PayPal Review (For Businesses)

Pros

• Trusted by consumers
• Flat-rate pricing
• Multiple pricing plans are available
• Good 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
• New pricing scheme hurts small-ticket merchants

PayPal For Business Overview

With no contracts, no monthly fees, and a robust suite of tools for merchants to sell virtually anywhere, anytime, there are plenty of reasons to recommend PayPal for businesses. One factor in PayPal’s broad appeal is that, unlike the vast majority of merchant accounts or payment processors out there, you can implement PayPal as your exclusive means of accepting payments or as a supplemental option.

PayPal introduced a new fee schedule on August 2nd, 2021, and the $0.49 fixed fee for most transactions has alienated small-ticket merchants and content creators who receive lots of $1 donations through PayPal. This PayPal review will help you understand this new pricing scheme. Just keep in mind that there are still no contracts to sign and no early termination fees to worry about.

And as countless integrations are offered, you’ll have plenty of options for syncing PayPal with your shopping cart, your accounting service, or your shipping software. PayPal also provides its own mPOS app, PayPal Zettle.

The fact that PayPal’s new pricing hurts those who have long stood the most to gain from the company’s convenient services doesn’t sit well with us, and we’ve lowered the rating to 3.5 stars. However, we’ll be monitoring how PayPal responds to the outrage its new pricing scheme has caused among its user base.

Read our full PayPal review for more details about features and pricing. If you like what you see, check out our piece on how to set up a PayPal business account. And if it’s not for you, we’ve highlighted some alternatives to PayPal at the end of this review.

Accepting Online Payments With PayPal

For most merchants, getting set up with PayPal means deciding how you want to accept payments online. Now, this decision is more complicated for would-be PayPal merchants than it once was because it involves a) deciding whether you want Standard or Advanced Credit & Debit Card Payments and b) deciding which of the three PayPal payment plans you want to sign up for.

Regarding the former:

• Standard Credit & Debit Card Payments: This is PayPal’s default means of accepting card payments. With Standard payments, you can offer PayPal’s standard payment options on your checkout page, so your buyers can pay with PayPal, debit and credit cards, Pay Later options, Venmo, and alternative payment methods.
• Advanced Credit & Debit Card Payments: Advanced payments give you the same payment options as Standard while also giving you the ability to customize your credit card fields. It’s also required if you want to enroll in Chargeback Protection, use the Virtual Terminal, and/or upgrade your payment plan to Payments Advanced or Payments Pro. Additionally, you get a lower credit/debit processing rate with Advanced card payments than with Standard card payments. However, the rate you’ll ultimately pay will depend on whether you get Chargeback Protection and whether you sign up for one of PayPal’s more advanced subscription plans, which we’ll describe below. To use Advanced Credit & Debit Card Payments, you’ll need to specifically request it and supply PayPal with additional information about your business.

As for subscription plans, PayPal offers three options for web payments:

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

PayPal Checkout

PayPal Checkout is an easy solution if you just want 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 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 when you use Checkout:

• PCI Compliance: Because PayPal redirects customers to its 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 them. 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. Check out our guide to selling with buy buttons to learn more!
• Localized Payment Methods: PayPal is in the process of adding localized payment methods for customers across Europe. It’s already something we see with Stripe, so it’s hardly surprising to see PayPal implement it as well. 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 Advanced

PayPal Payments Advanced (which does not refer to Advanced Payments as described above — sorry, it’s complicated!) is more involved than PayPal Checkout. That’s because it gives merchants more control and customization with their payment process. Unlike PayPal Checkout, PayPal Payments Advanced will cost you $5/month to use. Payments Advanced includes all the eCommerce integrations that PayPal Checkout offers but not the “smart” checkout buttons. Here’s what you do get, though:

• Hosted Checkout Page: If you’d rather keep your customers on your website throughout the checkout process, it’s worth looking at the Advanced plan. PayPal makes it easy for you to customize the design of your checkout. However, you do take some of the PCI burdens onto yourself in the process. PayPal makes it simpler with tools such as transparent redirects. At a minimum, you can expect to have to do self-assessments and quarterly scans to maintain your PCI compliance.
• Customizable Payment Buttons: 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 make one-time or recurring donations.

PayPal Payments Pro

PayPal Payments Pro is for merchants seeking complete control over the entire checkout process. PayPal Payments Pro is the most customizable of PayPal’s online payment processing options, though it will cost you an extra $30 per month. Payments Pro’s main advantage over Payments Advanced is that Payments Pro gives you access to the virtual terminal, which you otherwise have to pay $30/month for as a standalone charge.

