Does Etsy charge fees on shipping?

Yes. The 6.5% transaction fee and the payment processing fee (3% + $0.25 in the US) are both charged on the order total, which includes the shipping you collect. The offsite ads fee — 15%, or 12% for high-volume sellers, capped at $100 — applies to the same total.

Is free shipping cheaper for me on Etsy?

By itself, no: if the total the buyer pays is the same, the fees are the same. Free shipping changes where the postage cost sits inside your price, not how much the platform takes. It costs you when you charge shipping below cost, or when you inflate the item price by more than the shipping you removed.

How much should I charge for shipping on Etsy?

At least what the carrier charges you for your typical parcel. Charging below that leaks the difference on every order, and you still pay platform fees on the amount you collected. Re-check the number when label prices or your packaging change.

Why did my profit drop after I switched to free shipping?

Usually the item price was raised by more than the shipping cost removed, so the fee base grew: the 6.5% and the payment fee now apply to a larger total. Work the same order both ways and the gap shows up as fees, not as shipping.

Do offsite ads fees include shipping?

Yes. The offsite ads fee is a percentage of the order total including shipping, so a $25 item with $5 shipping in an offsite-attributed order pays 15% of $30, or $4.50, subject to the $100 per-order cap.

Should You Offer Free Shipping on Etsy?

Free shipping is the most common pricing promise on Etsy, and one of the quietest margin leaks in the shop, because the fee structure makes it more expensive than the label suggests. Etsy charges its 6.5% transaction fee on the shipping you collect as well as the item, its payment processing fee does the same, and the offsite ads fee of 15% — or 12% for high-volume sellers — is applied to the order total including shipping. So the question is never 'free or not' the way buyers experience it; it is where the postage cost lives inside your price, and whether the total you charge actually covers it. This guide works a $30 order both ways, shows where the leak is, and gives a decision rule for when the badge is worth more than the fee math says.

How Etsy charges on shipping

Every fee on an Etsy order is charged on the total the buyer pays, and that total includes the shipping you charged. The 6.5% transaction fee applies to the item price plus shipping; the US payment processing fee of 3% + $0.25 applies to the same base; and when an order is attributed to an offsite ad, the 15% (or 12%) fee is applied to the order total including shipping, capped at $100.

The consequence is counterintuitive for sellers used to thinking of shipping as a pass-through. Shipping is not a neutral number you hand to the post office: it is part of the fee base, and every dollar you collect for postage carries roughly 9.5% of platform fees in the US — 6.5% plus the 3% payment share — before you have sent a single parcel. That shapes every decision below.

Worked example: the same $30 order, two labels

A buyer pays $30 for a $25 product plus $5 shipping. The order total is $30, so the fees are $0.20 listing, $1.95 transaction (6.5% of $30) and $1.15 payment processing (3% of $30 plus $0.25): $3.30 in total, $26.70 net. The seller then pays the post office whatever the parcel actually costs.

Now price the same product at $30 with free shipping. The order total is still $30, and the fees are identical: $0.20, $1.95, $1.15 — $3.30 total, $26.70 net. The label changed; the fee base did not. On Etsy, whether the buyer sees 'free shipping' or a shipping line does not, by itself, change what the platform takes.

Add an offsite-attributed order and both versions pay 15% of $30 — $4.50 — for $7.80 total fees and $22.20 net. The shipping decision and the offsite ads decision are independent levers on the same base, which is why they compound.

Where free shipping actually costs you

The first leak is pricing postage below cost. A seller who charges $4 for a parcel that costs $7 to send loses $3 before the fee conversation even starts — and still pays the platform on the $4 collected. On a $25 item with that $4 shipping, the fees are $3.21 and the net is $25.79; paying $7 of postage out of it leaves $18.79 on a sale that collected $29.

The second leak is over-compensating when you convert to free shipping. Moving a $25 + $5 price to $30 + $0 keeps the base at $30, but sellers frequently round up to $32 or $35 to cover the cost with room to spare. Every dollar above the real postage cost is now inside the fee base, taxed at roughly 9.5% in the US before it reaches you.

The third is the offsite ads interaction on heavy items. For furniture, ceramics or textiles, shipping can be a third or more of the order total, and 15% of that total applies to the shipping as well as the product. The higher the shipping, the more an offsite-attributed order gives back — which is part of why low-shipping, flat items are cleaner candidates for the free shipping badge.

Where free shipping actually pays

Buyers filter and sort for free shipping, and a listing with the badge tends to convert better than an otherwise identical listing without it. The effect is largest in categories where the buyer is comparing many similar sellers at similar prices. If your category is crowded and your price is mid-range, the badge is doing real conversion work that a few points of fee saving will not buy back.

Free shipping also changes the perceived total. A buyer comparing a $25 item plus $5 shipping against a $30 item with free shipping often reacts to the larger headline number, even though the amount they pay is the same. When competitors show a free shipping badge and you show a shipping line, the comparison is not happening on the number the buyer pays.

None of this is a universal answer. It is a category question: in a crowded, comparison-heavy category the badge tends to earn more than it costs in margin; for a distinctive product with little direct competition, the shipping line costs you little because the comparison never happens.

How to price shipping so it does not leak

Start from the cost, not the label. Weigh and size your typical parcel, price it at what the carrier actually charges you for that service level, and treat anything above cost as a decision — not a default. If the parcel costs $6.50, charging $6.50 is neutral; charging $4 is a $2.50 leak per order, plus a platform fee on the amount you collected.

Re-run the number when your inputs change: label prices, packaging weight, the mix between domestic and international orders, and any switch to a different box size. Shipping costs are the one input in your fee math that moves without your permission, and the fee base moves with it. The shipping calculator linked below takes your actual parcel numbers and shows the fee on both the charged and the free-shipping version of the same order.

For sellers shipping internationally, keep the two streams separate in your head: domestic and international orders have different postage costs, different fee bases and different buyer expectations, and a single 'free shipping' promise usually means you are subsidising one stream from the other.

A decision rule

Default to charging shipping at cost, and offer free shipping only when the conversion benefit in your category is worth the difference. If you do offer it, keep the math honest: fold in the real postage cost, not a guess, and re-check when carrier prices move. The label is a marketing decision and the number under it is an accounting one, so the two should not drift apart. In practice, offer it when:

Your category is crowded and buyers compare listings side by side, so the badge is visible in the comparison.
Your average order value is high enough that folding real postage into the price does not distort it — a $250 item and a $7 parcel are almost invisible.
You have measured your actual parcel cost, and the folded-in price still carries the margin you need after roughly 9.5% of fees on the total in the US.
You are not relying on discounts: a discount, an offsite-attributed order and a padded price are three levers pulling the same margin.