Send money with paypal friends and family

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.

inline_cta--creator=Download the Lumanu App to send free invoices and get paid.

Why do brand partners request 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” option instead of the “goods and services” option  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 brand were to select to pay a creator via the compliant "goods and services" option, then the creator would be subject to pay the 2.9% +30 cents per transaction seller fee. Some brands may offer to send the money non-compliantly via the "friends and family" to avoid having to cover 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?

As Sellers, Creators are held responsible for violating PayPal’s 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 money non-compliantly to pay a creator for their goods and services via the “friends and family” payout option, the brand is not held accountable for the legal liability or penalties for violating PayPal’s terms of service.  As the “seller”, the creator is responsible for accepting payment compliantly and would be the party penalized.  

Risk of Banned/Locked Accounts: 

‍The PayPal Enforcement Division team may lock or ban your account if you are suspected of accepting money 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.  Even if you are not banned after the investigation is complete, you will be locked out of your account and unable to access your funds for the length of the investigation until PayPal can close the case which can 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 money from brand partners that exceed this amount can lead to getting their account 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 offer protection or dispute assistance if something were to go wrong with the payment.  When sending/accepting money via the “goods and services” option, all transactions are backed by PayPal’s protection program.   

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 you goods or a service asks you to send a friends and family payment, you should refuse.”

How does Lumanu compare to PayPal?  

Lumanu was built specifically for creative businesses collaborating with brands. 

Not only does Lumanu offer additional tools and benefits to help creators run their businesses more smoothly that are not offered by PayPal, but creators can 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.

PayPal is putting new limits on a feature in its payment system that allows people to receive money without paying extra fees, the company recently announced. Starting July 28th, only personal PayPal accounts will be able to get funds via Friends & Family, a transaction method intended for trusted recipients.

There are two ways of sending money on PayPal: Friends & Family and Goods & Services. F&F is intended for paying your friend back for dinner, for example, or giving your kid some birthday money — you know who’s receiving the funds and what you’re paying them for. There’s typically no fee involved, but it also drops protections for issues that might come up, like refunds or scams.

G&S is intended for purchases, and money sent this way is subject to PayPal fees. Everyone hates fees! But with G&S, if the thing you buy isn’t as described, it’s damaged when it arrives, or it just never gets to the buyer, you can often easily get a refund for the purchase.

Many businesses handle transactions using a PayPal business account and take payments for goods and services through F&F, even though you’re technically not supposed to. The buyer might not realize the difference or care, or the business and the customer could agree to send cash that way to avoid seller fees. This is fairly common in many informal transactions, like people selling things on social media platforms — perhaps the buyer knows the seller personally and trusts that they’ll deliver. Sometimes sellers insist on F&F to avoid transaction fees, which causes problems if something goes wrong down the line.

The change is already causing frustration on the part of some creators, who use PayPal to run their business and will now be subject to additional transaction fees.

With this new change, US business accounts won’t be able to accept fee-free personal payments, and people who use PayPal for their company will need to create a personal account to receive money fee-free from friends and family.

PayPal didn’t immediately respond to questions about whether it changed the rules to crack down on miscategorized purchases but said in the announcement the tweak will “drive consistency on [the] platform” and “[remove] confusion around which payments are eligible for buyer and seller protections.”

In the same announcement, PayPal also said the transaction fee structure for goods and services would change beginning later this month. Currently, sellers pay 2.89 percent plus $0.49 per transaction, but starting July 28th, that will change to 2.99 percent without an additional flat fee.

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