PayPal is a huge name in the payments industry. With a PayPal Business account and the PayPal Here app, small businesses can accept credit, debit, and PayPal payments online, in-store and on the go. PayPal is one of the few processors that allows both businesses and individuals to accept payments, making it a popular choice for freelancers, consultants, solopreneurs and other very small businesses. It has flat-rate pricing and no contract, so you only pay for the processing services you use, and you can close your account at any time without penalty. For these reasons, it's our pick for the best low-volume credit card processor.
PayPal is our pick as the best Android mobile credit card processor. While some mobile credit card processing apps are platform-specific, the PayPal Here app works equally well on both Android and Apple phones and tablets, and its Android app includes all the same features as the Apple version.
Pricing and Terms
If your business doesn't accept many credit card payments each month, you may find it expensive to work with a full-service processor that has a monthly minimum processing requirement and a handful of regular fees, such as monthly statement and gateway fees and an annual PCI compliance fee. Choosing a processor like PayPal that has flat-rate pricing and pay-as-you-go terms can save you money since you only pay for the processing you use.
PayPal is very transparent with its pricing, and you can find all of its rates and fees posted on its website. Here's what you'll pay when you accept credit cards using PayPal:
- 2.7 percent: Cards and contactless payments you accept in-person using the PayPal Here app and a card reader, regardless of what kind of credit or debit card your customer uses, including mobile wallets like Apple Pay, Google Pay, and Samsung Pay
- 2.9 percent plus 30 cents: Cards you accept online, either through your website or digital invoice
- 3.1 percent plus 30 cents per transactions: Cards you accept using PayPal's virtual terminal, such as payments you accept over the phone, by fax or by mail
- 3.5 percent: American Express cards you accept using PayPal's virtual terminal, PayPal Payments Advanced or PayPal Payments Pro
- 3.5 percent plus 15 cents: Cards you manually key or scan in using the PayPal Here app
Incidental fees you may incur are as follows:
- A cross-border fee of 1.5 percent is added to the transaction fee when you accept payments from customers outside the U.S. If currency conversion is required, it costs an additional 2.5 percent.
- Chargebacks cost $20 per incidence.
Special pricing is available for certain business types:
- Registered charities pay 2.2 percent plus 30 cents for online donations; in-person donations cost 2.7 percent.
- Businesses with transactions less than $10 may qualify for PayPal's micropayment fees, which cost 5 percent plus 5 cents per transaction.
You'll notice that PayPal's rates are somewhat higher than those of full-service processors. However, it's still more cost-effective if your monthly processing volume is low. If you use a full-service processor, you pay around $20 per month in account maintenance fees and have a monthly minimum of $25, which can be difficult to meet if you process less than $2,500 per month.
There's no long-term contract requirement with PayPal, as you accept a user agreement instead. As your business grows and your processing volume increases to the point where the savings from lower rates would surpass account fees, if you close your PayPal account and switch to a full-service processor, you can do so at any time without penalty.
Here's a list of the fees you won't pay using 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
Some of PayPal's additional services cost extra. For example, if you need the money from your transactions immediately, you can pay 1 percent for an instant transfer from your PayPal balance to your bank account. Regular bank transfers are free and usually take one business day. Here are some more examples of optional services that carry fees:
- Recurring billing service costs $10 per month.
- Advanced fraud protection services cost $10 per month plus 5 cents per transaction.
- PayPal Payments Pro, which allows you to accept payments directly on your website and includes a virtual terminal, costs $30 per month.
One of the best things about PayPal is that it allows you to accept payments across multiple channels simultaneously – on the go, at a brick-and-mortar location and online, via invoice and website – and the money from all of your transactions goes into one PayPal account, making it easier to manage your finances. Here are more features PayPal offers.
Free Basic POS Software
To accept payments in person at your business location or on the go, you install the PayPal Here app on your phone or tablet and attach a card reader. This mobile credit card processing app includes point-of-sale features that help you run your business. Here's what it can do:
- Accept credit and debit card payments
- Record checks and cash payments
- Create an inventory list and add photos of items
- Add multiple users to your account and manage their access
- Set taxes, suggest tip amounts, apply discounts at checkout
- Email, text or print receipts
- Refund sales
- Generate sales reports
- Transfer funds from your PayPal balance to your bank account or your PayPal Business Debit Mastercard
Card Reader Options
PayPal has several card readers for you to choose from. Although the Mobile Card Reader is the least-expensive option, it isn't EMV compliant as it only reads magstripe cards.
