PayPal Friends and Family Payments – Do NOT Use It without Reading This First

By Carol J. Dunlop


PayPal is currently the most popular payment processor among companies and individual consumers. I've used PayPal for years, mostly for business, but also to pay and accept payments from others. My husband and I are always transferring money between accounts using the PayPal Friends and Family option.

Using PayPal Friends and Family (PPFF) is free. You can send money to anyone using their email or phone. However we don't use that option when accepting payments from our clients. And neither should you. This feature was originally intended as a way to send money between friends or a family member. This PPFF is not to be used by you to accept payments from clients or for you to pay someone for products or services.

In this post, I'll explain the risks in using the PayPal Friends and Family payment option to make payments and what you can do instead to stay in compliance when making commercial transactions.

PayPal logo

What is PayPal?

PayPal allows online merchants and PayPal users to transfer money by using their credit or debit card, without the need to share financial information or sell items on eBay or anywhere online. PayPal's over 400 million users are now in over a million countries. Because the services are so widespread most online sellers use their service on a daily basis for business transactions and digital payments. For a small fee, you are able to conduct business online, send money, transfer funds, receive funds, make personal payments, and request money using your Paypal business or personal Paypal account.

Request money in PayPal

Requesting Money via Paypal

PayPal offers an online payment service that makes it very easy for someone to pay you either from their bank account or using their PayPal balance. Everything is handled inside of the app. All you need to do is hit the Request Money button. The person receiving your payment request and initiates the payment on their end, it hits your account immediately.

When you receive a payment after using the “request money” feature in your business PayPal account, it's considered a “commercial transaction.” Your purchase could be covered under the PayPal Seller Protection for Merchants.

How Secure is PayPal?

Payments made via PayPal and are encrypted through an SSL-based encryption scheme. A number of security measures are in place for monitoring fraud. PayPal's purchase protection policy provides for full refunds if an order doesn't come to you, is substantially different from the item ordered, or wasn't purchased from you. PayPal provides an added layer of protection for your financial information because you don’t expose bank details or card numbers.

PayPal Fees and Payment Options

Using PayPal in your business allows you to get paid and make online payments quickly and easily.

First, if you're conducting business online via PayPal, you should be using a PayPal business account and not a personal account. There are two ways to pay and get paid: "friends and family" or "goods and services."

PayPal Friends and Family

PayPal Friends and Family

It's free to pay using PPFF. Just click the Send Money button and choose Paypal Friends and Family as the payment option. If you're sending money using a debit or credit card, you will be charged a Paypal Friends and Family fee of 2.9%.

If you're sending money using your PayPal balance or your bank account, there is no fee at all.

If you send money using international transactions, you may be charged a fee equal to 5% of the payment amount (up to $4.99 USD). 

Goods and Services Payments

When you click the Buy Now button on a website or use a checkout system, PayPal will process the payment as Goods and Services.

  • Goods are physical items or products that you buy from someone else.

  • Services are just that, services that are provided by someone else like a Tax professional.

Sales of ‘Goods and Services’ and online purchases are considered to be a commercial transaction by PayPal. They charge a fee of 2.89% + a fixed fee and a currency conversion spread based on the currency.

PayPal payments mobile

Should you Request Payment Using PayPal's “Friends and Family” Option?

Can you get scammed using the friends and family option? Yes indeed. That's why you should only use that option with actual PayPal friends and/or family members.

Sometimes sellers will request that you make a purchase using PayPal friends and family rather than the using the Goods and Services option. They may even offer you a discount for doing so. 

Don’t do it! 

Sending money using PayPal friends and family for business purchases is totally against their User Agreement (See "Restricted Activities"- section Af):

You must not use the “send money to a friend or family member” feature in your PayPal account when you are paying for goods or services.


Risks of Violating PayPal's User Agreement

As a seller or services provider, you are representing yourself as a business, so you might as well accept that there are some things you will need to pay for. Like transaction fees when accepting payments from customers for goods and services you've provided.

I know there are times that you feel like, what if I do it just this one time? Don't do it. It's not worth it, here's why.

Locked out of Paypal

Your Account Could Be Locked/Banned 

The PayPal Enforcement Division team doesn't play when it comes to following the rules. They may lock or even ban your account, if they suspect you are accepting money for goods and services as a seller via the “friends and family” option. PayPal will lock your account as they go through and complete their investigation. 

If you're suspected of violating the terms of service for restricted activities, you will be locked out of your account and unable to access your funds for the length of the investigation. Even if you are not banned after they complete their investigation, several months or even years can pass before reaching a verdict.

Lack of Protection

You work hard to produce what you sell. Paypal offers the PayPal protection program for protection or dispute assistance in case something goes wrong with the transaction. When you choose the friends and family method for payment, you, nor the transaction are protected.

Limited Ability to Resolve Disputes

When buyers experience any type of issue with a transaction, they can open a dispute in Paypal's Resolution Center. The dispute process helps to resolve issues before they are escalated to a claim. Protection does not cover money transfers between friends or family members

We cover physical goods that are sold and shipped with proof of delivery from within the United States to buyers around the globe. We also cover intangible items (digital items and services) subject to the Intangible Goods Additional Requirements below within the United States to buyers around the globe.


PayPal Limits

PayPal accounts have a minimum transaction amount of $0.01 and a maximum transaction amount of $4,000. A bank account withdrawal is limited to $500 per month. You can also send one-time payments of up to $4,000 to someone even if they don't have a PayPal account.

Paypal is NOT a Bank

Because Paypal has been around for so long many people use it as if it's a real bank account. It's easy to lose site of the fact that "PayPal is an electronic commerce company that facilitates payments between parties through online transfers."

Now that you know the real deal, it's time to look at PayPal like any other tool you would use in your business and follow the rules that they've laid out for conducting business. You will have fees, just accept it as the cost of doing business.

About the author

Carol J. Dunlop is a 5X Best-selling author for her book. Carol is known as “The Online WOW! Strategist.” She teaches entrepreneurs to convert marketing into money using their WOW! Website to attract the clients they need to live the life they want.

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  1. Great post. It's not worth it to be banned or have your account limited by paying a seller through Paypal friends and family. They usually do it to avoid the fees that sending a payment as Goods come with.

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