Starting July 28, 2022 PayPal will block rent payments using the fee-free “friends and family” option. This has been expected for years, although many landlords still collect rent for free in circumvention of the terms and conditions. Starting with August rent collections, the fee will be mandatory or else the transaction will not go through. All landlord business accounts will have to pay the transaction fee, which is increasing to 2.99%. The change applies to all business accounts, not just real estate.
Per PayPal’s policy updates, “U.S. business accounts will not be able to receive personal transactions from U.S. PayPal accounts. U.S. PayPal accounts will not be able to send personal transactions to U.S. business accounts.”
The result of this change is to force landlords registered as a business to pay the transaction fee.
Can Landlords Still Collect Rent Using PayPal?
Yes, landlords need to register as a business and pay the 2.99% fee on each transaction. To collect a $1,000 rent payment, it will cost $29.90.
How Much Will it Cost to Collect Rent Using PayPal?
Assuming a nationwide median gross rent of $1,000 per month, landlords using PayPal should budget $358.80 per year for PayPal fees per unit. Landlords renting in 95th percentile markets with rents over $2,500 per month should budget at least $897 per year for PayPal fees per unit.
What if I’m a Landlord Using a Personal Account?
Under the policy changes announced for July 28, 2022 landlords using personal accounts will not be subject to the fee. But landlords should not be using personal accounts for business. PayPal terms and conditions read, “We recommend business PayPal accounts for people and organizations that primarily use PayPal to sell goods or services or to receive donations, even if your business is not incorporated.”
Why Does PayPal Charge Such a High Fee?
PayPal offers guarantees of seller protection and buyer protection. The transaction fee helps offset the cost of enforcement and parallels the retail credit card rate. PayPal does not reduce their fee for ACH or banking transactions, which are more affordable for them to transact.