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PayPal friends and family — how does it work?

PayPal logo on a smartphone against a blurred background
(Image credit: Shutterstock)

When you make a payment in PayPal, you’re presented with two options: ‘friends and family’ and ‘goods or service.’ 

To be fair to PayPal, the branding is pretty self explanatory. If you’re informally paying somebody you know well, you want ‘friends and family.’ If you’re buying something from someone unknown (a company or a random seller on your marketplace of choice), you want ‘goods and services.’

The two options carry different fees and shift who pays. As such, you may be tempted to use a friends and family payment to complete a business transaction. There’s a very good reason you shouldn’t do that, which we’ll get on to in a moment. But first, some background information.

How do I use PayPal friends and family? 

It’s pretty straightforward to use PayPal friends and family.

1. Log in to your PayPal account. 

2. Click “Send & Request” on the navigation bar at the top of the screen.

3. Enter the phone number, contact name or email address of the person you’re sending money to, or select a contact that's already attached to your account.

A screenshot showing the PayPal options for sending to a friend or family member

(Image credit: PayPal)

4. Enter the payment amount, and add a note if you like. Then press Continue.

A screenshot showing the PayPal options for sending to a friend or family member

(Image credit: PayPal)

5. In the pop-up box, select “Sending to a friend.” 

A screenshot showing the PayPal options for sending to a friend or family member

(Image credit: PayPal)

6. You may now be prompted to choose a bank account to pay from. Finally, you'll get one final chance to check all the details are correct before you press submit and send your money on its way. 

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

Within the United States (or within the U.K.), personal payments between friends and family are free via PayPal, as long as you’re paying directly from your PayPal balance or bank account. If you’re paying via debit or credit card, there’s a “small charge” explained here (opens in new tab)

International payments between friends and family do, however, have a fee attached. It’s charged to the sender and comes in at 5% of the sent amount, up to a maximum of $4.99.

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

Yes, but you really, really shouldn’t — and not just because it’s against PayPal’s user agreement (opens in new tab).

The lack of fee makes it a tempting option for sellers to use instead of ‘goods and services,’ and you may be offered a discount on the agreed amount if you acquiesce. In theory that sounds great. You pay less, and the seller takes more — what’s not to like? 

Well, scammers can use this approach to take the money and run, knowing that you’ll have no recourse to open a fraud claim with PayPal. If you sign off someone as a friend or family member, PayPal reasons, then you’re vouching for the contact and therefore you’re not entitled to extra protections.

‘Goods and services’ payments are covered by PayPal Purchase Protection (opens in new tab). Friends and family payments are not. While a seller asking you to use ‘friends and family’ may just be trying to save a few bucks (albeit in a slightly underhand way), it simply isn’t worth the risk: consider it a red flag and insist on using the ‘goods and services’ option or find someone else who will.

For more information on PayPal, check out our guide to how to set up a PayPal account.

Freelance contributor Alan has been writing about tech for over a decade, covering phones, drones and everything in between. Previously Deputy Editor of tech site Alphr, his words are found all over the web and in the occasional magazine too. When not weighing up the pros and cons of the latest smartwatch, you'll probably find him tackling his ever-growing games backlog. Or, more likely, playing Spelunky for the millionth time.