PayPal Review

Overall Rating Breakdown
Sales & Marketing Tactics
Costs & Contract Terms
Complaints & Service
BBB Rating

PayPal Overall Rating

B- Credit Card Processor Rating

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PayPal Overview

PayPal Logo

PayPal Logo

This PayPal ( review is intended primarily for small business owners who accept credit card payments on a regular basis and for those starting new businesses that will need to accept credit cards. Due to this focus, the content of this review will cover the factors that are most important to merchants who are interested in using PayPal for the purpose of accepting credit card payments from their customers.

PayPal is a wholly owned subsidiary of eBay and is heavily used for payments between buyers and sellers of eBay auctions. The service is one of the most accessible electronic payment methods in the industry because it allows anyone with an email address to sign up to send and receive payments from other individuals. Additionally, PayPal has a “merchant services” division that allows businesses of all sizes to accept credit card payments, much like a normal merchant account.

PayPal is unlike traditional credit card processors because merchants cannot use PayPal with typical credit card processing equipment. Instead, PayPal offers several other services including shopping cart integration, “buy now” buttons, and donation buttons that are primarily targeted towards merchants with an online presence. The company also offers a virtual terminal with an optional credit card reader that plugs into the USB port of most computers. The virtual terminal allows merchants to enter credit card data themselves to use PayPal much like a traditional merchant account. Additionally, PayPal has introduced a mobile payment app and card reader dubbed “PayPal Here” that allow anyone with a compatible smartphone to accept credit card payments.

One important difference between PayPal and a merchant account supplied by a credit card processor is that merchants must request the transfer of funds from their PayPal accounts to their checking accounts. Typically, most merchant account providers transfer the money as a “batch” automatically with 48 hours of the close of a business day. PayPal also offers payments by check and a debit card that can be used for purchases or withdrawing money from an ATM.

Related: Compare Fees and Save Money

PayPal Sales & Marketing Tactics | A+

Key Points – Sales & Marketing 
Uses independent resellers? No
Promotes deceptive rate quotes? No
Discloses all important terms? Yes

PayPal scores well in this section because the company does not use independent sales agents or misleading sales tactics. PayPal primarily markets itself online and through eBay, and in many ways has become a household name. The company’s policies and pricing are transparent and easily understandable for anyone who takes the time to read them.

PayPal Marketing Example

PayPal Costs & Contract Terms | B

Key Points – Costs & Contract Terms
Swiped rate: 2.7%
Keyed-in rate: Variable
Termination fee: None
Monthly minimum fee: Variable

In this section, only PayPal fees and contract terms associated with PayPal’s business account for accepting credit card payments are being considered. We will not be covering personal accounts in this review.

Basic Merchant Setup (aka: PayPal Payments Standard)

This account does not allow merchants to enter credit card data themselves online but does allow for customers to pay by credit card through a merchant’s website. However, if a merchant has set up a PayPal Here account, s/he can accept a credit card directly through the mobile app. For merchants wishing for an easy way to accept online payments, PayPal offers this basic setup with a few advantages over traditional merchant accounts. First, there is no setup cost, no monthly fee, no time commitment, no PCI Compliance fee, and no cancellation fee. PayPal Payments Standard allows merchants to easily accept payments through their websites using “buy now,” “add to cart,” and “donate” buttons and recurring payments from other PayPal users (to accept recurring payments from non-PayPal customers, there is a $19.99 per month fee). This account is also compatible with most popular shopping carts. One of the disadvantages is that the customer must leave the merchant’s website and be redirected to PayPal to complete the transaction, which can reduce conversion rates and confuse customers. With no monthly fees, PayPal credit card acceptance does come at a higher than average processing rate. As of this review, PayPal is reporting the following rate structure for basic U.S. accounts transacting in U.S. dollars (international rates may differ):

PayPal Pricing

PayPal Pricing

*Note that PayPal charges different rate tiers based on sales volume whereas traditional merchant accounts charge different tiers based on the customers’ card types.

Advanced Merchant Setup (aka: PayPal Payments Advanced)

The next account up from the standard account allows merchants to keep the entire checkout process on their own site. Like PayPal Payments Standard, merchants cannot enter credit card data themselves, but they do get all the same features as the basic setup and can control the user experience throughout the entire online sales process. The PayPal rate tiers are the same as PayPal Payments Standard, but there is a $5 monthly fee. PayPal also offers additional services for data handling, PCI compliance, and customer support, but these come at extra costs.

Professional Setup (aka: PayPal Payments Pro)

PayPal Payments Pro comes with all of the same features as PayPal Payment Standard and PayPal Payment Advanced but with two extra features. The first is primarily of interest to high volume e-commerce retailers and web developers who want full control over the checkout process because it allows for custom design and self hosting of the checkout pages.

