PayPal Review

Taking $3,000 per month or less in card payments?

You’ll save with Square

Pros

• Trusted by consumers
• Predictable flat-rate pricing
• Multiple pricing plans available
• Ideal for low-volume merchants
• Extensive integrations
• Good developer tools
• All-in-one payments system

Cons

• Account stability issues
• Inconsistent customer support
• Not suitable for high-risk industries

Overview

For a merchant, accepting PayPal is a no-brainer. Almost everyone has a PayPal account these days — in fact, PayPal claims 254 million active consumer accounts and more than 17 million merchants. It’s incredibly easy to setup and use, and it can get you up and running in a very short amount of time (i.e., immediately). Your customers don’t even need a PayPal account…though odds are good they have one.

PayPal is extremely transparent with its terms and pricing, and it doesn’t lock you into a contract with an early termination fee. The number of integrations offered is unreal, so you can be certain that PayPal will sync with your shopping cart, accounting application, or shipping software. PayPal even offers an mPOS app, called PayPal Here.

Looking for a PayPal alternative? Check out Square Payments

Reader	eCommerce	Retail	Food Service
Free App & Reader	Square eCommerce	Square for Retail	Square for Restaurants
Get Started	Get Started	Get Started	Get Started
Free, general-purpose POS software and reader for iOS and Android	Easy integration with popular platforms plus API for customization	Specialized software for more complex retail stores	Specialized software for full-service restaurants
$0/month	$0/month	$60/month	$60/month
Always Free	Always Free	Free Trial	Free Trial

And unlike most other merchant accounts or payment processors out there, you can implement PayPal as your exclusive means of accepting payments or as a supplemental option.

But the question remains: Should PayPal be your primary payment processing platform?

PayPal is absolutely set up in a way that will grow with your business from day one until you make it to the big leagues. With no contract, no monthly fees, and a strong suite of tools for merchants to sell virtually anywhere, anytime, there’s no denying the appeal.

However, when you reach a point where you’re consistently processing at least $10,000-$20,000 in cards per month, a traditional merchant account may become more cost-effective. A merchant account will also give you the personalized service and attention that PayPal doesn’t offer.

If you only process sporadically, you have a low volume, you are just starting out, or you have trouble opening a merchant account (for a reason other than “I run a high-risk business”), PayPal should be near the top of your shortlist for payment options. It’s hard to beat that value, especially for new merchants. But you should also ask whether PayPal has all the features you need. If the answer is yes, you should go for it! 

We’re giving PayPal 4 stars for its ease of use, clear pricing, and transparent advertising. When we start to see actual, consistent improvement in PayPal’s customer service and account stability, we’ll consider bumping up the rating — but not until then.  

PayPal offers many different businesses services, many of which we’ve reviewed favorably. One of its new products is a service called LoanBuilder (see our review), a simple and straightforward short-term loan program available to all merchants, not just those that use PayPal. It’s one of our favorite small business loan programs currently. So if you like the PayPal brand, are interested in a loan, and have a credit score of at least 550, definitely check it out.

Read the full review for all the nitty-gritty on PayPal’s merchant solutions, including all the features and pricing. If it isn’t for you, we’ve got some alternatives to PayPal at the end of this review. You can also head over to our comparison chart to see some of our favorite merchant account providers!

Our Top Picks For Credit Card Processing

Products & Services

Rating: Excellent

Most people think of PayPal mostly as a P2P payment app or the primary payment method for eBay. It is both of those things, but PayPal also offers an almost dizzying array of features and capabilities for merchants. In fact, PayPal is expanding and diversifying a lot now that it’s a publicly traded company in its own right. I like to see this because it means PayPal is keeping up with the times and in some ways attempting to be an industry leader.

But on to more practical matters! First, to process payments with PayPal you need a business account, which is free to sign up for.

Then you’ll need to decide which of PayPal’s products and services you plan to use. Hold tight because there are a lot.

