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What is PayPal goods and services?

PayPal building
(Image credit: PayPal)

If you make a payment in PayPal, the site wants to know the type of transaction you’re making so it can offer appropriate protections. In short, you have to choose between PayPal’s ‘goods and services’ and ‘friends and family’ options. 

As the names suggest, the two are for different things. While PayPal friends and family is for known contacts who trust each other and keeps costs to a minimum, ‘goods and services’ is for those buying from a business or a complete stranger selling something via an online marketplace.

While there’s technically nothing stopping you using friends and family for those you don’t trust (even if the terms and conditions forbid it (opens in new tab)), there’s a good reason you shouldn’t do it. But before we get onto that, here’s how to use PayPal goods and services.

How do I use PayPal goods and services? 

The steps are pretty similar whoever you’re paying, with the only difference between the two lying in the penultimate step. 

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. Select “Paying for an item or service” in the pop-up that appears. 

A screenshot from PayPal showing the Items and services option highlighted

(Image credit: PayPal)

6. Choose where the money is coming from. Check through the details, then when you’re sure everything is all okay, press submit to send your money through. 

How much does it cost to use PayPal goods and services? 

While friends and family payments are usually free for transactions within the United States, goods and services transfers require the person receiving the transaction to pay a percentage of the money they’re accepting. 

You can find up-to-date details of the merchant fees you’ll be charged for receiving money here (opens in new tab), but at the time of writing for domestic transactions, it’s between 1.2% and 2.9% plus a fixed fee of 30c. International transactions attract an additional 1.29% for EEA members and 1.99% for all other markets, so it can get pricey.

Do I have to use PayPal goods and services for marketplace deals? 

Technically you could use ‘friends and family’ to pay for something bought on Facebook Marketplace or Craigslist, but it’s both against PayPal’s terms of use, and not a very good idea in its own right.

While it will cut the fees paid to zero in most cases for domestic transactions, using friends and family means you don’t get PayPal Purchase Protection (opens in new tab) as it’s designed to be used by two parties that know and trust each other. 

So, if a seller asks you to use ‘friends and family’, you shouldn’t be tempted even if they offer you a discount: if you end up being scammed, you’ll simply have no recourse to get your money back. Consider it a red flag and look elsewhere if they’re not prepared to budge.

New to PayPal? Here’s 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.