PayPal invoicing: A complete guide to PayPal invoices

14.02.18
9 minute read
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The paperwork involved with selling goods or services online can be a bit daunting. You’ll need to issue invoices to make sure you’re paid properly, and as your business grows you’ll also have to find ways to keep track of payments, and chase any customers who are late to pay their dues.

PayPal invoicing can be a quick and easy way to issue invoices, and receive payments from customers and clients from all around the world. However, this service comes at a cost - especially if you work in a global marketplace and sell to people from other countries.

This article will cover:

  • PayPal invoice fees and charges
  • International invoice fees and costs
  • How to create a PayPal invoice
  • How to pay a PayPal invoice
  • How PayPal invoicing works (and how it’s different than PayPal Request Money)
  • Buyer protections

Make sure you understand the costs involved before you choose the invoicing platform that’s right for your business. Here’s a handy guide to get you started.


Sending US$2000 to the UK with PayPal business: A case study

Consumer Intelligence Ltd made a price comparison study to research the costs of sending $2000 from the US to the UK for a business transaction

Fees/cost TransferWise PayPal Business
Amount sending (USD) $2000 $2000
Exchange rate (Reuters’ rate = 0.7267) US$ 1 = £0.7267 US$ 1 = £0.7013
Exchange rate markup (USD) $0 (0%) $72.44 (3.5%)
Upfront Sender fee (USD) $8.43 $0
Recipient fee applied (GBP) £0 £61.92
Final recipient amount (GBP) £1447.27 £1340.80
Total cost of transfer (GBP) -£6.13 -£112.60

All data was obtained independently by market research company Consumer Intelligence Ltd on January 16 2018, 07:07 UTC. Read more about the case study.


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Banks and money transfer providers often give you a bad exchange rate to make extra profits.

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Check out how to make your first transfer with TransferWise. And give it a try.

Oh, and while you’re at it, check out TransferWise’s free borderless multi-currency account. Where you can manage and send dozens of currencies all from the same account.

Now, back to what you came here to read.


How much does PayPal charge for an invoice? What are the invoice fees or deductions?

PayPal doesn’t charge fees for setting up and sending invoices, or for cancelling them. There’s no monthly or fixed charge, but if your customer pays online, there’s a fee for each invoice paid:

Location of PayPal sale Percent of transaction Currency conversion fee Fixed fee
US-based normal sales 2.9% of the transaction - $0.30
US-based eligible charity sales 2.2% of the transaction - $0.30
International sales (US dollars) 4.4% of the transaction - Fixed fee based on currency received
International sales (non US dollars) 4.4% of the transaction 2.5% of the transaction + 1.5% international transaction fee Fixed fee based on currency received

As you can tell, anything involving additional currencies gets really expensive quickly. It’s hard to figure out how much you’re really paying unless you look at independent research studies showing the real cost of PayPal business international transfers.

But we’ll talk more on the additional costs if the payment is international, or involves any currency conversion, later.

(Source 1, Source 2, Source 3, 6 February 2018)

Invoicing internationally? You’ll want to be aware of PayPal’s international transfer fees and currency conversion

If PayPal carries out a currency conversion for you, you can expect to pay fees for the service. In most cases, the seller can decide whether they or the buyer will pick up the costs involved with the international transfer. You can try to understand the full list, or it may just be easier to look at a case study showing what real businesses were charged for PayPal business international transactions.

PayPal international transfer fees

Firstly there could be fees which depend on where the money’s moving, and how the transfer is funded. These fees are levied if you send or receive money. For example, if you need to withdraw your PayPal balance to an account held in another currency.

If you hold a US-based PayPal account, international transfers using PayPal balance or from a linked bank account will cost you at least somewhere between 0.3% - 2% of the total transaction amount, depending on where the money is going. And that’s not counting the spread that PayPal adds on top of the wholesale exchange rate.

The same international transfer using PayPal but funded by a credit or debit card would cost even more, 3.4% of the transaction amount if you’re sending money to Australia - 3.9% everywhere else, plus a small fixed fee depending on the country you’re transferring to. You can get a full list of fixed charges by country in Source 3 below. Or check out this handy article which covers everything you need to know about PayPal’s international fees for the US or international fees for UK-based PayPal accounts - and how you can avoid paying more than you need to.

(Source 1, Source 2, Source 3 6 February 2018)

PayPal currency conversion fees

In addition to the fees set out above, the exchange rate used by PayPal includes a markup added to the wholesale exchange rate. The wholesale rate - also known as the spot rate, the interbank rate, or the mid-market rate - is the rate that PayPal gets from a third party when they convert currencies. This will apply in any circumstance in which PayPal exchange currency on your behalf - whether you’re sending money, or invoicing an overseas client.

PayPal takes the wholesale rate and adds a currency spread, which is an extra charge of 2.5%-3%, depending on exactly what type of transaction you’re carrying out.

