Paypal Friends and Family vs Goods and Services – The Difference

PayPal is one of the largest payment platforms in the world. It allows users to send money to each other via email or mobile devices. It also offers a marketplace where merchants can sell their products and services.

PayPal was founded in 1998 and has since grown into a global company with over 250 million registered accounts. 

PayPal is a great way to pay for things online. If you want to get paid for your skills, you can create a free account at Paypal.com. The site lets you accept payments from anyone who wants to pay you. In this post, we explain the differences between being paid via Friends and Family or Goods and Services.

What is PayPal Friends And Family?

PayPal Friends & Family allows you to pay friends and family members back for purchases they’ve made using your PayPal balance. You can also use it to send money to other people if you have an existing PayPal balance. 

Because you’re sending to friends and family, Paypal allows you to send the money for free, so long as you use your Paypal balance or bank account. If you use a debit card or credit card, Paypal does charge a small fee. 

What is PayPal Goods And Services?

The PayPal platform allows merchants to accept payments from customers using credit cards, debit cards, bank transfers, and digital wallets. Merchants are charged a small fee, but this provides buyers with Paypal’s purchase protection.

Purchase protection helps to prevent fraud, resolve disputes, and even refunds. You can learn more about Paypal’s purchase protection here.

How much does it cost to send a PayPal friends and family payment?

While friends and family payments are free to make, you don’t get the purchase protection that is provided to transactions to goods and services. So be careful who you make friends and family payments to. 

Can you use a PayPal friends and family payment to buy things from strangers?

Yes! In fact, it’s one of the easiest ways to pay for something online. But if you don’t know the person, it’s probably best to stick with a goods and services payment. While it will cost them a small fee, it entitles you the buyer to Paypal’s purchase protection, making sure you actually get what you ordered.

Do content creators qualify as “sellers” on PayPal?

Yes, if you accept payments through PayPal. And while it may seem like there aren’t any benefits to paying the small fee on each transaction, there are merchant protections provided. 

For example, buyer’s can’t just demand Paypal give them their money back, it also ensures that customers can make secure payments with you. Here is more information on Paypal’s seller protection.

Why do brands ask to send payment to creators with the PayPal “friends and family” option?

It’s not uncommon for brands to ask creators to pay them back through this method. This is because it makes it easier for them to track payments, but it also means they don’t have to pay a fee to Paypal.

Difference Between PayPal Friends And Family And Goods And Services

The biggest advantage of using PayPal Friends & Family is that it’s free. This means you don’t have to pay anything upfront to start accepting payments from friends and family. 

Can you get scammed on PayPal friends and family?

Yes! There are many ways to scam people using PayPal friend and family, because those transactions are protected with Paypals purchase protections. Meaning you have little recourse if the person takes the money and doesn’t deliver what they said they would. 

Does PayPal report to the IRS on Friends and Family?

Yes and no. Paypal will issue you a 1099-K tax form if you sell $600 (or more) of goods. However, money sent to you as reimbursement (for example, from friend) or money sent to you as a gift are generally excluded. 

If this seems like a new thing, that’s because it is, the $600 threshold came into effect in 2022, before Paypal only issued a 1099-K for $20,000 in sales and at least 200 transactions, so it’s big difference. You can read more about Paypal’s tax reporting requirements here.

Bottom Line

Friends and family payments are great, especially when you want an easy way to make personal payments to people you know. However, if you’re purchasing something you’ll likely want to select “goods and services” for the peace of mind you get with Paypal purchase protection. 

While friends and family payments are completely free, you won’t get the same level of protection as you would with goods and services which are meant for business transactions. That being said, it’s still a good option for simple purchases.

What do you think? Have you ever used PayPal friends and family to pay someone? Let us know your thoughts in the comments below.