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PayPal Credit Card Processing: How to Accept Card Payments With PayPal

By
Adam Uzialko
,
business.com writer
|
Dec 13, 2019
Image Credit: radifanil / Getty Images
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Accepting debit and credit card payments is easy with PayPal. Here's how to do it.

  • To accept credit and debit card payments with PayPal, you need to sign up for a PayPal Business account, download the PayPal Here app and get a PayPal card reader.
  • There is no long-term contract, so you can close your account at any time without penalty.
  • For PayPal's basic credit card processing services, all you pay is transaction fees. There are no setup or application fees, monthly or annual account maintenance fees, or PCI-related fees.

Accepting credit cards and debit cards as payment methods is a must for modern businesses. Fewer consumers are carrying cash than ever, so making alternative payment options available is a matter of customer satisfaction and retention. To secure more business, you need to partner with a payment processor that enables you to accept these types of payments. However, if you don't complete a large volume of credit card transactions each month, a full-service processor might not be for you.

PayPal, the popular peer-to-peer transfer mobile application, offers credit card processing as one of its business services. This guide covers what you need to know about working with PayPal Business, the transaction rates and fees you can expect to pay, and other key considerations you should know before signing up for an account.

If you want to know more about credit card processing services, visit our best picks page for a complete buying guide and reviews of the top services on the market today.

 

Editor's note: Looking for a credit card processing service for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

 

 

Does PayPal offer credit card processing?

PayPal is best known for its peer-to-peer money transfers, but it also offers credit card processing services for businesses. In fact, PayPal is our best pick for mobile credit card processing services for Android devices. PayPal extends credit card payment processing services to 23 million merchants throughout the world. Coupling a PayPal Business account with the PayPal Here mobile application allows businesses to accept debit and credit card payments, both in person at the point of sale and online.

While PayPal is our best pick for mobile credit card processors for Android, it works equally well on Apple devices, including smartphones and tablets. The Apple version of PayPal includes all the features we found in our review of the Android version, so no matter what platform your small business relies on, PayPal can deliver payment processing services. [Read related article: How to Accept Credit Card Payments: A Beginner's Guide]

How much does PayPal charge for credit card processing?

PayPal charges competitive rates for its credit card processing services. Even if your business doesn't accept a high volume of credit card payments, PayPal offers inexpensive rates and transaction fees that can help you start accepting debit and credit card payments from your customers. It has flat-rate pricing and pay-as-you-go terms, so it doesn't require any long-term contractual commitments.

All of PayPal's pricing is laid out transparently on its website. Here are the current rates that PayPal lists for its credit card processing services:

  • 7% of each transaction: This rate applies to credit cards, debit cards, and contactless payments from digital wallets that you accept during in-person transactions using the PayPal Here mobile app and card reader. PayPal works with all major credit card brands and applies this same rate to each, as well as to mobile wallets like Apple Pay, Google Pay and Samsung Pay.
  • 5% of each transaction plus $0.15 per transaction: This rate applies to credit cards and debit cards you manually key in or scan using the PayPal Here mobile app. You can avoid these higher fees by using a PayPal card reader to accept cards in person.
  • 9% of each transaction plus $0.30 per transaction: This rate applies to debit cards and credit cards that you accept through your website or by digital invoice.
  • 1% of each transaction plus $0.30 per transaction: This rate applies to Visa, Mastercard and Discover card payments that you accept through PayPal's virtual terminal. These payments are typically accepted over the phone, by fax or through the mail.
  • 5% of each transaction: This rate applies to any American Express cards you accept through PayPal's virtual terminal, PayPal Payments Advanced or PayPal Payments Pro.

