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PayPal Credit Card Processing Reviews & Complaints
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This PayPal review is intended primarily for small business owners who accept credit card payments on a regular basis and for any 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 established business owners who are interested in using PayPal for the purpose of accepting credit card payments from their customers.
Is PayPal Holding Your Funds Right Now?
Thousands of merchants have had their payments frozen by PayPal. If you’re one of them, then you might find these resources helpful:
- How To Make Your Payment Processor Release Your Money
- How to Fight Chargebacks
- Best PayPal Alternatives
A Titan of E-Commerce
PayPal began as a wholly-owned subsidiary of eBay, where it was heavily used for payments between buyers and sellers of eBay auctions. In mid-2015, PayPal split off from eBay to become its own independent company. 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.
PayPal Credit Card Processing
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.
Paypal Point-Of-Sale (POS)
Paypal utilizes an all-in-one POS solution called Zettle, which provides portable in-person acceptance of chip, swipe, and contactless payments. The company focuses on the small handheld POS for most of their physical payment processing, but they also offer larger register-style POS and scanning equipment for managing inventory. The device can operate off customers’ smartphones and other USB devices. It integrates with an existing PayPal merchant account as well as Apple Pay, Samsung Pay, and Android Pay. The advertised rate for Zettle is 2.29% + .09$ per transaction, with added costs for additional equipment.
PayPal Requires a Separate Account
One important difference between PayPal and a merchant account supplied by a credit card processor is that business owners must request the transfer of funds from their PayPal accounts to their bank accounts. Typically, most merchant account providers transfer the money to their merchants’ bank accounts as “batches” automatically within 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. Merchants who would like to avoid this arrangement are better off using PayPal alternatives instead.
PayPal Business Accounts
Businesses can use PayPal to accept payments online, in-person, or through mobile devices. With a PayPal business account, companies can access a variety of features, such as generating and sending invoices, accepting credit and debit cards, and enabling touch-free payments.
E-commerce Solutions by PayPal
PayPal offers e-commerce solutions to facilitate online businesses. Businesses can integrate PayPal’s payment processing services into their websites or apps, allowing customers to pay securely with just a few clicks.
PayPal Mobile Payments
Recognizing the importance of mobile transactions in today’s digital age, PayPal offers a mobile payment option. Through the PayPal app, users can send and receive payments, check account activity, and even donate to their favorite charities.
PayPal Credit is a unique service that allows customers to buy now and pay over time. This feature provides customers with a flexible payment option, while businesses receive payment upfront, reducing their financial risk.
PayPal’s International Money Transfers
PayPal also facilitates international money transfers, enabling users to send money across borders swiftly and securely. This feature is particularly useful for businesses operating in the global marketplace.
Security Measures Implemented by PayPal
PayPal places a significant emphasis on security. Their advanced security measures, including data encryption and fraud prevention tools, help protect users’ personal and financial information.
Location & Ownership
Daniel Schulman is the CEO of PayPal, which is headquartered at 2211 North First Street, San Jose, California 95131.
Table of Contents
- Competitors and Comparisons How does the company square up against…
- Costs & Contract: Offers a month-to-month contract with no early termination fee and…
- Complaints & Service: Has received thousands of public complaints regarding…
- BBB Rating: Has an “A” rating with the BBB but has received 33,516 complaints and 0 reviews in the past 3 years in regards to…
- Sales & Marketing: Does not hire independent sales agents and has not received any complaints about its…
PayPal Competitors and Comparisons
PayPal vs Venmo
PayPal and Venmo, while technically the same company, are competing as an alternative option for small businesses to take payments online and in person. Many clients aren’t aware that PayPal actually owns Venmo when making this decision.
It’s also important to note that both PayPal and Venmo were not originally designed to be the primary payment processing service for most merchant accounts. Originally Paypal was the payment backbone for the online auction giant eBay before it split off in 2015. Venmo was created to transfer funds between family, friends, and other trusted individuals. Paypal acquired Venmo as part of its purchase of startup Braintree in 2013 for $800 million.