With the second extra feature of the Pro account, PayPal offers a virtual terminal for merchants that need to enter credit card data themselves for face-to-face transactions and/or mail orders and telephone orders. Merchants who wish to use this service will need to go through an extra application process even if they already have a PayPal account. Apparently, it takes about 48 hours to find out if you have been approved for a virtual terminal account. Generally speaking, the cost for this service is fairly high in comparison to other virtual terminals and merchant account providers. In addition to a $30 per month fee, US merchants will pay the follow processing fees:

PayPal Virtual Terminal Rates

PayPal Virtual Terminal Rates

*The crosses next to the fees indicate that merchants must be approved for those rates.

PayPal also has a “micropayment” fee of 5% + $0.05 for transactions under $10. Even though merchants can use an optional credit card reader that plugs into nearly any computer, the processing rates appear to be the same for swiped and keyed transactions. PayPal’s swipe rates are unusual because nearly all other merchant account providers offer lower processing fees for swiping a credit card through a reader.

PayPal Complaints & Service | C

Key Points – Complaints & Service
Total complaints: Thousands
Live customer support? Yes
Most common complaint: Fund holds

The grade for this section was difficult to determine because of PayPal’s unique position in the credit card processing industry. Unlike traditional merchant accounts, virtually anyone can sign up for a PayPal account, and PayPal has over 100 million users. As one could imagine, PayPal has thousands of complaints. The two most common that appear to come from actual merchants are complaints of sudden freezing of accounts that disable the merchant’s ability to accept further transactions and withdraw money, and poor experiences with customer service.

Merchants that complained of experiencing holds often reported difficulty in getting explanations of why the hold was established and that the money was held for long periods of time. Holds are a common practice in the credit card processing industry and are often used on merchants that are deemed as “high risk,” or have experienced numerous chargebacks or fraudulent transactions. Many merchants do not transfer their PayPal funds on a daily basis, so days’ or weeks’ worth of sales can get locked up during an account freeze. However, holds and account freezes are never a problem for most merchants, even though there are quite a few reported cases online.

As for complaints about customer support, PayPal offers several options for resolving problems, including a phone helpline. The basic support line is open to all account types and appears to suffer from periodic long wait times and poor service. Merchants can get higher levels of customer support by paying either $159 per month for “13X7 Enhanced” support, or $495 per month for” 24X7 Premium” support.

PayPal earned a “C“ in this section because it does a good job of providing many customer service options and has a small proportion of complaints in comparison to its user base, but the company still has room for improvement by working to reduce the amount of complaints being filed online.

Related: Best Credit Card Processors for Service

PayPal BBB Report | C (CPO Adjusted)

Key Points – BBB Report
Product/service: 3,326
Billing/collection: 1,648
Advertising/sales: 755
Guarantee/warranty: 128
Delivery: 95
Other: 65

As of this review, PayPal is accredited with the Better Business Bureau (BBB) and maintains an “A+” rating despite having 6,017 complaints filed in the last 36 months. Of the complaints, 3,326 are related to problems with the service, 1,648 with billing and collection, 755 with advertising and sales issues, and 288 with other issues. The BBB justifies the high rating with the length of time PayPal has been in business, the complaint volume versus PayPal’s size, the company’s response to complaints, the rate of resolution of those complaints, and that the BBB has sufficient background information on PayPal.

Based on PayPal’s complaint count, resolution ratio, and size, we are adjusting this section’s rating to a “C” for the purposes of this review. You can learn more about why we adjust BBB ratings in our rating criteria.

Bottom Line

PayPal is a huge company and in some circles has a bad reputation. In spite of this, the company remains one of the best options for easily accepting electronic payments and continues to gain popularity. PayPal is comparable in cost to many merchant account setups, but is much more expensive than merchant accounts under the Interchange Pass-through pricing model. Although PayPal has a lot of complaints, most of them are due to the fact that even the most inexperienced and naïve business owners can set up an account in a matter of minutes. Overall, PayPal is a solid choice for accepting credit card payments and can be offered as an additional payment option alongside a normal merchant account and payment gateway setup.

This review was originally published on 8/4/11 and was last updated on 7/7/14.

Leave your review of PayPal in the comment section below:

PayPal Review

Rated 3.375 Out of 5 Stars
Reviewed by Phillip Parker
Reviewed on 2014-07-07 13:16:44

PayPal ( has over 100 million users and, as one could imagine, there are thousands of PayPal reviews that describe the company as a scam or a ripoff. The two most common that come from actual merchants are complaints of… Learn more in this PayPal review.

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About the author

Phillip Parker

Phillip Parker is a former merchant services agent turned small business advocate and the author of "Fee Sweep," which teaches merchants how to dramatically lower their processing rates, eliminate junk fees, and avoid fine-print scams. He founded to help merchants enact positive change in the credit card processing industry.

Phillip can help you find an ethical and honest processor that will offer you great rates. Click here to request a free provider consultation.

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  1. Kat

    I haven’t been able to use my Paypal account in 2 years because someone hacked and used my Paypal account. I had to pay what the hacker took off with my own money every paycheck. NOW, my account is limited until I here from them by Friday. I’m upset because I’ve been going with out a few important things (Dr. check ups, car fixes, etc.) for these last few years. It has been awful. The worst and most awful feeling in the world is that I possibly can’t open my Etsy shop and may have to close my Red Bubble shop.