• Virtual Terminal: If you want to accept payments over the phone, PayPal’s virtual terminal will let you key in card numbers from a browser window. However, $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, neither PayPal’s Payments Advanced nor its Payments Pro plan includes recurring billing. It’s an add-on service that costs an additional $10/month. Again, I think that’s pretty expensive given that Stripe offers much better pricing and more flexible tools in this regard. Note that you get recurring billing for no additional monthly charge with PayPal Checkout.

Please note that PayPal’s service plan offerings seem to be in flux. For instance, until recently, PayPal had been offering a plan called PayPal Payments Standard, a plan which offered customizable payment buttons but not hosted checkout pages. While still existing for current users, this plan does not seem to be currently offered for new merchant signups. What’s more, PayPal’s Help Center does not yet contain any information regarding Payments Advanced, so we wouldn’t be surprised if PayPal’s plan offerings undergo further changes in the near future.

For a visual reference detailing the three payment plans PayPal currently offers, have a look at the following chart.

In addition to the above, PayPal offers a special payments plan for enterprise-level businesses called PayPal Enterprise. PayPal hasn’t released a great deal of detailed information about the plan, but it does tout an optimized processing engine to remove friction at checkout, a brandable web portal, granular data analysis, and more.

PayPal Merchant Fees & Rates

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

PayPal’s pricing used to be very straightforward, even if those costs were a bit higher than most traditional merchant accounts. Unfortunately, the recent changes made to PayPal’s pricing and feature offerings make the job of explaining PayPal’s pricing considerably more difficult. I’ve laid out the new fees below, but you can also check out our other article, How Much Does PayPal Charge? The Complete Guide To PayPal Credit Card Processing Fees. This article explains PayPal’s pricing structure in finer detail.

Overall, while PayPal’s new pricing scheme will result in many merchants — particularly those using PayPal Checkout as a means of accepting PayPal digital payments as a supplementary payment option — paying more in processing fees than they had previously, new merchants may find the lack of additional fees more cost-effective than an interchange-plus plan.

Under PayPal’s new pricing plan (introduced August 2nd, 2021), your transactions fees will be as follows:

Other PayPal Fees

PayPal sports a couple of alternative rate offerings: a microtransactions plan and nonprofit discounts.

PayPal’s micropayments plan had been open to all merchants, though I’ve seen reports recently that some users have been unable to sign up for it. This is particularly unfortunate for small-ticket merchants looking to mitigate the effects of the new $0.49 per-transaction fixed fee. We’ll continue to follow the situation, but here is the micropayments rate that is still shown on PayPal’s official pricing page:

• Micropayments Rate: 4.99% + $0.09 per transaction

Qualified 501(c)(3) organizations that go through the verification process are eligible for a discount for online transactions:

• Nonprofit Discount Rate: 1.99% + $0.49 per transaction

PayPal doesn’t offer a discounted rate for in-person transactions. This nonprofit rate applies only to online sales or donations. Read our PayPal Nonprofit & Donations Guide: What You Need To Know About Fundraising & Accepting Donations Via PayPal article to learn more about what PayPal can offer nonprofit organizations.

Remember that with PayPal Checkout, you’ll pay no monthly fees, but if you prefer to keep customers on your page, use customizable checkout buttons, and/or use a virtual terminal, you’ll need either PayPal Payments Advanced or Payments Pro:

• Paypal Payments Advanced: $5 per month
• Paypal Payments Pro: $30 per month

PayPal Payments Advanced & Pro don’t include an option for Recurring Billing. If you want to offer subscription services, that will run you an extra $10 per month on top of the Pro plan. PayPal offers free recurring billing for PayPal Checkout users but not PayPal Advanced/Pro users.

Finally, PayPal offers its Payflow gateway to process payments. It works with most payment processors. 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, Payflow is an option. Payflow supports two plans:

• Payflow Link: This pay-as-you-go option costs $0.10 per transaction with no setup or monthly fees. With Payflow Link, you embed a checkout form on your website that will redirect to the PayPal site to complete the transaction. Payflow Link also adds PayPal and PayPal Credit buttons.
• Payflow Pro: Payflow Pro costs $25/month, and there’s a relatively high $99 setup fee. Plus, you’ll still be paying the $0.10 per-transaction fee. The PayflowPro plan gets you a customizable checkout page that’s hosted on your website, with the ability to add PayPal and PayPal Credit options.