You can check if you’re happy with the exchange rate by comparing it to the mid-market rate using a currency converter online. This will help you get an idea of how much extra you’re being charged through the PayPal currency conversion spread.

(Source 6 February 2018)

How to create an invoice on PayPal

To create an invoice using the PayPal business website, you’ll need to take the following steps:

  • Log in to your account
  • Click ‘tools’ which is in the toolbar on the top of the page
  • Select ‘invoicing’ - from here you can choose to create and manage all your invoices
  • To create an invoice, select ‘create invoice’ and enter the email address of the person you’re billing
  • You can then enter all the invoice details, such as the description, the amount and currency being billed. You can even add a custom logo, use a template, and leave a note for your customer

Helpfully, each invoice to a specific customer is assigned an invoice number automatically. You can alter this number if you prefer - but it can be a useful way to keep track which invoices you have sent to which customers.

Also, if you prefer a little more instruction, there’s a handy video to walk you through the process of sending a PayPal invoice, available on the PayPal website.

If you prefer a mobile experience, you can download the PayPal business app and send your invoices from there. In both cases, templates are preloaded, and can be customised however you’d like. Add your logo, a delivery message, or a thank you for your customer, for example.

(Source 6 February 2018)

How to send an invoice on PayPal

If you’re sending an invoice from the PayPal website, follow the steps above to create your invoice. Then you can preview it if you like, to make sure it includes all the details you need - and simply hit send. It’s then delivered directly to your customer, using the email address you’ve already entered.

How to pay an invoice on PayPal

Once you’ve sent the invoice, your customer will receive an email notification. They can simply click through from this email, to view and pay the invoice within PayPal. If they’d rather pay off-line that’s possible too.

Paying an invoice offline (not through PayPal)

To pay an invoice offline merely means that you pay the invoice via a means other than PayPal.

If you’re concerned about the PayPal international fees and the currency conversion fees, which add up quite quickly for those international payments, you’re almost always better off using a cheap and transparent provider like TransferWise. An independent case study has even shown that, in the US, you can save, on average, up to 8x as much by using TransferWise over PayPal business for international transfers. In the UK, average savings jumped to 9x as much.

Even if your customer chooses the offline payment option - choosing to pay you outside of PayPal, you can still reconcile the invoice within your PayPal business account to show it as paid and make sure your accounts stay accurate.

Paying an invoice with debit or credit card

Once an invoice has been received, your customer can choose how they want to pay it. If they already have a PayPal account they can choose to pay using PayPal balance or a linked bank account.

However, even if they don’t have a PayPal account, they can pay using a credit or debit card, or choose to pay off-line with cash, a check, or with TransferWise if they’re paying the invoice from a different currency.

(Source 6 February 2018)

How does PayPal invoice work?

PayPal invoice is pretty quick and easy to set up and use - and can be convenient for customers. However, it’s not the only way to get paid via PayPal - you can also use the request money service for personal payments.

PayPal invoice vs PayPal request Money

PayPal invoices allow you to customise your invoice, and include full details of whatever goods or services you’re selling. This service is designed for merchants invoicing their customers and clients - and comes at a fee.

There’s another service, called PayPal request money, which is intended for personal use. It’s great for when your friends or family owe you money - splitting a restaurant bill for example. This allows you to send a simple text or email request for cash, which can then be paid via PayPal. This service isn’t intended to be used for commercial or business purposes.

(Source 6 February 2018)

Is PayPal invoicing safe? Buyer protections.

PayPal offer protections to both buyers and sellers, depending on the specific circumstances of the transaction. The PayPal dispute resolution centre is the first point of call if you have a problem either as a buyer invoicing a customer, or a customer who has been disappointed by a purchase.

PayPal will help to resolve the issue if possible and, if not, may issue a refund. As a seller, though, it’s important to be aware of some fairly common scams from unscrupulous buyers on platforms such as eBay. It’s possible for a buyer to open a dispute with PayPal, claiming that an item that they purchased from you never arrived, wasn’t as described, or was damaged upon arrival. The PayPal team members have to then decide firstly if the claim is genuine, and then whether the buyer or seller was at fault.

The protections are often considered to be stronger on the side of the buyer, meaning that some legitimate PayPal business users claim to have fallen victim to scams. In this case, the seller can have money deducted from their PayPal account in order to refund the buyer if PayPal believe the buyer’s story concludes that the seller was at fault or acted fraudulently.

There are a few things you can do as a PayPal seller to help avoid this issue. Common sense tactics such as photographing all items and packaging before sending them, using registered mail, and making sure that accurate descriptions are used when selling online can all help limit the likelihood of there being a problem.

(Source 1, Source 2, 6 February 2018)

Nobody wants to pay more than they have to - and the fees involved in receiving payments through PayPal invoicing can add up quickly. The service is quick and convenient, but it’s certainly worth comparing the costs against other options.

If you do a lot of business internationally, it could be better to consider using an alternative option - such as TransferWise - to transfer money overseas.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content is the publication is accurate, complete or up to date.

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