PayPal Goods and Services (G&S) vs Friends and Family (F&F)

Online payment services and systems provide people with a secure and convenient online shopping method. If you have spent time selling or buying on any online marketplace such as eBay or even Facebook Groups, you must have come across PayPal  as a choice to complete your purchase. 

However, PayPal offers two separate types of payment channels to sellers and buyers: Goods and Services (G&S) and Friends & Family (FF). 

Although the two have numerous differences, the main one comes down to the fees. Believe it or not, these charges can quickly add up, provided you’re not careful. 

This article will walk you through everything you need to know about PayPal Goods and Services (G&S) vs. Friends & Family (FF), including their fees, when to use each, and potential alternatives.

What are PayPal Goods and Services and Friends and Family?

Whether you wish to buy a rare sports card or split dinner with a friend, PayPal—a service people trust that has been around for over twenty years¹—offers options to suit your needs. 
PayPal is one of the most popular payment processing channels among users. Don’t believe us, believe the stats: according to one report, more than 400 Million people² use it globally, with 278.1 million users in the United States alone. 

Let’s explore how each works:

What is PayPal G&S?

PayPal G and S refer to ‘Goods and Services.’ As per PayPal, users can choose it when buying services or goods. This payment method is best if you wish to buy online merchandise or pay for items you won in auctions, download digital items, or similar things. 

Consider PayPal G&S as a credit card used at a store. It’s a mode to exchange money for goods. Many sellers prefer PayPal G and S due to its reach: 35 million merchants³ use it to collect customer payments worldwide. 

That said, PayPal covers these purchases with “PayPal Purchase Protection.”⁵ It means buyers will get additional security if they:

• Are charged for items they never bought
• Never got their package 
• Received items that don’t match the description 

Now that you understand what PayPal G&S means, let’s learn what ‘PayPal friends and family’ means.

What is PayPal Friends and Family?

PayPal F&F is short for “Friends and Family.” You can use it for personal payments or everyday exchange of funds between you, your family, or friends. 

This payment channel is best when you split lunch bills, send funds as gifts, pay rent, or something similar. Think of it as the “let me loan you a dollar” feature.

The bright side? PayPal won’t charge any fees for F&F transactions if you use funds from your PayPal balance or a linked bank account. However, if you use a credit or debit card, it will charge a small fee of 2.90% plus a fixed fee⁶.

For example, if you’re paying a friend back for lunch, there’s nothing to protect; no product or service is involved.

Key differences between G&S and F&F

It’s crucial to understand the differences between PayPal's Goods and Services (G&S) and Friends and Family (F&F) to avoid unnecessary fees and ensure the right level of protection for your transactions. 

Here are a few key differences to help you make the right decision.

Features

Designed for business transactions, Goods and Services (G&S) is used when you’re buying or selling products and services. It includes built-in protection for both buyers and sellers. 
On the other hand, Friends and Family (F&F) is meant for private transfers, such as sending funds to individuals you are familiar with and trust. It’s not suitable for business purposes and doesn’t offer protection for buyers or sellers. 

Fees

When it comes to G&S, PayPal imposes a charge of 2.9%+ fixed fee for domestic transactions, with higher fees for international transfers. These charges are usually deducted from the seller's payout.

In contrast, F&F domestic transfers financed by a bank account or PayPal balance are usually free of charge. However, fees may apply if you use a credit card or make an international transfer.

Protection

Goods and services offer buyer protection, ensuring you’re covered if the item isn’t delivered or isn’t as described. Sellers also receive limited protection against unauthorized payments or disputes.

But you won’t get buyer or seller protection in PayPal Friends and Family. This is because the option is solely for reliable, non-business exchanges.

Availability

While GS is available for all PayPal accounts (including business accounts), FF is exclusively offered for individual accounts. Business accounts can’t use this feature, as PayPal explicitly restricts its use for commercial purposes.

Selecting the appropriate choice according to your requirements can help you evade unwanted charges and dangers while taking full advantage of PayPal’s advantages.