PayPal Business Products & Services

Before delving into the full range of PayPal products, we should establish upfront that PayPal is a third-party processor (also known as a payment service provider [PSP] or an aggregator).

The primary difference between a third-party processor and a traditional merchant account provider is that instead of providing merchants with their own merchant account, PSPs aggregate all their merchants into one enormous merchant account. One unfortunate side effect of this arrangement is that merchants bear an increased risk of account instability. Holds and terminations are all too common due to the risk management policies required for PSPs to function.

Check out our PayPal vs. merchant accounts article to get the entire scope of the differences between these two fundamentally different payment processing methods.

PayPal Tools For Businesses

• PayPal Commerce: Formerly known as PayPal for Partners, the PayPal Commerce Platform is a payments solution for marketplaces, crowdfunding platforms, and other platforms for merchants and fundraising teams. Features such as vaulting (the secure storing of customers’ credit card data to streamline the checkout process) and channel billing agreements are available on an approval basis.
• PayPal Zettle: This is PayPal’s new mobile processing app. While it’s not the most feature-laden out there, it’s quite solid and features a more robust inventory system and card reader than PayPal’s other mPOS system, PayPal Here (which is no longer available to new merchants but continues to operate for current PayPal Here merchants). The fact that your funds get deposited into your PayPal account along with the rest of your online sales is pretty nice. You don’t have to pay any subscription or software fees; you just pay the processing costs.
• POS System Integrations: If PayPal Zettle isn’t robust enough for your needs, you can integrate PayPal into one of the company’s partners for 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 for invoicing 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. Recurring invoicing is supported as well. Both the lifecycle status and the payment/refund status of an invoice are tracked. You can also create custom billing apps with PayPal Invoicing APIs.
• 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 but no gateway. See the PayPal Merchant Fees & Rates section below for more pricing information.
• 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. “Shopper Insights” lie at the heart of this package, and these insights include sales conversion rates, average purchase size, and shopper device type.
• PayPal Payouts: Want to pay employees or contractors via PayPal? The PayPal 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 PayPal Merchant Fees & Rates section for more information.
• PayPal.me: PayPal sports a Venmo-style payment solution in the form of PayPal.me. With this app, you can send and request payments to/from friends, family, customers, and clients. The other party doesn’t even need to have a PayPal account. While personal payments do not incur any fees, commercial payments are charged the same 3.49% + $0.49 rate as payments made via PayPal proper. Be aware that PayPal is watching to ensure you don’t pass off commercial payments as personal payments. If you have a PayPal Business account, PayPal will assume any PayPal.me link associated with your account is commercial by nature and will charge you accordingly.
• PayPal LoanBuilder: PayPal now offers 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 pretty simple.
• PayPal Developer Tools: PayPal has recently invested some notable efforts into improving its developer tools. These tools include PayPal Checkout for online sellers who opt not to implement an eCommerce integration. PayPal Here SDK is for those seeking to add PayPal payments to your own POS system. There’s also a White Label Wallet if you need a branded mobile wallet app that works at the point of purchase at in-person locations. Connect With PayPal is for merchants who want to allow customers to log into your website/app using their PayPal credentials. And, finally, there’s the aforementioned PayPal Commerce Platform.

What’s New With PayPal?

PayPal continues to innovate and regularly rolls out new features. The following features have been added over the last two years.

• Social Media Selling: If you don’t have a website and would prefer to sell items through your existing social media channels, you can create an embedded payment link and post it to your account on Facebook/Twitter/etc. A separate feature, “Checkout on Facebook and Instagram,” allows you to sell products from your Instagram page while letting you use the full ecosystem of Instagram Shopping tools.
• PayPal In 4: To compete with the likes of Klarna, PayPal has introduced its new pay later installment option, Pay in 4. This lets your customers pay for purchases in four interest-free payments, with one of those payments being a down payment due at the time of purchase and the remaining three payments being due every 15 days thereafter. The great thing about this feature is that you’ll still get paid the entire amount upfront. Purchases qualifying for Pay in 4 must be between $30 and $600. Check out our post, PayPal Pay in 4, to learn more about offering it to your customers.
• Shipping Discounts: When you create and use an online shipping label in PayPal, you’ll get access to USPS Commercial Base pricing along with UPS discounts — up to 45% off UPS Ground shipments and up to 55% off 2nd Day Air on eligible packages.
• Cryptocurrency Support: US users can now use PayPal to buy, hold, and sell Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. That’s all well and good, but merchants should know that customers can now use crypto to pay for purchases from PayPal merchants. Once this policy is enacted and a customer makes a purchase from your site using cryptocurrency, the crypto will be instantly converted to fiat currency, and the transaction will be settled like any other.
• QR Code Payments: PayPal merchants can now use QR codes to accept payments from customers in-store. Just generate a QR code online or in the PayPal Business app, display it by your register, and let customers scan the code to make their payment. It’s a nice contactless payment option, well-suited to the COVID era.
• New Card Reader: When PayPal launched its new mPOS app, PayPal Zettle, in the US, it brought its popular mobile card reader over from Europe. The Zettle Reader 2 accepts contactless, chip, PIN payments, Apple Pay, Google Pay, and Samsung Pay. You can get your first reader for just $29, with each subsequent reader costing $79. Its battery lasts up to 8 hours/100 transactions, but you can also get the Zettle Dock 2 for $49 to ensure that the reader remains charged throughout your sales day.

