Paypal Goods and Services Vs. Friends and Family
Every bit a creator, you accept payment from your make partners in exchange for your content and services y'all are considered a "seller" by PayPal's adequate use policy. Every bit sellers, creators should never take payment from their brand partners via the "friends and family" option through PayPal. Accepting payment through the "friends and family" option puts the creator business organisation at pregnant risk.
What is the "friends and family unit" payout option vs. the "goods and services" payout pick on PayPal?
When your brand partner is electing to send your payment via PayPal, they volition have two types of transactions to choose from. Per PayPal'due south aid center they define the difference betwixt sending coin "friends and family" or every bit "appurtenances and services" as the post-obit:
- Sending to a friend and family - used when sending coin or a gift carte du jour to a friend or family unit member. Before you lot complete a payment, you can opt to pay the fee, or pass it onto the recipient to be covered past PayPal Purchase Protection.
- Paying for goods or services - used when ownership an detail or service from someone. When yous make a buy, the seller pays a pocket-size fee to receive your money. Your payment is covered by our protection policy automatically.
What are the PayPal Fees associated with "friends and family" vs. "appurtenances or services?"
Friends and Family Fees:
The friends and family payout method is intended for occasions similar sending cash gifts or paying back friends/family members for casual personal purposes. (splitting dinners, splitting hotel costs, etc.)
When paying on credit/debit: 2.nine% fee
When sending money via "friends and family", if the person sending the money is using a credit or debit card and so the payor is charged a two.ix% fee with the selection to laissez passer that fee on to the recipient of the coin.
When paying from a United states bank business relationship: 0% fee
If the payor is paying from their banking concern account, they can ship money to anyone in the US for no fee.
Goods and Services "Seller fees"
When sending money for "appurtenances and services", the "seller" will incur a fee of ii.nine% + xxx cents per transaction. The "seller" is the ane receiving the money from the "buyer."
Are content creators considered "sellers" on PayPal?
Short answer: Yes.
As an influencer, content creator, or freelancer, when you charge a brand for your services you are considered a "seller" providing a "good or service" to the brand who is considered a "buyer." Accepting payments when collaborating with brands is considered a commercial transaction.
Why do brand partners asking to send payment to creators via the PayPal "friends and family" option?:
The reason why a brand partner may offer to pay a creator via the "friends and family" choice instead of the "goods and services" choice is simple- it's free (if the recipient is in the US and the brand is paying from a bank account.)
Per PayPal's fee policy, if a make were to select to pay a creator via the compliant "goods and services" selection, then the creator would exist subject field to pay the two.9% +thirty cents per transaction seller fee. Some brands may offer to send the money non-compliantly via the "friends and family" to avoid having to comprehend the fees on behalf of the creator or as an option for the creator to avoid incurring the fees themselves.
What are the risks and penalties of accepting money via the "friends and family" PayPal option?
Equally Sellers, Creators are held responsible for violating PayPal'south policy:
Using PayPal friends and family for business purchases is explicitly against their User Agreement (under the category of "Restricted Activities -section Af.)
When a brand offers to send the coin not-compliantly to pay a creator for their goods and services via the "friends and family" payout pick, the brand is not held answerable for the legal liability or penalties for violating PayPal's terms of service.Equally the "seller", the creator is responsible for accepting payment compliantly and would be the political party penalized.
Risk of Banned/Locked Accounts:
The PayPal Enforcement Segmentation team may lock or ban your account if you lot are suspected of accepting coin for goods and services as a seller via the "friends and family" option. PayPal locks accounts that are suspected of violating the terms of services for restricted activities in order to complete an investigation. Fifty-fifty if you are not banned later on the investigation is complete, you will exist locked out of your account and unable to access your funds for the length of the investigation until PayPal tin close the case which tin take several months-years to reach a verdict.
Daily limits:
PayPal limits the amount of money a seller can receive to $60,000 per day. Each transaction cannot exceed $10,000. For some creators, being sent coin from brand partners that exceed this amount tin can lead to getting their business relationship locked for investigation.
Lack of Protection and limited ability to resolve disputes:
When accepting money via the friends and family method, PayPal offers does not offering protection or dispute assistance if something were to go wrong with the payment. When sending/accepting money via the "goods and services" selection, all transactions are backed by PayPal's protection programme.
To put it simply, according to the article by Moneysavingexpert.com, "A PayPal spokesperson said: "PayPal Buyer Protection does not cover money transfers between friends or family. If someone selling yous goods or a service asks yous to ship a friends and family unit payment, you lot should decline."
How does Lumanu compare to PayPal?
Lumanu was congenital specifically for artistic businesses collaborating with brands.
Not only does Lumanu offering additional tools and benefits to assist creators run their businesses more smoothly that are not offered by PayPal, but creators tin rest assured that accepting money through Lumanu is a secure and compliant option.
With payments, expense management, collaboration tools, and creator protection, we take the hassle out of your hustle.
Ready to get started with Lumanu? Sign up now!
Source: https://www.lumanu.com/blog/payment-via-paypals-friends-family
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