recommend approaching Paypal slowly and carefully and provide them detailed documentation of your financial loss. This is very forward thinking on Paypal's part as I've put a lot more money in their coffers than the relatively small sums separating us.
Why would Paypal steal from their very best clients? A bit of a mystery. You'd think they'd take better care of those of us keeping them in business.
The Usurers Marinus van Reymersuaele: senior Paypal executives eyes look much the same
while they are cooking the books in their favour.Plus ça change, plus c’est la même chose.
Since the days of the Old Temple, through hawala in the Middle Ages and to Casanova's lettres de change, the money changers have always had their hands deep in our pockets. For a small business, operating internationally, it's very difficult to get paid without paying close to 10% of the revenue to some intermediary or another (sometimes split like merchant and gateway fees). In this context, Paypal seems like a breath of fresh air. At 2.9% to 3.9% plus 30¢ transaction fee, your costs are about half of the other solutions.
Happily Paypal seems to have stopped regularly stealing from businesses by freezing accounts on slim grounds.
I don't like to use them since they stole Wikileaks money (see also Cryptome incident: this time Paypal gave the money back) but we don't have much choice as almost every Western financial institution accepted the shutdown orders from Washington (including Amazon and all the major credit cards).
So far so good. But outside of outright fraud, Paypal has another trick in their pocket, through which they are raking in millions at the expense of their best partners, mainly small businesses.
Paypal fees are on a sliding scale depending on how much business you do.
|Monthly Sales Volume||Fees|
|$0.01 - $3,000.00||2.9% + $0.30 CAD|
|$3,000.01 - $12,000.00||2.5% + $0.30 CAD|
|$12,000.01 - $125,000.00||2.2% + $0.30 CAD|
|Over $125,000.00||1.9% + $0.30 CAD|
Here's how Paypal sells clients on their services:
Here's how the offer looks on Paypal's initial merchant sales page.
Here's the fine print at the bottom of that page. Still pretty clear:
Paypal volume tiers: instead of "Click here to apply for a lower rate" it should read:
"Higher rate applies in perpetuity unless you apply for a lower rate."
Looks great. Just pump up your volume and your fees fall.
Nope, you missed the trick. It doesn't work like that.
You can pump up the volume all you want and Paypal doesn't change your rates. You have to ask Paypal to change your rates. In the meantime, they pocket .4% to 1% of your total sales volume.
It happened to Foliovision. Our sales volume has been third tier for about a year now. I thought Paypal had put us in the appropriate tier or that we were sliding in and out depending on the volume of international payments. No, Paypal were just keeping our money and not saying anything.
One expects this kind of duplicity from con artists and/or stock brokers. This sort of ball and cup game suits the fair grounds of a dodgy circus outside of Paris but not from a financial partner to whom one is paying fat fees every month.
I've spoken to a pleasant enough fellow in merchant services called Bill who has been there for twelve years. He's put in a request to his manager to credit the stolen fees back to my account. I'll post how it goes.
Bill's defence is that this information is on the Paypal website. No Bill it's not on your website, it's hidden. Here's where rates are buried in the user agreement (15 pages of small print):
Paypal user agreement fine print: very cute little asterisk which costs Paypal's best clients thousands per year
If you are in our situation, make sure you apply for merchant rates as soon as you qualify. It's not clear for me that if you apply when in the second tier if you will be boosted to third tier if you make the volume requirements.
ADDENDUM: Merchant Rates over Time and Remaining Qualified
One bit of good news: if you qualify for third tier you only need to maintain second tier volume to keep your third tier rates. I.e. if you had a month with $20,000 of sales but your normal sales volume is $4000 and you apply for merchant rates in month, it appears you keep the tier three pricing. No I'm misreading the letter:
Congratulations! You have been approved to receive PayPal's Merchant
Rates. Effective immediately, you will be charged
2.2% + $0.30 CAD to receive payments.
To keep your Merchant Rate, please keep your PayPal account in good
standing and your payment level above $3,000.00 CAD.
It's clear that I keep a merchant rate if we meet tier two. But if we fall below $3000 in even a single month (could easily happen on our billing cycles), we're kicked out of the program and Paypal is free to pickpocket me again when sales climb.
Alas, dealing with Paypal is like going to the market in Bucharest or Paris. Keep a firm hand on your wallet and your eyes wide open.