However, they have seen an uptick in use in recent years from smaller businesses that do not wish to maintain an account with one of the larger payment processors. This shift has been embraced by both brands, and we’ve seen a recent introduction of new products and services aimed at appeasing their growing number of clients who use the services as their primary form of payment service provider. Venmo in particular has changed its platform to begin allowing businesses to create profiles and provide transactions with more transparency and security. There are some key differences between the two brands when it comes to payment processing.
Credit & Debit Processing
While we remind our readers that neither service was initially designed to handle large volumes of transactions, both allow this in one form or another. Both companies offer electronic invoicing services, QR scanning, keyed-in transactions, and account-to-account transfers, but PayPal has a lot more to offer in terms of physical POS systems and virtual terminal options when it comes to taking cards. Venmo does not seem to have some of the consumer protections in place for chargebacks and consumer disputes, as indicated by the numerous warnings to only deal with trusted accounts and individuals.
Venmo allows clients to accept credit card payments but will charge an additional 3%. PayPal charges the same fee outside of account-to-account transfers. Venmo does not have a credit card scanner currently, and transactions must be made through the app. PayPal has several tiers of physical POS systems with card and chip readers depending on your needs, something Venmo can’t currently offer.
Paypal also issues debit cards tied to their accounts, which Venmo plans to offer in the future, according to their site.
Neither brand charges a monthly fee or early termination fee, making them both very attractive to businesses that make few or sparse transactions. While it can be difficult to gauge Venmo and Paypal’s direct cost difference on services Venmo doesn’t offer, we can look at QR-based transaction fees and costs. QR codes are most likely going to be the primary payment method for Venmo users, considering their lack of physical card readers. Venmo charges 1.9% + $0.10 per QR transaction, whereas Paypal is slightly more expensive at 2.29% + $0.09 per transaction. This percent difference comes with a lot of consumer protections on PayPal’s end. PayPal does offer several optional monthly services, such as added fraud protection for additional costs.
Pros & Cons
One of the biggest drawbacks to both services is the inability to automatically transfer funds to your bank. This might be the main distinguishing feature from a normal credit card processing company. While both companies make it easy for users to transfer funds to their bank in a few clicks, there is usually a delay of 1-3 days before the funds are released. PayPal in particular has received large amounts of complaints related to this delay, and it’s also where funds can get frozen for one reason or another.
While Venmo can typically take 1 to 3 business days to transfer money to a bank account for free, the company also has an instant transfer option. It allows merchants and other users to instantaneously transfer funds. However, a 1% fee is attached to these transfers, with a minimum of $0.25 and a maximum of $10. PayPal offers a similar service for 1% with no fee ceiling. These very small nuances can mean the difference of hundreds of dollars over the lifetime of using PayPal versus Venmo.
Both services offer a large amount of flexibility, and that seems to be the main attraction for businesses. While PayPal boasts one of the largest payment networks out there, Venmo can really shine as a low-maintenance and highly mobile payment platform. It’s also more accessible to users, allowing them to simply download the app to pay. While PayPal technically matches all these services on paper, the end-users and mobile market seem to prefer Venmo. We think there’s room for both services depending on a client’s needs; however, it will be interesting to watch the two brands trying to stay off of each other’s toes as Venmo steadily approaches merchant account territory.
We invite our readers to check out our Venmo review for more in-depth information.
PayPal Customer Reviews
Here's What Their Clients Say
|Total Online Complaints||8000+|
|Live Customer Support||Yes|
|Most Common Complaint||Fund-Holds|
Millions of Users, Thousands of PayPal Complaints
The grade for this section is difficult to assign 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 can imagine, there are thousands of negative Paypal reviews. The two types of negative PayPal reviews that are most common among actual business owners are of sudden account freezes that disable the merchant’s ability to accept further transactions and withdraw money, and poor experiences with customer service. If you have your own PayPal review to make, please do so in the comments below.
Moderate Risk of Fund-Holds
Business owners who complain of fund-holds often report difficulty in getting explanations as to why the hold was established. They also state 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 “high-risk” businesses who would be better served by high-risk processing specialists. Many businesses 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 clients, even though there are quite a few reported cases online.
