How to NOT mess up your affiliate’s PayPal account. (And Yours!)

by Joel on June 9, 2010

So,  I got a very interesting email from PayPal yesterday (I pasted it at the bottom of this post).

I’ve had my PayPal account for over 10 years now….ya I know I’m an old timer in Internet years!

Well come to find out there is something that many Internet Marketers are doing right now that can get the accounts of the affiliates they pay messed up as well as your own account…….and most people don’t even know they are doing anything wrong!

So here is the deal…

Recently PayPal change a long standing policy.  It is now FREE to send money to friends and family.  It used to cost the sender or the receiver fees.  Those have gone away now.

So the problem is people are using the “Personal” payment option to to pay business transactions to avoid fees.  This can get your PayPal account severely limited if not canceled.

So how is this affecting Internet Marketers and causing problems?  Let me walk you though the steps of how many people are sending money via paypal.

1.  Say I owe Mark $2,000 for affiliate commissions.  The first thing I do is login to PayPal and click “Send Money”

2. Next you have two options…. “Purchase” or “Personal”

…. ok so put your self in your shoes.  You need to pay your affiliate.  You are not purchasing anything from him and you don’t see any good option you so click on “Personal”

…. Hey there you go….. you see a Payment owed button.  That sounds good.  I owe Mark money so lets select that option.

OK SO THAT IS THE PROBLEM!!!

You see when you select anything under the Personal tab, Paypal doesn’t charge any fees….but since this is a business transaction paypal says that is a big “NO NO” and will limit or cancel the affiliate’s account if it happens too much and will also cancel your account for doing it.

They think you are trying to “Game the system” and avoid fees.

Really I think it is just a simple mistake on both parts…. you and PayPal.  99% of PayPal account holders don’t even know this is a problem.  In my opinion PayPal should change their interface a bit to make it clear.  Also PayPal account holders need to be a little more educated.

So what is the correct way to pay your affiliates or send “Business” payments.

1.  Mass Pay

This method charges the sender a max of $1 per send.  It does not cost the receiver anything.

2.  Use the “Purchase” tab and select Service

This method will charge the receiver or sender a fee.  If you are going to pay your affiliate this way you need to realize they will be charged a fee.  You can also choose to pay the fee for them or pay them extra.

Also you can use the “eCheck” option and the max fee that will be charged is $5 however they will be a several days until the money will be available to them.

So that’s it…..

Hope that helps a few of you out there.  Feel free to comment below if you have other insight.

Joel

Here is the email I received from PayPal……

Dear Joel Peterson,

We recently changed our pricing so that all PayPal customers can receive
money from friends and family within the US for free. PayPal merchants
receiving money as payment for a purchase, continue to incur fees.

We’re not sure if you are aware of this, but we noticed that some of
your customers are sending you personal payments for purchases.
Unfortunately, this violates our rules, and we need your help correcting
this. Please don’t ask or allow your customers to use personal payments
to pay for their purchases.

If we continue to see such activity after 23/6/2010, we may have to
disable your ability to receive personal payments, and then you will pay
fees for all money received through PayPal.

You can find more information about payment types and fees in sections
4.2 and 8 of our User Agreement – just click “Legal Agreements” at the
bottom of any PayPal page.

If you have any questions, concerns, or think we may have made a
mistake, please contact us at www.paypal.com/contactus. Thank you for
helping us resolve this matter.

Sincerely,

P2P Risk Team

PayPal

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