PayPal is ending fee-free Friends & Family payments for business accounts

Illustration by Alex Castro / The Verge

New limits are being put on a feature that allows people to receive money without paying extra fees. Friends & Family is a transaction method intended for trusted recipients and will only be available for personal accounts.

Friends and family and goods and services are the two ways to send money. You know who is receiving the funds and what you are paying them for when you use F&F. There is usually no fee involved, but there is usually no protection for issues like refunds or scam.

Money sent via G&S is subject toPayPal fees. Fees are hated by everyone. If the thing you buy isn't as described, you can often get a refund for the purchase.

Many businesses take payments for goods and services through F&F even though they are technically not supposed to. The customer could agree to send cash to avoid seller fees if the buyer wasn't aware of the difference. The buyer knows the seller personally and trusts that they will deliver, which is fairly common in informal transactions. Sometimes sellers insist on F&F to avoid transaction fees, which can cause problems down the line.

Some creators who usePayPal to run their business will now be subject to additional transaction fees as a result of the change.

US business accounts won't be able to accept fee-free personal payments, and people who usePayPal for their company will need to create a personal account to receive money fee-free from friends and family.

PayPal didn't immediately respond to questions about whether it changed the rules to crack down on miscategorized purchases but said in the announcement that it will "drive consistency on the platform" and remove confusion around which payments are eligible for buyer and seller protections."

The transaction fee structure for goods and services would be changed later this month. Beginning on July 28th, sellers will be able to pay 2 percent without a flat fee.