Because there's a greater risk of counterfeit fraud when you use this card reader, PayPal will hold your funds in a reserve account if you use it to process more than $500 of sales in a seven-day period. You can avoid this problem by choosing one of PayPal's other three card readers. Each is EMV compliant and connects to your phone or tablet via Bluetooth.
- PayPal Chip and Swipe Reader: $24.99. Accepts magstripe and chip cards.
- PayPal Chip and Tap Card Reader: $59.99. Accepts magstripe, chip and contactless cards. Also accepts mobile wallets like Apple Pay and Google Pay.
- PayPal Chip Card Reader: $79.99. Accepts magstripe, chip and contactless cards as well as mobile wallets. It's the only model that has a screen and a built-in PIN pad.
One of PayPal's strengths is that it integrates with many business systems and applications. Here's a small sampling of the business solutions PayPal integrates with:
- POS systems like Revel Systems, TouchBistro and Vend
- E-commerce platforms, such as 3dcart, BigCommerce and Shopify
- Accounting software, including QuickBooks, Xero and Zoho Books
Online Processing Solutions
PayPal makes it easy to accept credit, debit and PayPal payments online. It offers two plans:
- PayPal Payments Standard. There's no monthly fee for this plan; all you pay are the transaction fees for your sales. With it, you place buy buttons on your website that redirect your customer to a checkout page hosted by PayPal.
- PayPal Payments Pro. This plan costs $30 per month. With it, you can design and host the checkout pages yourself. It includes a virtual terminal that you can use to key in credit card information for sales made over the phone or by fax or mail.
You can create and send invoices by logging into PayPal's website using your business account credentials or using the PayPal Business app on your phone or tablet. Your customer receives an email with a link, clicks the link to open the invoice and can then choose to pay the invoice using their credit or debit card or their PayPal account. There's no cost to send invoices; when you receive payments from your customers, you pay 2.9 percent plus 30 cents for each transaction.
Invoicing with Messenger
If you and your customers use Facebook, you can create invoices in Messenger to send to your customers. Your customers can click on the invoice in your message to pay it using their PayPal account.
Accept Payments from International Customers
If your small business sells to customers in other countries, PayPal is a good processor for you. It accepts payments made in the 25 currencies that are used in more than 200 countries.
Here's additional information about PayPal to keep in mind as you decide which credit card processing company is the best fit for your business.
- If you run into an issue using PayPal, you can call or email the company 24/7 or use the self-help resources on its website, which include a searchable knowledgebase, how-to guides, a community forum and a Resolution Center that assists with customer disputes. Although the company lists extended phone hours on its website, a company rep noted that you can actually reach a representative 24/7, though if you call after hours, your call may be routed to one of its international offices.
- PayPal uses multiple security measures to keep your customers' payment data safe, including end-to-end encryption and 24/7 transaction monitoring. It complies with the data security standards established by the Payment Card Industry, and most of its card readers are EMV compliant, which deters counterfeit fraud. Your account is password-protected, and you can add a second authentication factor using PayPal Security Key, which sends a unique one-time PIN code to your phone via text.
- The processor offers a PayPal Business Debit Mastercard with no annual fee. Using this card, you can spend your PayPal funds at any store and receive one percent cash back on qualified purchases. You can also withdraw cash from in-network ATMs.
- Eligible merchants can receive small business loans and working capital through PayPal. You can also offer your customers financing options on purchases over $99 through PayPal Credit.
PayPal is a great solution for low-volume businesses as it allows you to accept credit, debit, and PayPal payments in-person and online on a pay-as-you-go basis, with no monthly or annual account maintenance fees and no long-term contract. However, if you go beyond the basic credit card processing services, there are a lot of little fees to keep track of and they could add up quickly. Though to PayPal's credit, it lists them in full on its website.
Another issue to be aware of is held funds and frozen accounts, which is the cause of many online complaints. This problem isn't exclusive to PayPal – you'll find similar complaints about other payment facilitators online as well. Rather, this type of payment processor tends to be more wary of fraud, and irregular patterns in your processing, such as spikes in transaction amounts or frequency can raise red flags.
Following PayPal's seller best practices can reduce the likelihood of having your money held in a reserve account. You also want to make sure that the products or services your business provides are within PayPal's acceptable use policy, as otherwise your funds may be frozen or your account may be closed without notice.
Editor's note: Looking for a credit card processor? Click the Compare Quotes button below to have our sister site Buyer Zone connect you with vendors that can help.
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