Can I use Paypal for micropayments?

Great timing! My friend and colleague Kevin Savetz was just telling me how he uses a PayPal micropayments account on his Printable Certificates site, where he sells printable award certificates for $4. The micropayments rate saves him 17 cents per transaction compared to a regular PayPal account.

Here's what he shared with me about Paypal micropayments:

Merchants who wish to use PayPal's micropayments pricing need to open a new PayPal account through the account registration link below.

Merchants who receive both "macro" and "micro" payments should maintain two separate accounts: 1: to apply their standard rate to "macro" payments and 2: to apply the "micro" payments rate to their micropayments.

(However, having set up a second account for micropayments, I found that I couldn't link it to my checking account: PayPal only allows one PayPal account to be linked to any checking account. The company is aware of this issue but doesn't have a solution yet.)

Each PayPal account is associated with only one merchant processing rate. That rate determines the fee that's applied to funds received into that account. For example: a standard Premier/Business Account rate for receiving funds is 2.9% + $0.30. Using PayPal's 5% + $0.05 micropayments rate would reduce the total transaction fee charged to payments received below the value of $12 (per payment). However, if you accept payments that are greater than $12, you would pay a lower processing charge by accepting the payment into the account set with the 2.9% + $0.30 rate.

If you want to set up a PayPal account for accepting micropayments, you must use this URL to do it:

    Sign up for Paypal micropayments @ 5% plus 5 cents

(During and after creating the new account, I saw no special indication that it has micropayment pricing, but the customer service guy assured me that using the above URL means you'll get micropayment pricing.)

Finally, the part about not being able to link two PayPal accounts to a single checking out is a real issue. If you don't have a second checking account, cashing out means paying for them to cut you a check. The sneaky way to get around it is to use the Mass Pay feature on the micropayments account to transfer money to the regular account. (It costs less - 2% or $1, whichever is less.)

Thanks, Kevin, for that inside scoop!