Merchants Beware: Pros and Cons of Using PayPal for Your Business

28 July 2016

Who hasn’t heard about PayPal? Based in the United States of America, this leading payment processor allows transferring money, accepting and processing debit and credit card payments, as well as guarantees 100% protection against unauthorized account access. PayPal is used by numerous powerful brands including Ebay, Walmart, iTunes, Adidas, Nike, Coca Cola, and many others. If you are going to sell your goods or services online, should you choose PayPal as a method of payments?

Advantages & Benefits of Using PayPal

Easy registration. You don’t need a special business license to open a PayPal account and start accepting money online as a merchant – just enter your personal data and valid email address. Basically, PayPal offers three types of accounts: Personal, Premier, and Business, the last two types are used for doing business. A Premier account is recommended for casual sellers like contract workers, freelancers or auction sellers who wish to receive and make payments online under their personal name. A Business account is for larger companies who operate under their business or group name. This type of account allows them to accept payments under this business name and make mass payouts from their accounts.

Worldwide reach. PayPal makes it possible to sell your goods and services across the globe – it is available in 202 countries and 25 currencies. You can sell your services to someone in America or Australia even if you live in a small Asian country.  In this case, your customers will feel safe making secure payments via a stable and reputable payment processor – their credit card data will not be disclosed to an unknown person that can suddenly disappear.

Data storage and processing. PayPal offers everything you need to accept different kinds of payments; it combines a merchant account and a payment gateway into one smart solution. You don’t need to worry about storing and protecting the financial and personal information of your customers to avoid data breaches that can ruin your reputation. You don’t need to deal with different banks and credit card companies to find out why a transaction was declined and what are the actual currency exchange rates – just add a Paypal button to your website and get money.

Using PayPal for Your Business

Mobile apps. PayPal offers iPhone and Android applications that you can download in the Apple iTunes store and Google Play, respectively. These apps allow users to send or accept money, pay bills, check their account balances and confirm transactions right from their smartphones. If you are waiting for a payment, you can set instant notifications that will inform you if the funds have arrived into your account.

No extra costs. PayPal is a cost-effective solution because they don’t charge any extra fees – there are no membership fees, no maintenance fees or other processing fees. When you make a sale, all that you need to pay is just a fixed percentage of your sale price. If you rarely make sales or just enter the market, you are protected against the risk of spending money for a service that you use occasionally. And you don’t need to pay anything before receiving a payment for your items or services.

Possible Problems: What You Need to Know Before Opening a PayPal Account

Fees. There is a fee for every payment you receive. For example, for U.S. accounts the charges are the following: if you make a sale within the U.S., you need to pay 2.9% + $0.30 per sale, international sales are more expensive – 3.9% plus a fixed fee depending on the received currency. If you sell low profit products, it might seriously reduce your profit. If you have a Business account and want to let your customers make payments directly on your website, you will need to activate an Advanced plan – PayPal Payments Advanced ($5 per month) or PayPal Payments Pro ($30 per month). The difference is that the Pro option also allows you to accept payments via a virtual terminal and customize your checkout pages.

Lousy customer support. PayPal is often considered as a user-unfriendly platform because of its poor customer service – it’s difficult to find necessary contact information, and emailed queries often receive automated responses. Surfing the website becomes a kind of quest, with numerous access levels and outdated Q&A forms. If your eBay Money Back Guarantee request or PayPal Purchase Protection case gets closed in the buyer’s favour, you won’t get any proper explanations and you can’t dispute the decision.


Customer support

Freezing your account. PayPay is a private company and not a real bank, so forget about any banking federal and state level regulations. They don’t need any permissions for freezing your account and holding your funds if they decide that you are engaged in suspicious activity and transactions. For example, they can put a hold on money received for pre-orders until you provide all invoices and other related business information to verify that everything is legitimate. Or they can limit your account if you have received too large amount of money that is much higher your average. A fraud investigation can last for up to 180 days, leaving you with quite limited options for this period of time – knows a lot of such sad stories.

Verification system. PayPal uses account verification to prevent money laundering and scams. The “verified account” status will increase the customers’ trust in your business and raise your account withdrawal limit (typically, $500 per month). You can check your personal account limits if you log in to your account and click on the ‘View Limits’ link on the ‘Account Overview’ page. Verifying your business PayPal account usually means that you need to add and confirm your bank account and in some cases provide more information about your business. PayPal will make two deposits that you will need to enter on their site to confirm – and it can take 3-5 days for these deposits to appear in your account.

Customer fraud. PayPal protects users from identity theft and data leaks, but they don’t protect you from malicious shoppers. Your buyer can report that he/she hasn’t received the ordered item, of that you sell counterfeit goods from China, or that your item description is misleading. There are many complaints from sellers who were obliged to make a refund without any proper investigation – and it was impossible to appeal that decision.

So should you consider PayPal as a payment processing solution for your business? The number of people actively using PayPal is over 188 million, so it shouldn’t be ignored by any business operating online. Playing as an intermediary for money transfer services, PayPal makes it possible even for individuals and small startup companies to start e-commerce business and accept payments online. However, every story has two sides, so get ready for the possibility of getting your account frozen or limited. Don’t keep all of your eggs in one basket – consider an alternative payment gateway as Google Checkout, Amazon Payments,, Stripe, Tranfergo, and others.

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