Why PayPal Seems So Darn Expensive in 2024

PayPal is undoubtedly the big fish in the online payments pond. With over 429 million active user accounts, it‘s the giant that merchants and peer-to-peer users alike have embraced.

However, over the past few years one growing complaint is how expensive PayPal‘s services seem compared to some competitors.

In 2022 various fee increases especially irked many merchants already feeling nickeled-and-dimed. PayPal counterargues these measures help fund better fraud protection, security and new features.

In this comprehensive expert guide, we‘ll analyze 10 reasons why you may find PayPal so expensive compared to other processors in 2024 from an independent consumer perspective.

1. PayPal‘s Merchant Fees Keep Rising

One chief complaint around PayPal‘s pricing is their steady creep upwards in merchant fees over time. These variable and fixed fees include:

While still competitive, this table illustrates how PayPal has raised even standard fees higher over the past 5 years:

These incremental hikes alienate merchants already dealing with slim margins amid rising costs. Many view it as an alarming trend.

2. Forex Fee Sting Surprises Users

PayPal tacks on an additional 1.5% currency conversion fee to any international transaction or cross-border payment/withdrawal. This ‘forex fee‘ already stings, but some users are shocked to realize it applies even when simply withdrawing existing funds in a shared ‘wallet‘:

"I sold some digital products to a European client and had €850 in my account. But when I withdrew the funds to my Canadian bank account, they took nearly $60 extra in fees without warning! Their forex spreed seems very high." (Alex S, Etsy Seller)

It‘s vital to factor these hidden oversea costs into pricing decisions. For merchants, these forex losses quickly erode margins. Alternatively, some users recommend transferring money to a low-fee service like Wise before cashing out.

3. Cryptocurrency Fees More Costly Than Exchanges

PayPal also facilitates buying, selling and holding popular cryptocurrencies like Bitcoin. But its convenience comes at a steep price versus dedicated crypto exchanges:

These percentage-based and fixed crypto fees at PayPal are markedly higher. For example, a $50 Bitcoin purchase incurs $2 extra in fees versus leading exchange Coinbase. This adds up for active traders or merchants accepting crypto payments.

4. Some Fees Seem (Almost) Impossible to Avoid

Some users think PayPal‘s fees start bordering on deceptive with how tricky they make it to find ways to avoid unnecessary charges.

For example, adding funds from a bank account or debit card generally doesn‘t incur fees. However, if that money is used for nearly any subsequent activity like online shopping, sending money overseas etc – you guessed it – more fees emerge!

Financial blogger Dom Rollings vents "I funded my account for free from my checking account. But as soon as I sent money to a friend internationally, they still hit me with a 1% currency conversion fee! It seems designed so you can‘t escape fees"

And beyond dinging you on various transactions, PayPal even charges fees on refunding certain purchases like return shipping fees.

5. PayPal Earns More Profit from Fees Than Competitors

How does PayPal stack up against other top processors like Stripe and Square in terms of fee revenue?

This chart reveals the higher percentage PayPal derives from merchant and transaction charges versus main rivals – an important pricing dynamic at play:

You can argue that if ~25% more of PayPal‘s gross income depends on those merchant fees, it depends more on escalating them over time to boost overall earnings.

6. Subjective Fee Descriptions Confuse Users

Some of PayPal‘s fees come under scrutiny for sounding deceptively vague or innocuous. This confuses less financially-savvy users who struggle to grasp what activities exactly will incur charges.

For example, their 2.9% + $0.30 merchant processing fee seems pretty straightforward. However, other charges like:

• "Currency conversion margin of 3.0% above base exchange rate"
• "Variable withdrawal and deposit fee"
• "Dispute fee per disputed transaction"

Could benefit from plainer language and real dollar case studies around what those represent for budgeting sake.

7. Customer Support Refunding Fees Is a Headache

Trying to recover unfair fees and charges also poses headaches with PayPal according to merchant complaints.

Navigating their customer support departments to identify improper charges and then receive fee refunds often proves a test of patience. As one furniture maker selling globally grumbled:

"It took nearly 9 emails and 4 phone calls to finally get an unjust currency conversion charge reversed. Given my small volumes as a hobbyist, it barely seems worthwhile hassling for $20 or spending more on lower fee alternatives."

For professionals, this time drain dealing with resolving fee disputes cuts into productivity. The easier route involves simply passing higher costs onto buyers – not ideal either.

8. Some Fees Appear (Almost) Hidden

Another somewhat sneaky ploy is how hard PayPal makes locating the full schedule of their various fees outside of marketing content. The notorious ‘fine print‘ phenomenon applies here.

Buried in pre-signup disclaimers – which users breeze by – is the nitty-gritty list of potential charges. But good luck finding the comprehensive fee breakdown after you start actively sending money and making purchases regularly.

The updated fee list lives here in tiny text under an inconspicuous ‘Legal‘ sub-menu. Without warnings about charges as you use services, unpleasant surprise fees keep happening.

9. Certainty Fees Deter Disputes But Annoy Sellers

In 2021, PayPal also introduced a new $20 ‘Certainty Fee‘ whenever buyers somehow manage to reverse an online purchase through their protection program. This financial deterrent aims to reduce illegitimate disputes.

But some merchants dislike how this extra fee comes directly out of their own possible earnings from a sale. Especially since disputes often arise from a user‘s oversight, like forgetting details of their order or impulse purchase.

While protecting PayPal‘s profits, it irrationally penalizes sellers for a buyer‘s mistake according to opponents.

10. Steep Charges on Growing PayPal Credit Balances

Rounding out our analysis, you may not even fully avoid fees by keeping a balance parked in your PayPal account.

Leaving excess money sitting there seems harmless – but you actually permit PayPal to earn interest float revenue from your idle cash. Yet they share none of these earnings with you. That free loan helps their bottom line but shortchanges users.

In this 2023 update, we‘ve highlighted the top 10 reasons for increasing user frustration around PayPal‘sexpensive and excessive fee practices contrasts against rivals. Concerns largely focus on three areas:

• Steadily rising rates over the past decade without consumer input
• Intentionally complex fee names and disclosures confusing users
• Extreme difficulty getting unfair charges reversed

The accelerated pace of fee hikes alongside murky descriptions and policies around resolving disputes compound user objections.

Does PayPal deserve its ‘fee bully‘ reputation as some declare? Or are they pricing services based on internal costs and norms fairly compared to alternatives? Weigh the arguments as their next pricing policy change looms.