The risks of accepting payment via PayPal’s “Friends and Family” payout option

The risks of accepting payment via PayPal’s “Friends and Family” payout option
Kam Thandi


Kam Thandi

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As a creator, you accept payment from your brand partners in exchange for your content and services you are considered a "seller" by PayPal's acceptable use policy. As sellers, creators should never accept payment from their brand partners via the "friends and family" option through PayPal. Accepting payment through the "friends and family" option puts the creator business at significant risk.

What is the “friends and family” payout option vs. the “goods and services” payout option on PayPal?

When your brand partner is electing to send your payment via PayPal, they will have two types of transactions to choose from.  Per PayPal’s help center they define the difference between sending money “friends and family” or as “goods and services” as the following: 

  • Sending to a friend and family - used when sending money or a gift card to a friend or family member. Before you complete a payment, you can opt to pay the fee, or pass it onto the recipient to be covered by PayPal Purchase Protection.
  • Paying for goods or services - used when buying an item or service from someone. When you make a purchase, the seller pays a small fee to receive your money. Your payment is covered by our protection policy automatically.

What are the PayPal Fees associated with “friends and family” vs. “goods or services?”

Friends and Family Fees: 

The friends and family payout method is intended for occasions like sending cash gifts or paying back friends/family members for casual personal purposes. (splitting dinners, splitting hotel costs, etc.) 

When paying on credit/debit: 2.9% fee

When sending money via “friends and family”, if the person sending the money is using a credit or debit card then the payor is charged a 2.9% fee with the option to pass that fee on to the recipient of the money.   

When paying from a US bank account: 0% fee

If the payor is paying from their bank account, they can send money to anyone in the US for no fee.  

Goods and Services “Seller fees” 

When sending money for “goods and services”, the “seller” will incur a fee of 2.9% + 30 cents per transaction.   The “seller” is the one receiving the money from the “buyer."

Are content creators considered “sellers” on PayPal?

Short answer: Yes. 

As an influencer, content creator, or freelancer, when you charge a brand for your services you are considered a “seller” providing a “good or service” to the brand who is considered a “buyer.”  Accepting payments when collaborating with brands is considered a commercial transaction.

inline_cta--creator=Download the Lumanu App to send free invoices and get paid.

Why do brand partners request to send payment to creators via the PayPal “friends and family” option?: 

The reason why a brand partner may offer to pay a creator via the “friends and family” option instead of the “goods and services” option  is simple- it’s free (if the recipient is in the US and the brand is paying from a bank account.)  

Per PayPal's fee policy, if a brand were to select to pay a creator via the compliant "goods and services" option, then the creator would be subject to pay the 2.9% +30 cents per transaction seller fee. Some brands may offer to send the money non-compliantly via the "friends and family" to avoid having to cover the fees on behalf of the creator or as an option for the creator to avoid incurring the fees themselves.

What are the risks and penalties of accepting money via the  “friends and family” PayPal option?

As Sellers, Creators are held responsible for violating PayPal’s policy:

Using PayPal friends and family for business purchases is explicitly against their User Agreement (under the category of “Restricted Activities -section Af.) 

When a brand offers to send the money non-compliantly to pay a creator for their goods and services via the “friends and family” payout option, the brand is not held accountable for the legal liability or penalties for violating PayPal’s terms of service.  As the “seller”, the creator is responsible for accepting payment compliantly and would be the party penalized.  

Risk of Banned/Locked Accounts: 

The PayPal Enforcement Division team may lock or ban your account if you are suspected of accepting money for goods and services as a seller via the “friends and family” option. PayPal locks accounts that are suspected of violating the terms of services for restricted activities in order to complete an investigation.  Even if you are not banned after the investigation is complete, you will be locked out of your account and unable to access your funds for the length of the investigation until PayPal can close the case which can take several months-years to reach a verdict.

Daily limits: 

PayPal limits the amount of money a seller can receive to $60,000 per day. Each transaction cannot exceed $10,000.  For some creators, being sent money from brand partners that exceed this amount can lead to getting their account locked for investigation.

Lack of Protection and limited ability to resolve disputes: 

When accepting money via the friends and family method, PayPal offers does not offer protection or dispute assistance if something were to go wrong with the payment.  When sending/accepting money via the “goods and services” option, all transactions are backed by PayPal’s protection program.   

To put it simply, according to the article by, “A PayPal spokesperson said: "PayPal Buyer Protection does not cover money transfers between friends or family. If someone selling you goods or a service asks you to send a friends and family payment, you should refuse.”

How does Lumanu compare to PayPal?  

Lumanu was built specifically for creative businesses collaborating with brands. 

Not only does Lumanu offer additional tools and benefits to help creators run their businesses more smoothly that are not offered by PayPal, but creators can rest assured that accepting money through Lumanu is a secure and compliant option.

With payments, expense management, collaboration tools, and creator protection, we take the hassle out of your hustle.

Ready to get started with Lumanu? Download the Lumanu app! 

Kam Thandi

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