When to use Goods and Services (G&S)

PayPal G&S is good for both sellers and buyers who have to exchange funds safely online. Here are a few factors when to use PayPal goods and services.

Online purchases

If you buy from a popular online marketplace such as eBay, an e-commerce store, or a seller you don’t know personally, always use G&S. That’s because this approach is created especially for commercial exchanges, which guarantees protection for purchasers and vendors. 

Service payments

Paying for services such as freelancing, coaching, or consulting? Like goods, you should choose PayPal G&S to protect yourself if the service isn’t delivered as promised.

International transfers

For international purchases, G&S is often the safer option, even though the fees are higher. PayPal usually applies a minor percentage of the transaction total in addition to a fee for currency conversion. Although these expenses may accumulate, the reassurance offered by Buyer Protection frequently surpasses the cost. Always opt for G&S for safe and hassle-free online shopping, particularly for international or expensive transactions.

When to use Friends and Family (F&F)

PayPal FnF is the option users can go for to send gift cards or money for all non-commercial activities between family and friends. 

Wondering when to use PayPal for friends and family? Listed below are some factors that help you decide.

Send money to trusted contacts

F&F is best for transferring money to friends or family members. Whether you’re gifting money, paying back a loan, or splitting dinner costs, this option is cost-effective.

Avoid unnecessary fees

A major advantage of PayPal F&F is the minimal or nonexistent fees. For domestic transactions funded by a PayPal balance or bank account, F&F often incurs no fees, which makes it an economical choice.

Caution against misuse

Users should not use F&F for business transactions. Not only do you lose buyer protection, but PayPal may penalize you for violating their policies (we’ll discuss these potential risks in detail later in the article).

Fees comparison between G&S and F&F

PayPal charges fees based on the type of transaction and the payment method used. Let's examine how these fees vary between Goods and Services (G&S) and Friends and Family (F&F) for both local and international transactions.

Fees for domestic transactions

For PayPal GS, the system levies a fee of 2.9%⁴ of the transaction (plus a fixed amount) for domestic goods and services payments. For example, if you purchase an item priced at $100, the vendor gets $96.80 once a $3.20 fee is deducted.

Domestic F&F payments incur no charges if funded through a PayPal balance or connected bank account. However, when you send money via a credit or debit card, PayPal imposes a fee of 2.9% plus a fixed amount, akin to G&S. For instance, transferring $100 to a friend via a bank account will cost you nothing. However, using a credit card will incur a fee of $3.20. 

Fees for international transactions

For international goods and services transactions, PayPal adds a 1.5%⁴ cross-border charge in addition to the domestic fee, along with potential currency conversion fees. 

Consider the example to understand better.

Let’s say you purchase a product for $100 from overseas. It may incur charges of $4.70 or higher, based on the currency exchange rate. The seller gets approximately $95.30. 

However, international PayPal FF payments come with a fixed cost, usually 5%⁶ of the transferred amount (capped at $4.99). For instance, sending $100 to a family member abroad costs around $5 if funded by a bank account. 

Now that you know both domestic and international fees for each, let’s learn how funding sources such as bank transfers impact the amount sent.

Risks of misusing Friends and Family (F&F)

As mentioned, the Friends and Family (F&F) payment feature of PayPal is intended for private, non-business transactions, like transferring funds to reliable contacts such as friends or relatives. 

However, using PayPal F&F for commercial dealings poses considerable risks for both purchasers and vendors. 

Listed below are a few risks of misusing F&F.

As sellers, you’re held responsible 

As a seller, you have to follow PayPal’s policies. If you’re using PayPal F&F for business transactions, you explicitly violate its User Agreement⁷ under the ‘Restricted Activities’ section. 

However, as the seller, you are fully accountable. Accepting such payments puts you at risk of penalties and consequences.

Account risks

PayPal may lock or ban your account if you’re caught accepting “Friends and Family” payments for goods or services. During the investigation, your account – and funds – can remain frozen for months or even years, even if you aren’t banned.

Transaction limits

PayPal caps daily payments of sellers at $60,000⁸. Each transfer can’t exceed $10,000⁸. 