PayPal Online Payments

For a very large majority of merchants, getting set up with PayPal means deciding how you want to accept payments online. PayPal offers 3 options for web payments:

• PayPal Checkout (formerly Express Checkout)
• PayPal Payments Standard
• PayPal Payments Pro

PayPal Checkout is an easy solution if you just want to be able to add PayPal as a payment option on a website where you already accept credit cards or integrate with an ecommerce provider. To implement Checkout on your own website, you may need a developer, but it won’t take a lot of work after that point. PayPal does the maintenance and upkeep for you. Here’s what you get with Checkout:

• PCI Compliance: Because PayPal redirects customers to its own site to complete the transactions, you don’t have to worry about PCI compliance at all.
• Contextual Checkout Buttons: PayPal will use what it knows about your customer to display “smart” checkout buttons tailored to the customer. For example, Venmo users will see a Venmo checkout option. PayPal Credit (formerly “Bill me later”) will also appear as an option on eligible purchases. Welcome to the age of contextual commerce, people.
• Localized Payment Methods: PayPal is in the process of adding localized payment methods for customers across Europe. This is already something we see with Stripe, so to see PayPal implement it is hardly surprising. In addition to existing support for SEPA Direct Debit (Germany) PayPal is adding support for iDEAL (the Netherlands), EPS (Austria), Giropay (Germany), MyBank (Italy), and Bancontact (Belgium), with more to come in the future.

PayPal Payments Standard is slightly more involved than PayPal Checkout, but that’s because it gives merchants slightly more control and customization for their payment process. The Standard plan includes all the eCommerce integrations that PayPal checkout offers but does not offer the “Smart” checkout buttons. Here’s what you do get, though:

• PCI Compliance: As with Checkout, PayPal routes your customers to its own website to complete transactions, which eliminates the PCI compliance burden for merchants.
• Customizable Payment Buttons: PayPal says that it only takes about 15 minutes to implement PayPal Payments Standard, and it’s just a matter of copy-and-paste. With payment buttons, you can create an online shop where you can sell one item, or 10, or as many as you want. PayPal’s button builder tools allow you to customize the look of the buttons as well as how some aspects of the checkout process work (whether you want to go immediately to purchase or allow customers to add items to a cart). Nonprofits can also create donation buttons with the option to create one-time or recurring donations.

PayPal Payments Pro is certainly not everyone’s cup of tea, but if you have access to a skilled developer and are extra finicky about controlling your payments experience and don’t mind the extra work, it might be worth a look. PayPal Pro is the most customizable of PayPal’s online payment processing options.

• Hosted Checkout Page: If you’d rather keep your customers on your website throughout the entire checkout process, it’s worth looking at the Pro plan. PayPal makes it easy for you to customize the design of your checkout. However, you do take some of the PCI burden onto yourself in the process. PayPal makes it simpler with tools such as transparent redirects, but at minimum, you can expect to have to do self-assessments and quarterly scans to maintain your PCI compliance.
• Virtual Terminal: If you want to be able to accept payments over the phone, PayPal’s virtual terminal will let you key in card numbers from a browser window. However, I think $30/month is a pretty hefty price to pay for this feature considering both Square and Shopify offer it at no additional charge.
• Recurring Billing: Technically, recurring billing tools aren’t included with PayPal’s Pro plan. This is an add-on service that costs an additional $10. Again, I think that’s pretty expensive given that Stripe offers much better pricing and more flexible tools in this regard. (As a tradeoff with Stripe, though, you’ll need a developer to really make the most of the features offered.)

