Hey, Etsy sellers! Did you know that the 2.9% + $.30 fee on Paypal is not the only fee structure you can use for your Etsy shop? A few years back, Paypal quietly released their Micropayments plan to offer a way for sellers of low-priced items (under $12) to save on fees. I recently discovered this while trying to find a way to profitably sell individual pinback buttons and magnets for a low price. Take a look at Paypal’s chart for such an item:

To learn about Micropayments, take a look at Paypal’s Micropayment link.

The Problems, and How to Get Around Them

While offering a convenient, automated Micropayment option to sellers would be the best thing since sliced bread, the Micropayment plan we were given is neither convenient nor automated. There are several annoying caveats:

1. Your Paypal account can use either Standard or Micropayment rates, but not both. This is important because for purchases ABOVE $12, the Micropayment rate is more expensive than the Standard. If you want to take advantage of both Standard and Micropayment rates, you need two accounts. Which leads to number two…
2. Your bank account can only be attached to a single Paypal account. Since most people have one business account, they would not be able to directly transfer funds from both Paypal accounts.
3. Etsy doesn’t allow the use of two Paypal accounts on one store.

Unfortunately, we can’t do anything about number three. As an Etsy seller, you’ll have to choose the plan you want based on the sort of sales you normally receive. We can, however, do more to connect the two accounts, so that you have the option to use both accounts with the same bank. This can be great if you have two shops (one of which sells higher-priced items) or if you also sell in other avenues. I’ll explain how to set up and link your accounts below.

Creating and Linking Paypal Micropayment Account

Creating a Micropayment account and linking it to your main Paypal account is not very straightforward.  Luckily, I’ll walk you through it!

Step 1: Create a new Paypal Premier or Business Account

Visit Paypal and setup a new Paypal account. It has to be a Premier or Business account, which you should be used to if you’re selling on Etsy anyway. Choose an email address different than your main Paypal account, where you can distinguish it as a Micropayments account: i.e Micro@YourSite.com. Don’t worry about attaching a bank account– you’ll be linking it to your main Paypal account.

Step 2: Convert your account to a Micropayments Account

Your new Paypal account will automatically be set with the Standard rates. To take advantage of Micropayments, you need to apply to have it converted. To do that, visit the Paypal Micropayment site and click to “Signup.” From there, choose your country or region and click the yellow “Login Here” button. On the login screen you’ll see “Paypal Micropayment Pricing” at the top. Log In, and it should ask you if you want to switch to the Paypal Micropayment Rates. Select “Yes” and you’re all set. The Micropayment Pricing is not applied immediately– you’ll receive an email in a couple days letting you know that it’s set. That’s really all the notice you’ll get, too. Your Paypal page will look just like a Standard Account.

Step 3: Link Your Micropayment account to your Standard Account

Since your Micropayments account has no funding source or bank account attached, it can’t be verified and you can’t transfer money out of it for free. We want to be able to manage our money from a single bank account, and have an option to get money into our main account for free. To do this, you have to contact Paypal over the phone.

Make sure your main Paypal account (The one you use for Etsy, or whichever online store you have) is verified and has your bank account attached. Then, log in to your Micropayment account and follow the instructions to contact them by Choosing “Contact Us > Speak to Us” or through this link.

When you get on the phone with someone, you need to tell them that you would like to link your Micropayment account to your main account using a “parent/child” relationship. You want the Micropayments account to be the “child” account. The person you are speaking to will likely have no idea what you’re talking about, and will transfer you. Don’t get discouraged if you are transferred a few more times. It’s not a common request, and they need to direct you to someone who can help. Eventually, you’ll speak to someone who can do what you want. Give them the above message, and follow their instructions to get your account set up. You should also get their direct phone number, in case you need to speak to them later.

That’s all! Now your Micropayment account is linked to your Main account, and you can manage multiple Paypal accounts into one funding source. Here is how the parent-child relationship works:

1. Each night, your Micropayment account funds will be automatically transferred fee-free into your Main Paypal account.

2. Each night, the balance of your Main Paypal account will be automatically transferred into your bank.

For me, this works out just fine because I prefer not to leave Paypal in charge of my money. Having it transferred into my bank each day makes one less step for me. However, if you would prefer to not have Paypal do this automatically, ask the person who set up your Micropayment account if he or she can turn off the automatic transfer into your bank account. I haven’t asked myself, but heard from someone else that this is possible.

I hope you know a bit (okay, a lot too much) more about Micropayments now! Paypal fees can really add up, and Micropayments offers a solution to cut them drastically.