Funding Options For PayPal Business Users

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. Standard transfers typically take one to two business days and are cost-free.

If you need your funds within minutes, PayPal offers an instant transfer option. It will cost you 1.5% of the transfer volume (capped at $15), which is on par with what Square charges for the same service.

Whether you’re doing a standard transfer or an instant transfer, your debit transfer limits are as follows:

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

If you’re transferring funds to your bank account, there is a $25,000 per-transaction withdrawal limit.

PayPal Business Debit Card

PayPal also has its very own debit card for businesses, the PayPal Business Debit Mastercard. The card gives you fast access to cash from your PayPal account — no waiting 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.

PayPal Working Capital

If you need a quick influx of cash and don’t want to deal with a loan, PayPal merchants are eligible to apply for PayPal Working Capital. 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.

Contract Length & Cancellation Fee

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. We rarely find a service that will help you start and stay with you as your business grows, and we like that quite a bit.

Sales & Advertising Transparency

The best thing about PayPal is that its sales and advertising are very upfront. All of the rates are listed in plain sight, so there’s no hidden agenda. PayPal has gotten 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 its 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.

Please don’t think that everyone can process with PayPal just because anyone can open an account. That’s not true, and I think it plays a considerable role in complaints against PayPal. There’s a specific list of PayPal prohibited businesses, which I encourage everyone to check out. You’ll also be under scrutiny as soon as you start processing. 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.

PayPal Customer Service & Support

PayPal has several different customer service channels. 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: Any PayPal customer service review must note that PayPal’s phone support is quite inconsistent, judging from online opinion (see Negative PayPal Reviews & Complaints). 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 the most common problems can be found with just a little bit of searching. Between the knowledgebase, 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 send a tweet to PayPal and get some assistance that way.
• Resolution Center: Through PayPal’s resolution center, a merchant can communicate directly with a buyer to resolve a transaction problem. You can also use it to attempt to report unauthorized account activity, resolve an account limitation, and ask PayPal to investigate a transaction problem.

One compelling benefit of using PayPal is the sheer volume of users. Whenever you encounter an error or a problem, you can google it. The odds are good that 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’ll need to talk to someone over the phone. If need be, you can go through the BBB (read more about that in the PayPal Customer Reviews & Complaints section).

Integrations & Add-Ons

PayPal integrates with a vast number of applications, from shopping carts to accounting software, 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.

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

eCommerce

• Shopify
• X-Cart
• BigCommerce
• Wix
• BigCartel
• Volusion
• WooCommerce
• CS-Cart
• Ecwid
• WordPress
• Squarespace
• UltraCart

In-Store

• Vend
• Lavu
• Franpos
• NCR Silver
• SalesVu

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 and Xero. 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.

PayPal Customer Reviews & Complaints

Positive PayPal Reviews & Testimonials

Though you’ll find plenty of negative comments in PayPal customer reviews, there are plenty of positive comments from merchants (and even some developers). Considering over 33 million merchants are using PayPal, this shouldn’t be too much of a surprise. Here’s what the positive chatter in PayPal credit card processing reviews is all about:

• Easy Setup: Most PayPal for business reviews — particularly from business owners — rave about how easy it is to set up a PayPal account.
• Widely Accepted: PayPal has an extensive user base, making it a trustworthy payment option for everyone. If you’re just getting your business off the ground, starting with something such as 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. It works like a debit card, but it 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 truly is a solution that will grow with you.
• Transparent Pricing: Every PayPal payment review notes that pricing-wise, what you see is what you get with PayPal. There are no setup fees, annual fees, cancellation fees, or downgrades for sellers.