Other PayPal Products & Services

• PayPal Here: This is PayPal’s mobile processing app. While it’s not the most feature-laden out there, it’s solid; the fact that your funds are deposited in your PayPal account along with the rest of your online sales is pretty nice. You don’t have to pay for any subscription or software fees; you just pay the processing costs. Check out our review here.
• POS System Integrations: If PayPal Here isn’t robust enough for your needs, you can integrate PayPal into one of the company’s partner POS solutions. You’ll still pay for the software subscription, but PayPal charges nothing except the transaction fees and hardware. Check out the Integrations & Add-Ons section below for a better look at your third-party integration options.
• Online Invoicing: Consultants and contractors can use PayPal’s invoicing features to invoice their clients for the same rate as regular web transactions. PayPal’s invoicing tools are pretty solid, allowing you to add a tipping option to the invoice and even setting up installments.
• Payflow Payment Gateway: The gateway comes automatically bundled with PayPal’s online processing tools, so it’s not something many people will think about. However, PayPal’s gateway is available as a standalone product to businesses that have a credit card processor and just not a gateway. See the Rates & Fees section below for more information about pricing.
• Marketing Solutions: Honestly, PayPal’s “Marketing Solutions” makes me think of a pared down Google Analytics with some PayPal tools thrown in. But if most of your customers use PayPal or you want to increase conversions on your site, it’s certainly worth looking at. The Marketing Solutions package is available with all of PayPal’s online processing options, including Checkout, and now it’s available outside the US as well. If you really want to understand PayPal users and how they interact with your site, this would be a great place to start. PayPal has some benchmarking tools using anonymized PayPal user data.
• Mass Payouts: Want to pay employees or contractors via PayPal? The Mass Payout feature allows you to send multiple payments at once rather than one at a time, using either a spreadsheet or the PayPal API. Plus, you’ll save money compared to PayPal’s standard rates. Check out the Fees & Rates section below for more information.

PayPal Developer Tools

PayPal’s had developer tools for a long time, but it’s only recently that it’s really invested some obvious effort into making them better. From what I’ve gathered in my research of developer-centric platforms, Stripe is the gold standard, but Braintree, a PayPal-owned company (read our review), is also up near the top. PayPal doesn’t seem to match Braintree’s quality, although time will tell. Also, you can actually open a merchant account with Braintree and integrate PayPal into your setup pretty easily. PayPal’s developer tools include:

• PayPal Checkout: Unless you opt for an ecommerce integration, PayPal says you’ll need a developer to implement PayPal checkout on your site. The tools include three options for integration. Two are focused on mobile and desktop web browsers, while the third is designed for in-app payments.
• PayPal Invoices: While you can use the web interface to create invoices, you can also use the developer API to create and design invoices to send to your customers.
• PayPal Subscriptions:  If you’d like to manage a subscription-based business on PayPal’s platforms, Subscriptions makes it easy to create plans and billing agreements and automate the process.
• PayPal Payouts: I mentioned the mass payout option already — but I would like to mention that you can use the API to issue payments, as well as manually uploading a spreadsheet.
• PayPal Here SDK: If you’d like to add PayPal payments to a POS system you’re developing, you can do that using the PayPal Here SDK for both iOS and Android.
• PayPal For Marketplaces: Despite powering eBay payments almost since the beginning, PayPal hasn’t actually had a unified set marketplace tools until fairly recently. The question is whether those tools are any good. PayPal certainly has the knowledge to make it work, but does the reality live up to the potential? It’s too early to say. We’ll just have to wait and see. Also, PayPal for Marketplace is still only available to select approved merchants. However, both Braintree and Stripe offer extensive marketplace options that are open to all their customers if you’re willing to consider alternatives.

PayPal Funding Options

Generally speaking, money from PayPal transactions is available almost immediately in your PayPal account. You can then spend that balance anywhere that accepts PayPal online, or transfer the funds to your bank account. Transfers typically take 1-2 business days.

PayPal also has its very own debit card for businesses. The card gives you fast access to cash from your PayPal account — no reason to wait for a funds transfer. You can spend your balance at any store that accepts cards, or withdraw money from any ATM with a Mastercard, Maestro, or Cirrus acceptance mark. It also makes accounting simpler because you don’t have to use your personal accounts to make business purchases or constantly shuffle funds around.

