Last month, I transferred some funds to my friend Steven Kippel via Paypal. Shortly thereafter, he reported that Paypal had charged him a fee on the incoming funds. We both had no idea why.
Steven writes for one of my websites and I’ve been sending him funds monthly through Paypal for over 2 years. These fund transfers were always initiated from a personal Paypal account to another personal Paypal account, using funds from a Paypal account balance (not from a bank account or credit card). These transfers had always been free. Neither party had to pay any fees to send or receive the funds.
The experiment – verifying the new fees
We wanted to get to the bottom of the issue, so I contacted another friend, Jared Newman, to help perform a test. I sent him $1 classified as Purchase – Services. The Purchase tab also happens to be the default send payment option. It is the same way I had been sending funds for years that had never incurred a fee for transferring from a personal account to another personal account.
Jared received the entire $1 at that time, so we thought perhaps there was some problem or other snafu with Steven’s account. Not so. Later on, Jared reported back that Paypal had retroactively charged his account a fee (2.9% + 0.30) to receive the funds that I transferred. This is particularly disturbing because Paypal used to prompt you, asking whether or not you wish to accept a funds transfer if it was going to incur a fee. There is no such prompt for this type of fund transfer.
Jared then wrote about the fiasco on PCWorld. The story was then picked up by The Consumerist, Gadgetell and other websites.
Paypal’s public statement
Charlotte Hill, Paypal’s PR Manager, had this to say to PCWorld “We didn’t want to make a huge formal communication out of this pricing change, because we weren’t really adding any fees, and we were hoping it would be a more useful experience for people”.
You “weren’t really adding any fees” ? Really Paypal? I’ve been doing the same type of funds transfer every month for over 2 years and now when I do that same transfer, the recipient is charged 2.9% + 0.30. How is that not adding any new fees?? How is that a more useful experience?? The bottom line is, personal account Paypal users weren’t being charged for this type of fund transfer before and now they are. Paypal did not notify its users. Almost no one knew about it. Everyone I’ve talked to had no idea about the new fees until they were charged.
All this attention evoked an official blog post response from Paypal. Even so, their reply still didn’t fess up to the fact that they started charging for something that was previously free, without informing their users adequately. Sorry Paypal, but you screwed up. You have added new fees for personal accounts and you won’t even admit the change.
So even though you can avoid the fees and send funds for “free” using the Personal tab in Paypal, I’m still exploring alternatives due to their shady practices. Perhaps Revolution Money Exchange or Google Checkout?