PayPal is a popular payment processor for businesses and individuals—but things get messy when you mix the two.
Here’s everything you need to know about PayPal friends and family transfers (and a few friendly warnings as well).
Note: The following applies to Personal PayPal accounts. If you have a PayPal Business account, friends and family payments may not be available to you.
When you send or request money through your personal PayPal account, you can choose whether it’s a “Friends and Family” payment or a “Goods and Services” payment.
Friends and Family payments are often used to pay back a friend, deliver money to family members abroad or send digital gift cards.
In order to send money using PayPal friends and family, both you and the recipient need to have a PayPal account (you can set one up for free).
Sending money with PayPal friends and family only takes a few steps:
Note: PayPal friends and family may not be available in some countries.
You can also send friends and family payments using the PayPal app or PayPal.Me. The process is pretty similar on the app—you just enter the payment amount before selecting whether or not it’s a friends and family payment.
Friends and Family payments can be made to anyone in the U.S. for free (from your bank account or PayPal).
If you are sending money internationally, you may be charged a transaction fee equal to 5% of the send amount (up to $4.99 USD).
When you pay with a debit or credit card, you’ll be charged a small processing fee—for both domestic and international transactions. Currently the rate is 2.9% + a fixed fee (varies by currency; $0.30 in the U.S.).
But you can always count on Michael Scott to get you out of a jam
Here’s a good rule: If they’re not your friends and family in real life, they shouldn’t be your friends and family on PayPal.
Occasionally, sellers will request that you make a purchase using PayPal friends and family rather than the traditional Goods and services payment. This can be a convincing argument as there is no fee required, meaning they may offer you a discounted rate.
Don’t take the bait.
In fact, using PayPal friends and family for business purchases is explicitly against their User Agreement:
“You must not use the “send money to a friend or family member” feature in your PayPal account when you are paying for goods or services.”
Business owners know this as well as should never ask you to pay in this way. Take it as a red flag and just pay the goods and services fee.
As one user commented “3% is a small price to pay for peace of mind”
While PayPal does protect against “Goods and Services” scams, Paypal does not reimburse “payments sent using PayPal’s friends and family functionality.”
Thus, the following information only applies to goods and services payments made from personal PayPal accounts.
Items and services payments are protected by PayPal Purchase Protection. Here’s what that means:
According to PayPal’s policy, you’re protected if:
If any of these things happen to you, PayPal guarantees to reimburse the full cost of the purchase plus any shipping costs (just make sure you report the problem within 60 days of the transaction date).
PayPal asks that you work with the seller first, but if they refuse to hit the “Issue a Refund” button, you can open a dispute in the Resolution Center.
For Sellers, the protection guarantees are pretty similar. Particularly, PayPal covers against two types of buyer complaints:
However, in order for Sellers to be protected by PayPal they need to have proof of delivery or shipment and be upfront with all the details. Learn more here.
For business transactions, pretty much any business alternative is better than PayPal friends and family—Square, Stripe, even PayPal Business.
In general, payment processors that are designed for buying and selling goods always afford better security—and they tend to have pretty fair rates. For example, ZipBooks free invoicing allows digital payments for businesses, so you have better security and get paid faster.
If you are actually transferring money between friends and family, PayPal is just one option. There are tons of great peer-to-peer payment apps out there. My go-to is Venmo, but I’ll let you compare for yourself.
Rachel Cottam is a content writer at ZipBooks and a former high school English teacher. Her writing and editing have been featured in academic journals and tech websites alike.