If, for whatever reason, you don’t want a debit card, or you need to move money to your bank account right away, PayPal does offer an instant transfer option, which will cost 1% of the transfer volume (capped at $10) — this is on par with what Square charges for the same service. Your limits are as follows:

• $50,000 per transaction
• $100,000 per day
• $250,000 per week
• $500,000 per month

If you find yourself in need of a quick influx of cash and don’t want to deal with a loan, PayPal merchants are also eligible to apply for PayPal Working Capital. Essentially it works like a merchant cash advance, where you pay back the financed amount by deducting a small portion of each day’s transactions processed via PayPal. Check out our PayPal Working Capital review for more information.

What’s New With PayPal

PayPal continues to innovate and is rolling out new features on the regular. Most are pretty small, but the list is growing pretty fast. It’s worth paying attention to PayPal’s blog to see what’s going on. Here’s what I’ve found since my last check-in.

• PayPal LoanBuilder: PayPal’s newest addition is a simple short-term loan service available to merchants regardless of their payment processor. The service requires a credit score of at least 550, but the application process is simple and we found it reliable in our review.
• PayPal Acquires iZettle: In 2018, PayPal announced that it was acquiring the mPOS app provider iZettle. iZettle has been dominating the mobile processing space in Europe, giving PayPal an easier way to access those markets. What this means for PayPal Here and the iZettle app is not clear — will they merge? At this point, we don’t know much other than the iZettle CEO is staying on board to help the company and report to PayPal’s Chief Operating Officer. I would expect things to stay status quo for a little while longer at least.
• PayPal Checkout: One of the biggest shakeups to PayPal’s product offering in a long time has been the switch from PayPal Express Checkout to PayPal Checkout, even though all that’s changed is the name and the addition of the contextual payment buttons. I suppose the expansion of PayPal Marketing Services to new markets outside the US also counts as a fairly big change, though.

I know, this is a lot of information to take in. The key thing to remember is that PayPal has something for everyone. Whether you just want to sell online or accept payments through multiple channels, PayPal has a solution for you. It makes a great starter option if you’re just getting set up and want an easy, trusted way to take payments. PayPal will grow along with your business, too. There are so many different payment options, as well as all of the integrations and add-ons available. While the developer tools might not be on par with some other industry leaders, most of PayPal’s other offerings are top-of-the-line or at least above average. The problem with PayPal has never been the services and products themselves — it’s been about the merchant experience. But we’ll get to that later.

Integrations & Add-Ons

PayPal integrates with a huge number of applications from shopping carts to accounting software to shipping applications and email marketing software. There are just way too many to write out, but you can find the full list on PayPal’s site.

Something PayPal rolled out a while ago was its “Business in a Box.” Essentially it’s a set of bundled services tailored to your needs. Originally it was just discounted offers for WooCommerce and Xero, but it’s expanded to include several other integrations tailored to your needs, including Shopify, MailChimp, and Intuit. If you aren’t sure what other services to choose for your website, this could be a good way to go about making a decision.

If you are interested in PayPal integrations, here’s a quick primer on some of the options available:

E-Commerce

• Shopify (read our review)
• Magento (read our review)
• Xcart (read our review)
• 3dcart (read our review)
• BigCommerce (read our review)
• Wix (read our review)
• BigCartel (read our review)
• Volusion (read our review)
• WooCommerce (read our review)

In-Store

• Vend (read our review)
• Revel (read our review)
• Lavu (read our review)
• TouchBistro (read our review)

There’s an obvious benefit to having so many integration options. You won’t have to worry about whether your shopping cart is compatible or not because it most likely is. The same goes for major accounting applications such as QuickBooks Online (read our review) and Xero (read our review). And there’s no shortage of well-known, robust POS solutions for retail stores and restaurants. Plus, PayPal integrates with some more specialized solutions as well.

Fees & Rates

Rating: Good

All PayPal services come with no annual fee, no setup fee, no PCI compliance fees, and no cancellation fee. With the exception of a few optional software-related fees, you won’t have to worry about anything other than payment processing costs.

