PAYPAL is set to introduce an annual fee of up to £12 for users whose accounts have been inactive for a year or more.

The penalty comes in on December 16 with 'inactive' defined as 'an account where the user hasn't sent, received or withdrawn money, or logged into their account'.

Users can currently open an account for free with the company which makes its money by charging fees to those who use its online marketplace.

A spokesman for Paypal said the annual fee was to help invest in more services for its users.

He said: “Paypal customers enjoy a range of benefits associated with their accounts, including a full suite of tools, products and support for sellers, and shopping experiences that include quick and convenient checkout for buyers.

“As the value we provide our customers has expanded, Paypal continues to invest in our services, giving customers even greater opportunities to buy and sell globally."

It is important to note that those who have no funds in their Paypal account will not be charged and if you have less than £12 the remaining funds will be taken.

But if you do have a balance and want to avoid the charge, all you need to do is log into your account on or before December 15 – this means you will have been 'active' in the 12 month period.

If you don't want to risk being charged in future, you can close the account.