PayPal’s fee-free Friends & Family payments for business accounts are coming to an end

PayPal has placed new restrictions on a feature in its payment system that allows customers to receive money without paying additional fees. Beginning July 28th, only personal PayPal accounts will be able to receive funds through Friends & Family, a transaction mechanism designed for trusted receivers.

PayPal allows you to send money in two ways: Friends & Family and Goods & Services. F&F is intended for things like paying a friend back for dinner or giving your child some birthday money – you know who’s getting the money and what you’re paying for. There is usually no price involved, but it also removes protections for potential concerns, such as refunds or scams.

G&S is designed for purchases, and funds sent through this method are subject to PayPal fees. Everyone despises fees! However, if the item you purchase is not as represented, is damaged when it arrives, or never arrives, you can often quickly obtain a refund.

Even though it is legally illegal, many firms conduct transactions with a PayPal business account and accept payments for goods and services through F&F. The buyer may not notice or care about the difference, or the company and the consumer may agree to provide cash to avoid seller costs. This is extremely frequent in many informal transactions, such as persons selling items on social networking sites – perhaps the buyer knows the vendor personally and has faith in their ability to deliver. Sometimes vendors insist on F&F in order to reduce transaction fees, which poses issues if something goes wrong later on.

Because of this new change, US business accounts will no longer be able to accept fee-free personal payments, and people who use PayPal for their business will need to register a personal account in order to receive money fee-free from friends and family.

PayPal did not respond immediately to questions about whether it changed the rules to crack down on miscategorized purchases, but stated in the announcement that the change will “drive consistency on [the] platform” and “[remove] confusion around which payments are eligible for buyer and seller protections.”

PayPal also announced that the transaction fee structure for products and services would change later this month. Sellers currently pay 2.89 percent plus $0.49 for every transaction, but that will change on July 28th to 2.99 percent without an additional flat cost.