PayPal is very straightforward about transaction costs, even if they are a bit higher than most traditional merchant accounts. However, its pricing structure is absolutely competitive with other pay-as-you-go and payment aggregating services, and many new merchants might find the lack of other fees more cost effective than an interchange-plus plan. I’ve laid out the fees below, but you can also check out our other article, The Complete Guide to PayPal’s Fees, Rates, And Pricing.

PayPal Transaction Fees

Regardless of which plan you are on (Standard or Pro), your transactions fees will be as follows:

• For all online sales, you pay 2.9% + $0.30 per transaction.
• For all swiped/dipped/tapped mobile and in-store transactions, you pay 2.7%.
• For all keyed-in mobile and in-store transactions, you pay 3.5% + $0.15.
• For virtual terminal transactions, you pay 3.1% + $0.30 per transaction.
• For mass payouts, you’ll pay 2% using the online form, or $0.25 per payout using the API.

It’s also worth noting a few other charges apply to transactions as well:

• For any chargebacks, PayPal assesses a $20 fee.
• Any transactions that originate from outside the US incur a 1.5% cross-border fee.
• When you issue a refund, PayPal charges a small refund fee, equal to the per-transaction fee amount. For online transactions, that means PayPal charges $0.30 for refunds; for keyed transactions, it would be $0.15.
• If you initiate an instant transfer, PayPal will charge you 1% of the transfer amount.

Alternative Payment Processing Rates 

While PayPal’s payment processing costs are very predictable, they’re not suitable for every type of business. You can’t negotiate with PayPal for a different rate unless you are essentially a very large corporation, but you can take advantage of a couple of alternative rate offerings: PayPal’s microtransactions plan and nonprofit discounts.

• Micropayments Rate: 5% + $0.05

PayPal’s micropayments plan is open to all merchants, but it only benefits you if the vast majority of your transactions are under $10. PayPal won’t automatically switch between the two rates based on transaction size, so if you opt for the micropayments plan, you really need to make sure it’s the best option based on your individual processing history. Generally speaking, if you sell digital goods online (single songs or digital albums, or other low-value items), this is the plan you should look for.

In addition, qualified 501(c)(3) organizations who go through the verification process are eligible for a discount for online transactions:

• Nonprofit Discount Rate: 2.2% + $0.30

Sadly, PayPal doesn’t offer a discounted rate for in-person transactions processed through its mPOS or a partner POS system, so the discounted rate would apply only to online sales or donations. However, keep in mind that some software providers also offer nonprofit discounts, so if you’ve integrated PayPal with accounting software, a POS app, or another third party, you should also check whether that company offers a discount.

PayPal Monthly Fees

Remember, there are two options for accepting PayPal on your site that charge nothing beyond transaction fees: PayPal Checkout and PayPal Payments Standard. Both allow you to accept payments on your website but will redirect to the PayPal site to complete the transaction. If you prefer to keep customers on your own page, or if you’d like a virtual terminal to take payments over the phone, you’ll need PayPal Payments Pro:

• Paypal Payments Pro: $30 per month

The biggest advantage, as I said, is that the Pro account lets you keep customers on your page to finish the checkout process. You can completely design your own checkout page. In addition, Pro subscribers get access to the Virtual Terminal to accept payments by phone, mail, and fax.

Unfortunately, PayPal Payments Pro doesn’t include an option for Recurring Billing. Subscription services are hugely popular — and if you want to offer them with PayPal, that will run you an extra $10 per month on top of the Pro plan. If you dig a little deeper, you’ll also see that PayPal offers free recurring billing for users who have implemented PayPal Express Checkout, but not PayPal Standard.

