Etsy Free Shipping Break-Even: What It Costs You

Free shipping sounds like a marketing choice, but on Etsy it is also an accounting question. Shipping you charge is part of the order total, and Etsy takes fees on the order total. So whether you charge for shipping, hide it in the price or absorb it, the result for your bank account differs in ways that are easy to calculate and easy to get wrong. This guide shows the arithmetic with US rates; other countries follow the same logic with their own percentages.

Fees apply to shipping

Etsy's Fees & Payments Policy says the transaction fee is 6.5% of the price you display for each listing plus the amount you charge for shipping and gift wrapping, and that the payment processing fee is assessed on the total amount of the sale, including tax and shipping. For a US shop, processing is 3% plus $0.25. That means every extra $1 of shipping you charge costs 6.5 cents of transaction fee and 3 cents of processing, 9.5 cents in all. On an order that comes from Offsite Ads at 15%, the same dollar costs 24.5 cents, because Offsite Ads is also a percentage of the order total.

Three ways to ship the same $30 item

Assume your postage costs $5.00, your product costs $10.00 and you sell in the US with no ads.

Option B is the trap. You keep the price, stop charging for shipping, and pay the $5 postage yourself. The fees fall by 48 cents because the order total is lower, but you lose $5 of income, so profit drops by $4.52. Option C shows the fix. Because Etsy's fees are based on the order total, putting the $5 into the item price produces the same total, the same fees and the same profit as option A. Break-even for free shipping is therefore simple: raise the item price by the shipping you used to charge.

When it is not that simple

You can only raise the price as far as buyers accept. If you raise the price by $3 instead of $5, the order total is $33.00, fees are $3.59, and profit is $14.41 after the $5 postage and $10 product cost, which is $1.81 less than option A. The $2 you absorbed costs you $2 less the 19 cents of fees it saves, which is $1.81. The general rule: every dollar of shipping you absorb costs you about $0.905 in the US, or $0.755 on an Offsite Ads order at 15%.

If your postage varies by destination, the average matters. Charging a flat $5 when some parcels cost $9 means the far-away orders lose money in option A too. Use a weighted average of your real postage and test the worst case in the Etsy profit calculator.

Offsite Ads make free shipping more expensive

With Offsite Ads at 15%, option A leaves $25.97 after fees on the $35.00 order, so $10.97 profit after $5 postage and $10 product, and option C is identical. Option B, a $30 order with the postage absorbed, has fees of $7.80, which leaves $22.20 after fees and $7.20 of profit. The same decision costs $3.77 more than the version that folds the shipping into the price, and that is on top of the ad fee. Details of that fee are in the Offsite Ads guide.

A short checklist

1. Know your real average postage and packaging per order.
2. Decide the order total you need, then split it between price and shipping, remembering that fees apply to both.
3. If you offer free shipping, raise the item price by the shipping you would have charged and check the result in the margin calculator, which solves for a target margin with fees included.
4. Re-check when postage rates change.
5. Compare against your statement: shipping you charged shows inside the sale amount, and labels you bought show as costs, as described in the guide to the monthly statement.

The fee percentages used here were read on 25 October 2026 on Etsy's Fees & Payments Policy and Etsy Payments Policy. Outside the US, use the Etsy fee calculator with your country. Whether free shipping helps your shop's visibility or conversion is outside this guide; it is a separate question from the arithmetic. KeepCent is independent and not affiliated with Etsy, Inc.