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  2. LG

    Paypal has AWFUL customer service. I placed a transfer, through paypal, FROM MY bank TO paypal. Within 2 hours of the submission, went online to cancel but was unable to do so. Called paypal and was connected to one of the stupidest reps on the planet. Told him I needed to cancel the transaction and was informed that he couldn’t do it because the cancel button was no longer visible on his screen. What??? So for a 3-5 day transaction, within a 2 hr timespan, the submission cannot be cancelled? Ridiculous. Can I cancel the account? No, because there’s a pending transaction. Right but it’s pending TO ME!! After I was finally able to be transferred to a supervisor (after asking at least 3 times because he kept saying that no one above him could help me), that person explained that the transaction cannot be cancelled because it was more that 5-10 minutes after the submission. Really? Where’s the shovel because that reeks. Needless to say, I should have read reviews prior to signing on to it and I will inform everyone to NEVER use this service. Use AMEX prepaid instead.

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  3. California Merchant

    We switched to PayPal Pro after using Heartland. Much lower rates for us that were clear-cut and easy to understand. We’re using mainly Virtual Terminal for our phone orders, with a few online orders through their payment gateway, and are very happy with our current rates and set-up. Merchant support has been good, and we haven’t experienced many problems.

    There is however one drawback that we experienced today with receiving credit card payments through our website. I’m not sure what it’s like with other companies as this is the first time we’ve encountered this situation. We received an order that came with an invalid shipping address, different than the billing address. When we called the one number provided for both billing and shipping, it went straight to voicemail. No response through email. The IP address was from a different state than the billing and shipping addresses. So naturally, we suspected credit card fraud.

    We called Visa, and they told us that the best thing to do is to call the card issuer and have them contact their customer to verify the purchase. But since we didn’t have the credit card number as it was an online order through PayPal, Visa couldn’t help us. We had to call PayPal so that they could give us the card issuer since all the information went through them.

    We ended up calling PayPal 3 times and talking to 3 different departments, including Merchant Services and Disputes & Claims. They told us that they did not have the credit card number on file, and therefore could not give us the card issuer. They said they could do nothing about this issue.

    However, if the card was stolen, we got no protection from PayPal since this kind of online transaction was not protected. It would be our fault as the seller for accepting this stolen credit card, even though we tried to verify the validity of the card. The chargeback fee would be $20 from paypal if the card turned out to be stolen. Therefore, our best option was to refund the order (I believe seller still pays the small $0.30 transaction fee, and either the seller or buyer pays an additional fee reversal fee, in our case about $6).

    We still don’t know if the card was stolen or not. If it was, we had no way of notifying the card issuer or the cardholder that there was a suspicious charge. PayPal said it couldn’t do anything more than we could.

    It just seems like we should allow merchants to quickly verify an online purchase if they’re suspicious, and to easily report any fraud to save everyone involved any wasted time and/or money if the fraud continues after the current purchase. The earlier it’s reported, the better, right? Maybe the industry standards need to change. But I wasn’t very satisfied as a PayPal customer today.

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  4. Knower

    PAYPAL is simply a Gorilla that can afford to bully its customers.

    HERE is why we left:

    Paypal does not want you using your credit card. Rather they’d prefer you use your paypal credit. This is why they have not developed a default payment option. If you notice, your payment always defaults to paypal credit. Numerous complaints have been filed about why paypal refuses to allow people to have a default payment method that YOU, the user can chose. It is afterall your money right? Paypal always wants you to pay with paypal money so it saves them on fees. Every time we purchase something, we have to move the funds out of our paypal account to our bank in order to pay the full amount with our credit card. This is several clicks done numerous times a day, it adds up. If we do a $4000 purchase and our CC gives us 3% back, thats $120 gone in rebates. We have made the error when very busy of forgetting that we always have to transfer the money out before we make a purchase because paypal ALWAYS makes the PP money default. We made the error 2 times and the 3rd we said SCREW PAYPAL.
    We have over 32 domains and only one we still use paypal with. Paypal do what they can to screw you and not allowing you to choose a default payment that stays default is one perfect example.

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  5. Jason

    Sounds like this report was made by one of PayPal customer service team, I had used many different payment gateway and PayPal is the worst.

    PayPal took money out of my bank account even after I had done paid their fees.

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  6. Travis

    I have been a PayPal customer for many many years. I was very surprised to see that someone was able to steal my account information and use in store purchasing to buy $480 worth of stuff. Here I am over a month later and I still don’t have my money back. PayPal says they guarantee a refund and I even got an email from them saying it would happen in 5 days. Well it’s been 30 and I have been patiently waiting for my money. Called them today and they forgot to do “an important step”. Does that instill confidence in someone who has all my financial information? Too bad they’re a monopoly.

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    1 / 1 found this review helpful.

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