Finally, it’s worth noting that PayPal offers its own gateway, the PayFlow gateway, to process payments. It has a high degree of compatibility, so it works with most payment processors. So if you want to sell online but don’t want to use PayPal as your primary payment processor, and your chosen processor doesn’t offer a gateway, this could be an option. PayFlow supports two plans:

• PayFlow Link: This pay-as-you-go option costs $0.10 per transaction, and PayPal charges nothing for setup or monthly fees. Using Link, you can embed a checkout form on your website that will redirect to the PayPal site to complete the transaction. Link also adds PayPal and PayPal Credit buttons.
• Payflow Pro: At $25/month for the Pro Plan, there’s no questioning the value. You won’t pay setup fees or per-transaction fees. PayPal doesn’t even put a limit on the volume. With the Pro option, you get a completely customizable checkout page that’s hosted on your own website, with the options to add PayPal and PayPal Credit options.

As I said, PayPal really has something for everyone. I don’t know that I can say it has everything everyone would need, but it’ll definitely tick most of the boxes for most people. While PayPal still is dominating the online space, it definitely has moved beyond to encompass multiple sales channels. Being able to manage in-person and online sales from a single platform is a major point of convenience.

Contract Length & Cancellation Fee

Rating: Excellent

All of PayPal’s payment solutions are contract free and have no early termination fee. It really is that simple.

That’s great if PayPal is your starter option and you want to upgrade to a merchant account later. However, if the rates work for you (particularly as just a secondary option), PayPal will also scale with your business. It is rare that we find any service that will help you start out and stay with you as your business grows larger, and we like that quite a bit.

Sales & Advertising Transparency

Rating: Excellent

The best thing about PayPal is that its sales and advertising are very up-front. All of the rates are listed in plain sight, so there’s no hidden agenda. The company has, over the years, gotten even better about disclosing pricing and fees (such as its chargeback fee, which used to be hidden in the fine print).

Most of PayPal’s business comes directly through the website or via referrals. It doesn’t have the traditional sales team “pounding the pavement” and luring in potential customers with too-good-to-be-true deals like some merchant account providers (and yes, some are far more guilty of this than others). There’s no doubt that PayPal offers real value, particularly for new merchants without a sales history, and it doesn’t make any outrageous claims or promises about the nature of its services.

Please don’t fall into the trap of thinking that just because anyone can open an account, everyone can process with PayPal. That’s not true, and I think it plays a major role in complaints against PayPal. PayPal has a specific list of prohibited businesses, which I encourage everyone to check out. You’ll also be under scrutiny as soon as you start processing, and if PayPal decides you present an unacceptable risk, it will terminate your account. So make sure you operate transparently and use sound business practices. Check out our guide on how to prevent holds, freezes, and terminations.

Customer Service & Support

Rating: Good

PayPal has a bunch of different customer service and support options. All of this is pretty much exactly what I expect from a company that caters to startups and small businesses in the 21st century, but it is nice to see.

Depending on your question or problem, you can check out any of these options:

• Community Forum: If you want insights and advice from other PayPal merchants, the community forum is a good place to start.
• Knowledgebase: PayPal’s self-help resources are pretty extensive, both for consumer users as well as merchants. You’ll find a vast array of questions and answers in the searchable database, which should cover most of your needs.
• Phone/Email: Judging from the online chatter (see “Negative Reviews and Complaints”), PayPal’s phone support is very inconsistent. Sometimes you’ll get a rep who knows what they’re doing, other times you won’t. My advice is to avoid calling if at all possible. Answers to most common problems can be found with just a little bit of searching. Between the knowledge base, community forum, and quick answers sections, you should be able to find a solution.
• Social Media: PayPal is active on Facebook, but if you want help on social media, you’re better off taking to Twitter, where you can tweet at @AskPaypal and get some assistance.

One major benefit of using PayPal is the sheer volume of users. Any time you encounter an error or a problem, you can Google it; odds are good you’ll find a solution from another merchant who has already dealt with the same issue. However, when it comes to account issues (such as holds), you’re going to have to talk to someone over the phone. If need be, you can go through the BBB (read more about that in the next section).