Although PayPal's transaction fees tend to be higher than what most full-service credit card processors charge, the lack of account setup and maintenance fees easily offsets the costs and makes it a cost-effective option for small businesses that process a low volume of transactions each month. Here are the other fees you won't have to pay with PayPal:

  • No application fee or setup fee
  • No monthly fee for statements and customer support
  • No monthly minimum processing requirement
  • No gateway setup fee
  • No monthly gateway fee
  • No annual fee
  • No annual or monthly PCI compliance fee
  • No early termination or account closure fee

However, some of PayPal's services will cost you extra beyond the transaction rate and fee. These are optional services that cost extra:

  • Chargebacks: $20 per incidence
  • Recurring billing service: $10 per month
  • Advanced fraud protection services: $10 per month plus $0.05 per transaction
  • PayPal Payments Pro: $30 per month (this option allows you to accept payments directly on your website and includes a virtual terminal)
  • Cross-border fee: 1.5% added to the transaction fee when you accept payments from customers outside the U.S.; 2.5% added if your cross-border payments require currency conversion

Certain businesses are eligible for special pricing with PayPal. If you fall into either of these categories, you could qualify for lower rates and transaction fees:

  • Registered charities: Eligible charitable organizations are charged 2.2% of each transaction plus $0.30 for online donations. In-person donations cost the same as regular business accounts at 2.7% of each transaction.
  • Businesses with transactions less than $10: These businesses may qualify for PayPal's micropayment fees, which cost 5% of each transaction plus $0.05 per transaction.

Does PayPal have a card reader?

PayPal offers businesses several options for a card reader. You can choose a free PayPal card reader upon signing up (until June 30, 2020). Additional card readers cost extra, but some options are relatively inexpensive. It's always wise to incorporate a card reader that works with EMV chips and contactless payment options through near-field communication (NFC) as well. Here are the card readers PayPal offers.

  • PayPal Mobile Card Reader: $19.99. This model accepts magstripe cards only and plugs into the audio jack on your phone or tablet.
  • PayPal Chip and Swipe Reader: $24.99. This model accepts magstripe and chip cards. It connects with your phone or tablet via Bluetooth.
  • PayPal Chip and Tap Card Reader: $59.99 (or $79.99 with charging stand). This model accepts magstripe, chip and contactless credit and debit cards, and mobile payments from Apple Pay and Google Pay. It connects with your phone or tablet via Bluetooth.
  • PayPal Chip Card Reader: $99.99. This reader accepts magstripe, chip and contactless cards, and mobile wallets. It's the only model that has a screen and a built-in PIN pad. It connects with your phone or tablet via Bluetooth.

Which credit card types does PayPal process?

PayPal accepts all types of credit card brands, including the major names like Visa, Mastercard, Discover and American Express. When you sign up with PayPal, your customers will be able to use whichever brand of debit or credit card they already have, offering a versatile new payment method for your business.

Once a customer pays with their preferred credit card, you have the option to instantly transfer the funds to your bank account for a 1% fee. Regular bank transfers that take one business day are free with PayPal.

What do you do when PayPal cannot process a payment?

Sometimes PayPal will be unable to process a payment. This can occur for several reasons, such as when there isn't enough money in a customer's balance to complete a transaction or their card information is not up to date. The payment could also be blocked for various security reasons.

When this happens, first ensure that the customer's information is entered correctly, especially if you are manually entering it for a card-not-present transaction. You could also ask the customer to change their funding source in PayPal for their current transaction. If these methods fail, contact PayPal customer support to resolve your issue.

PayPal credit card processing makes accepting card payments for your business easy.

With relatively low rates and few fees, PayPal makes it easy for businesses of all sizes to process credit card payments. Even if you don't conduct a high volume of credit card transactions each month, you can still benefit from PayPal's credit card processing services. PayPal offers a variety of card readers and is compatible with several point-of-sale solutions. It has discounted rates for registered charities and businesses that conduct a lot of small-ticket transactions, and it offers additional services for extra costs.

Credit card and debit card transactions have become ubiquitous; consumers expect businesses to accept these payment methods. To avoid falling behind in an increasingly digital marketplace, you need to partner with a credit card processor. If you want to learn more about how to choose a credit card processor, see our buyer's guide for a complete overview of the buying process.

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Adam Uzialko
Adam Uzialko
Adam C. Uzialko, a New Jersey native, graduated from Rutgers University in 2014 with a degree in political science and journalism and media studies. He reviews healthcare information technology, call centers, document management software and employee monitoring software. In addition to his full-time position at Business News Daily and business.com, Adam freelances for several outlets. An indispensable ally of the feline race, Adam is owned by four lovely cats.
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