Negative PayPal Reviews & Complaints

PayPal is a massive company, and like all big companies, there are many complaints. The greatest difficulty with quantifying a negative PayPal account review is the fact that PayPal is also a consumer product. That means a good chunk of the complaints come from users on the consumer end of things. Therefore, 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 read over a chunk of the complaints, dating back about 12 months, and one thing stuck out for 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 that 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 leading source of information about how a company deals with complaints, but I do check out a few other review sites for more details. For the most part, I see the same trends: a mix of consumer and merchant complaints. Of the merchant complaints, one single complaint dominates all others. It’s not that PayPal’s products are 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 percentage of your funds, freeze your account, or even terminate your account. Usually, a red flag on your account comes with a request for documents, such as bank statements, photocopies of your IDs, purchase orders, invoices, and more. PayPal uses that information to determine what to do with your account. One of PayPal’s criteria 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 account termination.

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 get started. However, the lack of transparency in this process is the hardest part to defend.

To that end, PayPal now faces a federal lawsuit filed by three PayPal users who had their funds seized and accounts terminated without explanation (and when pressed by one of the plaintiffs, PayPal gave multiple, contradictory explanations). Now that PayPal finds itself having to defend its practices in federal court, we’ll see if PayPal makes any changes as to how it handles these cases.

In addition to the withheld-funds issue, here are some other common complaints found in PayPal merchant services reviews:

• High Transaction Fees: PayPal’s transaction fees are higher than a traditional merchant account. Visa’s wholesale rates for an eCommerce transaction are between 1.5% and 2.4% + $0.10 per transaction. At 3.49% plus $0.49 per PayPal Digital Payments transaction and 2.59% + $0.49 per online credit/debit card transaction, PayPal’s rates are 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 usually breaks even or comes reasonably close. What’s more, you don’t have a contract (or early termination fee) to worry about.
• Inconsistent Phone-Based Customer Service: Most merchants will rarely have to call PayPal’s customer service line. Reviews of PayPal note that the quality of service on the helpline can be inconsistent. Some reps are 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.). Barring any account-related problems, chances are you can find your answer without having to call in.
• Chargebacks: Chargebacks are the bane of existence for any merchant who sells online. They’re also bad for your account stability, no matter what company you process with. A lot of chargeback-related complaints found in PayPal merchant reviews seem to come from sellers on eBay or 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).

Most of the complaints about PayPal posted to the BBB are ultimately resolved to the aggrieved party’s satisfaction. Nonetheless, 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.

One thing we will be watching is whether PayPal’s new pricing scheme inspires a wave of new complaints from merchants disadvantaged by the changes (primarily low-average ticket sellers and merchants using PayPal Checkout). On the other hand, larger merchants may actually see some savings with these changes.

Final Verdict

PayPal is a solid payment option for new businesses, and you should definitely keep it around as a backup form of payment if you sell online. Of course, it functions quite well as your primary payment option as well. Setting up a PayPal business account is quick and painless, the platform is easy to use, and it’s widely accepted. If you own a brand new business and need to accept payments quickly, PayPal is a good solution.

That said, as your business grows and you exceed $10K in monthly revenue, it may be more worthwhile to pursue a traditional merchant account because the processing costs will be lower. Have a look at our merchant account comparison chart if you’re considering going this route.

Unfortunately, the changes PayPal recently made to its pricing scheme and credit/debit card acceptance methods have made determining your processing fees a much more complex affair. Overall, merchants who mainly accept payments using PayPal Checkout will be paying more in fees. Small-ticket merchants and video streamers who receive lots of $1 tips have already been fleeing the platform. Considering the impact this new fee schedule has had on the users least equipped to deal with a big fee hike, we’ve lowered PayPal’s score to 3.5 out of 5 stars. However, we’ll continue to monitor how PayPal responds to the uproar its new fees and policies have caused.

If you want the processing freedom that comes with no contract and no monthly fees, but you’re determined not to use PayPal, have a look at Stripe, which is very developer-friendly. Another good alternative is Square, which doesn’t have quite the wide-ranging eCommerce support that PayPal does but is still a powerful all-in-one option. We also have a piece comparing Square and PayPal if you’re intrigued. And if you want a bit more account stability but still have all the trust and tools that PayPal offers, it’s worth checking out Braintree. Since PayPal owns Braintree, it integrates seamlessly and provides merchants with their own unique merchant accounts. All of these processors have similar pricing models.

Read our article on PayPal alternatives to get a concise picture of your other payment processing options.

Thanks for reading! Again, if you’ve used or are using PayPal and have anything to share about your experiences — positive or negative — please let us know. Our comments are always open!

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