PayPal is one of the leading online payment systems in the world, largely because of how simple and easy it can be to use. It’s universal, secure, and provides a variety of different services for individuals, small businesses and large companies too. For individuals, you can simply use it as a safe payment method or a way to collect payments in sales, such as on eBay.
Many small businesses will use PayPal as their primary source of invoicing clients, collecting payments from customers and more! Depending on the service you choose there are various fees or charges related and plenty of terms and restrictions to consider when thinking about opening a business account. That’s where this guide comes in, as we’ll help you work through opening your bank account, give you some of the pros and cons, and even introduce some alternatives that can work with your PayPal account for even more convenience.
Before you start, it’s important to note that while the PayPal business account is mostly universal across the globe, there are differences from country to country to consider, and if there’s a particular feature or service you need, you’ll want to consider what country you’re in and if your country has that included. For this guide, we’ll focus on PayPal Canada, and the services and account types they offer here.
The very initial setup of the account is simple, as you’ll need some basic information about the business and your needs to start. When you sign up with PayPal, there are two initial account offers, a personal account and a business account. You’ll want to choose a business account, which provides the benefits of selecting credit and visa debit payments (with no monthly fee), accepting payments from customers who don’t have a PayPal account, online invoicing PayPal Checkout, and a significant feature: Seller Protection.
The next step is to choose PayPal Payments Standard or PayPal Payments Pro. The two significant differences come in the price and the customization features. The Standard option comes with no monthly fee, only charging you a fee (2.9% and $0.30 per domestic transaction) on each transaction, and for online shops sending your customers to the PayPal website, using their standard checkout system. For the Pro Option, the monthly fee is $35 and gives you complete control over the look and design of your checkout system. Customers won’t have to be directed to PayPal’s website, as it works with most shopping cart systems and allows you to make almost every detail as you want it. The per transaction fee still stands, the primary selling point being the ability to create your look and feel.
Once you get started, you’ll need to enter your email address and start filling out the required information including address, business identification number and more. And that’s it! Once you’ve finished filling out your information, the initial set up is complete.
However, once you’re done that, PayPal will help walk you through additional setup steps to get you started, including adding a bank account to transfer money to and from, and more.
An important thing to consider if you’re planning on using this account for international payments or transactions is the cost of those transactions. Not only will you have to consider the fees PayPal charges on general transactions, but the exchange rates as well.
Earlier we mentioned how PayPal charges a 2.9% fee plus $0.30 on every transaction, but that’s only for a domestic transaction. The fees increase when you go internationally, as PayPal charges more depending on which country you’re in. For any transactions from the United States, the percentage fee is increased to 3.7% of the transaction amount, with the $0.30 fee as well, though this time the $0.30 is in USD rather than CAD. It’s important to consider even just the CAD to USD difference on the $0.30, as high volumes of transactions can lead to a big difference over months and years. But, that’s not all, when you move outside of Canada and the United States, the percentage fee increases to 3.9%, with the fixed fee changing depending on the country the transaction is from (always in the local currency).
Like all other financial institutions, PayPal implements their exchange rate, which adds a markup to the base exchange rate that is traded globally between banks. Generally, that exchange rate will include an additional 2.5%, a cost you won’t have to deal with through Knightsbridge Foreign Exchange, though we’ll talk more about how you can to use PayPal for day to day transactions and Knightsbridge Foreign Exchange for your main international transfers.
For one transaction here or there, these fees may result in a couple of dollars difference, but if you expect a high volume of international business, then you’ll want to consider these different fees and whether or not it’s worth it for you. It’s always important to know going into it how much it’s going to cost, considering that no transaction ever gives you the full amount expected.
If you intended to use PayPal for all your international needs, but are turned off by the exchange rates, there is a way to use Knightsbridge Foreign Exchange indirectly with PayPal. If you have a UDS bank account in addition to your CAD bank account, you can connect both to your PayPal account, receiving payments in both funds and then transferring to their respective accounts. When you to exchange currencies, use Knightsbridge Foreign Exchange, as we always provide the best currency exchange rates in Canada and don’t charge any transfer fees. It may be a bit time consuming, as you have to wait for PayPal’s transfer time and ours (each is about 3-5 business days, but may be less), but for large amounts, it could still save your hundreds or thousands of dollars of exchange fees. Because our rates are typically about 2% less, you’d save $2,000 on a $100,000 exchange.
There are various benefits to using PayPal, which is why it’s so widely used around the globe, so if it works for you that’s great! It’s simple, easy and used in many countries around the world. As this guide showed, it’s easy to open an account (and just as easy to close one), with the main thing to consider is how the fees work for you!