User Reviews

Rating: Good

Negative Reviews & Complaints

PayPal is a gigantic company, and like all big companies, there are a very large number of complaints. The biggest difficulty with trying to quantify complaints against PayPal is the simple fact that PayPal is also a consumer product. That means a good chunk of the complaints are from consumers who had problems with the digital wallet, or from customers who purchased something on eBay or from another seller. They turn to PayPal expecting a solution. So the number of complaints about PayPal is not representative of the complaints about its merchant services.

While the number of complaints isn’t particularly helpful, the content of those complaints is. I did read over a chunk of the complaints, dating back about 12 months. One thing stuck out to me:

I was honestly impressed with PayPal’s quality of service. The department handling BBB complaints is full of real people writing the responses and explaining where the problem occurred. They’re genuinely trying to help where they can. If you go through the BBB, the odds are good you can probably get whatever help you need — it just might take a little while, and you should try going through PayPal’s customer support first.

The BBB is a major source of information about how a company deals with complaints, but I do check out a few other review sites for more information. I see the same trends there, for the most part: a mix of consumer and merchant complaints. Of the merchant complaints, there is one single complaint that dominates all others. And like I said before, it’s not a matter of PayPal’s products that’s the problem. It’s the service. Specifically, here’s the big issue:

• Withheld Funds, Freezing Of Accounts & Termination Of Accounts: If PayPal notes any suspicious behavior on your account, it may implement a hold on a certain percent of your funds, freeze your account, or even terminate your account. Usually, a red flag on your account is accompanied by a request for documents such as bank statements, photocopies of your IDs, purchase orders, invoices, and more. PayPal uses that information to make a determination about what to do with your account. One of the criteria PayPal uses to flag an account is a sudden spike in processing volume. It also doesn’t like seeing merchants sell goods below cost (an unfortunate tactic used by a LOT of newbie eBay sellers), or merchants selling vague, mysterious products. Anything that indicates an unsustainable business model might be grounds for an account termination. Again: read our article to learn more about how to avoid holds, freezes, and terminations.

That said, this certainly isn’t a problem unique to PayPal. Other aggregators, including Square and Stripe, have a similar reputation. Such is the nature of the “come as you are” business model — it’s easy to get an account with minimal history, but there’s an inherently higher risk because you’ll be under scrutiny once you actually get started.

In addition to the withheld funds issue, here are some other common complaints:

• High Transaction Fees: Compared to a traditional merchant account, PayPal’s transaction fees are higher. Visa’s wholesale rates for an eCommerce transaction are anywhere between 1.5% and 2.4% + $0.10 per transaction. At 2.9% plus $0.30 per transaction, PayPal’s rate is over that amount, even when you factor in a merchant service provider’s markup. However, merchant accounts aren’t always accessible or even viable for low-volume merchants. For those merchants, when you factor in the various costs that a merchant account often generates, PayPal often comes close to breaking even. And, you don’t have a contract to worry about.
• Inconsistent Phone-Based Customer Service: Most merchants will rarely have to call PayPal’s customer service line, but those that have done so complain that the quality of service can be inconsistent. Some reps are obviously more knowledgeable than others. The good thing is that PayPal has a whole slew of other service and support options (e.g., the knowledgebase, forum, email, etc.), so (barring account-related problems) chances are you can find your answer without having to call in.
• Chargebacks: Let’s be honest. Chargebacks are the bane of existence for any merchant who sells online. They’re also bad for your account stability, no matter who you process with.  A lot of chargeback-related complaints seem to come from sellers on eBay, or from merchants who aren’t happy with how a chargeback was resolved. PayPal does offer some limited seller protections for online transactions, but you should brush up on what is and is not covered (eBay sales, for example, aren’t covered).

That’s really about it for consistent complaints about PayPal. You might find the occasional odd story, but they are few and far between. If these complaints make you worried, check out our top selections for small business credit card processing instead. No business is perfect, but you might find that other companies give you a little less reason for concern.

