The end of free online payments - by Paypal decree

Paypal - the US company which allows businesses and individuals to send and receive money online - will charge all customers for credit card transaction fees from now on.

The news comes just days after Amazon.com introduced a store card payment programme aimed at reducing its credit card costs.

Previously, Paypal had only billed credit card processing fees to high transaction business customers.

The company has gradually limited this fee waiver since it first introduced credit card fees last year.

Initially only business customers were charged, but fees were then extended to any customer who received credit card payments in excess of $500 during a six-month period, and then to customers who accepted over $100 in credit card payments in a month.

Up to 90 per cent of Paypal customers now use fee-based accounts, paying up to 30 cents, plus 2.9 per cent of the value of each credit card transaction.

But Michelle Delussanet, an analyst with IDC, said the failure of pre-paid schemes, such as Beenz, would leave customers reluctant to switch to similar initiatives, despite the charges now being levied by the likes of Paypal.

"It's not surprising that e-tailers are looking for ways to save money, but there are few existing payment options that reduce risk. Pre-paid wallets were never the ideal solution," she said.

While Amazon has not yet passed on credit card charges to its customers, the new account system encourages customers to debit payments from their current accounts.

While credit cards will remain the preferred method of payment, the debit option will come a close second, according to Jim Van Dyke, research director of the financial services group at Jupiter Media Matrix.

Online retailers can pay between two and five times as much in credit card interest rates as high street retailers, and while consumers may be happy to continue with the convenience of credit cards, e-tailers who see their profit margins eroding will drive the change, said Van Dyke.