MasterCard Hits PayPal with New Fees

MasterCard Hits PayPal with New Fees

March 25, 2013         Written By Lynn Oldshue

Up until now, PayPal and similar electronic payment processors have been able to avoid excessive fees from credit card companies, with those companies assuming all the costs for transactions in their systems. MasterCard has finally grown tired of this, and they will soon require that PayPal pay fees for all purchases made through their credit network. The exact value of the fees has not been disclosed, but MasterCard said they will be based on a tiered system for the volume of transactions from the prior year.

Even though this is expected to put a dent in PayPal’s profits, it is only a mild one. The fees will only be on transactions in the United States, which represent roughly half of the total purchases made through PayPal. If Visa, American Express, and Discover induct similar rules though, PayPal may see a more significant loss than it is ready for. Researchers predict that the company will still turn high profits for the year if it can cut back on investments, but only time will tell how this will impact the future.

What does this mean for PayPal customers? Nothing at the moment. Since this issue is primarily revolved around transactions on eBay, users may want to watch for fee increases in the coming years. For now though, PayPal will be absorbing the costs it will be acquiring and aiming to avoid others in the future. If you make deposits into your PayPal account through your bank and not your credit card, you should not have any worries.

The effective date for these fees has not been released yet. MasterCard’s president Chris McWilton accused PayPal of “rid[ing] for free on the back of other business models.” Rest assured that he will find a way to stop that from happening.

The information contained within this article was accurate as of March 25, 2013. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Lynn Oldshue

Lynn Oldshue has written personal finance stories for for twelve years. She majored in public relations at Mississippi State University.
View all posts by Lynn Oldshue
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