Positive Reviews & Testimonials

Despite the negative reviews, there are plenty of good comments and reviews from merchants (and even some developers). Considering there are 17 million merchants using PayPal, this shouldn’t be too much of a surprise. Here’s what the positive chatter concerning PayPal is all about:

• Easy Setup: Most business owners rave about how easy it is to set up a PayPal account. If you’re exclusively offering PayPal Payments Standard (or even Express Checkout), then you can get started almost instantly.
• Widely Accepted: PayPal has a very large user base, which makes it a trustworthy payment option for everyone. If you’re just getting your business off the ground, then starting with something like PayPal is a good choice. The name recognition and trust associated with PayPal (especially with its buyer protections) can be a serious asset in the early days of operation.
• Almost-Instant Access To Cash: Your PayPal transactions clear almost immediately, so you can spend the money in your account as soon as you have it — provided the place where you’re spending it accepts PayPal, of course. If you want your money anywhere, don’t overlook the PayPal Business debit card, which spends like a debit card, but deducts directly from your PayPal account. And now we have the instant transfer option, too.
• Multiple Products/Services Under One Roof: PayPal offers you everything you need to process online or mobile payments (e.g., payment gateway, payment forms, virtual terminal, invoicing, micropayments, recurring billing, developer tools, etc.). It really is a solution that will grow with you.
• Transparent Pricing: As mentioned earlier, what you see is what you get with PayPal. There are no setup fees, annual fees, cancellation fees, or downgrades for sellers.

Final Verdict

PayPal is a great payment option to start with, and there’s no question you should keep it around as a backup form of payment if you sell online. It also works very well for businesses as the primary payment option.

Account setup is fast, it’s easy to use, and it’s widely accepted. If you’re a brand new business and you need to accept payments quickly, PayPal is the way to go. The mobile integration, PayPal Here, is seamless, which is useful for retailers and vendors who want to accept payments on the go, and there are plenty of POS options if you need more advanced features. There’s a massive array of shopping cart integrations and developer tools for online sellers as well.

That said, as your business grows, and you exceed $10K per month in revenue, it may be more worthwhile to pursue a traditional merchant account because the processing costs will be lower. But you should make sure that the merchant account provides everything you need — and that if you have to pay for additional services, they don’t exceed the costs of using PayPal.

As with any other payment processor that aggregates accounts, you also have to worry about account stability. While your account may be approved almost right away, you’ll be under scrutiny as you keep processing. Red flags can lead to held funds, or worse, account freezes or terminations.

But despite all of that, the credibility PayPal offers beginning and small-time merchants, its widespread recognition, and the sheer number of features available are serious advantages. Even well-established merchants can benefit from using PayPal. For those reasons, along with its ease of use, transparent pricing, and overall versatility, our PayPal review keeps its 4-star rating. We’d love to see more reliability and improved customer service, which would easily bump PayPal up a half star or more.

We’re confident in recommending PayPal to you, but we acknowledge that like most other aggregator services, it’s not for everyone.

If you want the processing freedom that comes with no contract and no monthly fees, but you’re determined not to use PayPal, it might be worth looking at either Stripe, which is very developer-friendly, or Square, which doesn’t have quite the wide-ranging eCommerce support that PayPal does, but is still a powerful all-in-one option. If you want a bit more account stability but still all the trust and tools that PayPal offers, it’s worth looking at Braintree, which is owned by PayPal and integrates seamlessly, but offers merchants their own unique merchant accounts. All of them have comparable pricing models.

If you are interested in merchant financing, PayPal has a new product we like called LoanBuilder (see our review), a simple and straightforward short-term loan program available to all merchants, not just those that use PayPal. It’s one of our favorite small business loan programs currently. So if you like the PayPal brand, are interested in a loan, and have a credit score of at least 550, definitely check it out.

Thanks for reading! If you have experiences with PayPal — good or bad — feel free to leave us a comment!

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