No protection

Payments made through "Friends and Family" lack buyer and seller protection. If something goes wrong, you can’t resolve disputes through PayPal. However, using the "Goods and Services" option covers your transactions.

PayPal buyer and seller protection explained

In addition to fees, the other biggest difference between G&S (Goods and Services) and F&F (Friends and Family) is PayPal’s Purchase Protection. As noted, it’s only available on purchases made through PayPal GS. 

But how does this protection work for buyers and sellers? Let’s break it down.

How PayPal GS protects buyers

PayPal’s purchase protection gives buyers peace of mind by ensuring they receive the item they purchased. Also, you can submit a dispute if a product isn’t delivered or arrives considerably different from the description. 

There are three key scenarios where buyers can report a problem, such as:

• You were charged for the wrong item: You order a Joe Montana rookie card from your favorite online marketplace. However, they charge you for a Jerry Rice card instead. 
• Your item never arrives: You buy online merchandise from an e-commerce store, but it never shows up on your doorstep. 
• Your package arrives in bad condition: You purchase a card like Joe Montana's rookie card. The product description mentions the condition as ‘without visible flaws.’ However, it arrives with a noticeable crease across the middle.

If PayPal decides in your favor, you'll receive a refund for the entire purchase price, including shipping fees. 

How PayPal GS protects sellers

Sellers also benefit from PayPal’s Seller Protection Program, which helps against fraudulent claims, unauthorized transactions, and chargebacks. 

However, there are a few important rules to keep in mind.

• U.S. accounts only: The Seller Protection Program only applies to accounts registered in the United States.
• Proof of delivery is required: For items under $750⁹, you must provide a tracking number from the shipping company. If the item is worth more than $750, you’ll need a signature confirmation as proof of delivery.
• High-value collectibles are not covered: Items sold for $10,000 or more¹⁰, such as rare sports cards, don’t qualify for protection.

Lack of protection under F&F

F&F transactions lack any protection for buyers or sellers. They are meant for private, reliable transactions—such as sending cash to a friend for a meal or giving money to relatives. 

If a problem occurs (such as undelivered items or fraud), PayPal will not step in, leaving you vulnerable to possible losses.

Alternatives to PayPal for international money transfers

Although PayPal is a popular option for global money transfers, it’s not always the cheapest or quickest choice. 

Luckily, there are numerous options to consider, including BOSS Revolution, Wise, and Zelle. Each provides unique benefits in terms of fees, speed, and security.

Sources: all third party information obtained from applicable website as of January 24, 2025

1. https://www.chargeflow.io/blog/paypal-statistics-facts#:~:text=PayPal%20Statistics%20and%20Facts%202024&text=PayPal%20has%20been%20revolutionizing%20commerce,in%20over%20200%20markets%20worldwide.

2. https://www.demandsage.com/paypal-statistics/#:~:text=429%20million%20people%20use%20PayPal,over%2030%20million%20merchant%20accounts.

3. https://capitaloneshopping.com/research/paypal-statistics/

4. https://www.paypal.com/us/business/paypal-business-fees

5. https://paypal.com/us/digital-wallet/buyer-purchase-protection

6. https://www.paypal.com/us/digital-wallet/paypal-consumer-fees

7. https://www.paypal.com/ee/legalhub/paypal/useragreement-full#r09

8. https://www.paypal.com/us/brc/article/understanding-account-limitations

9. https://www.paypal-community.com/t5/About-Protections/Proof-of-Delivery/m-p/1149178

10. https://www.paypal.com/ro/legalhub/paypal/seller-protection?locale.x=en_RO

This article is provided for general information purposes only and is not intended to address every aspect of the matters discussed herein. The information in this article is not intended as specific personal advice. The information in this article does not constitute legal, tax, regulatory or other professional advice from IDT Payment Services, Inc. and its affiliates (collectively, “IDT”), and should not be taken or used as such by any individual. IDT makes no representation, warranty or guaranty, whether express or implied, that the content in this article is current, accurate, or complete. You should obtain professional or other substantive advice before taking, or refraining from, any action on the basis of the information in this article.