In 2017, PayPal was sued in the matter of Zepeda v. PayPal Inc., a class-action lawsuit that alleged the company had improperly handled disputed transactions, placed holds, reserves or limitations on customers’ accounts without notice, and closed merchant accounts without notice. The company agreed to pay a sum of over $4 million to plaintiffs who were part of the class action.
2021 saw a flurry of legal activity concerning PayPal. It began in February 2021, when the company announced that it was under investigation by the Securities and Exchange Commission and the Consumer Financial Protection Bureau.
According to Bloomberg, “The SEC is investigating whether the swipe fees paid to the banks that issue PayPal’s debit cards are consistent with Federal Reserve guidelines, the San Jose, California-based company said Thursday in a quarterly regulatory filing. The agency is also investigating how PayPal reports marketing fees earned from its branded-card program. […] Separately, PayPal said it received a civil investigative demand from the CFPB in connection to the marketing and use of PayPal Credit in connection with merchants that provide educational services. The regulator asked PayPal to produce documents, written reports and answers to written questions. The company said it is cooperating.” Following the announcement of this investigation, PayPal Inc. stock dropped significantly. This led to a bevy of class-action suits being announced against the company. With such heavy legal action underway against one of the world’s largest and most well-known payment processors, these cases are sure to set standards for the industry going forward.
PayPal was also sued in June 2021 by World Series of Poker champion Chris Moneymaker in another class-action suit regarding seized funds from fantasy sports leagues.
An ongoing lawsuit regarding fund-holds and frozen accounts was brought against PayPal in 2022.
A further class-action suit was filed against PayPal in 2023 regarding a data break of 35,000 peoples’ accounts.
PayPal Customer Support Options
PayPal offers several options for resolving customer service 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. Businesses 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 Customer Service Numbers
- (888) 221-1161 – Toll Free General Customer Service
- (402) 935-7733 – Report Unauthorized Transactions
- (888) 914-8072 – Español
- (402) 935-2050 – For customers calling from outside the US
Other Support Options
- Live chat support
PayPal earns a “C” in this section because of the sheer volume of negative PayPal reviews filed online, but the company does a decent job of providing many customer service options and maintaining a small proportion of complaints in comparison to its user base.
PayPal Online Ratings
Here's How They Rate Online
Note: We have adjusted this company’s BBB rating according to our own standards. To better understand why we adjust BBB ratings, please see our Rating Criteria.
More Than 33,000 Better Business Bureau Complaints
As of this review, PayPal is accredited with the Better Business Bureau and maintains an “A” rating despite having 33,516 complaints filed in the last 36 months. This continues a trend of a large uptick in reviews. Only 33,516 of these 11,487 complaints were resolved by the company to the satisfaction of the merchant. The remaining 22,029 were resolved to the dissatisfaction of the client or received no final response.
What Merchants Say
The company had also previously received 2,182 informal PayPal reviews, with the vast majority being negative. Again, this is a massive uptick from the 1,551 when we last reviewed the company. However, all reviews have been removed with no explanation as of this review. One previous review from a client related to held funds and a poor customer service experience:
Worst outcome ever. Have been using ****** for transaction with a distributor of mine. I have had done numerous transactions with him over the last month. At least 4 of the transaction were 4 digits. Even single one of those transactions was flagged and held. Even after the first few cleared no problem. I’m not about to loose my largest clients and probably my business because of this….. the first time I understood. The second I was frustrated, the third I was mad and now I’m just done. And the support staff is of no help. My distributor can not even ca them and tell them to release it. Beyond ridiculous
Clients should review their options for merchant accounts with a history of great customer service to avoid situations like this.
FTC Venmo Settlement
At the time of a previous update, the BBB had posted a note regarding a February 2018 settlement between PayPal and the FTC:
“The Federal Trade Commission has reached a settlement with PayPal, Inc. over allegations that the company told users of its Venmo peer-to-peer payment service that money credited to their Venmo balances could be transferred to external bank accounts without adequately disclosing that the transactions were still subject to review and that funds could be frozen or removed.
In its complaint, the FTC also charges that Venmo misled consumers about the extent to which they could control the privacy of their transactions. In addition, Venmo misrepresented the extent to which consumers’ financial accounts were protected by “bank grade security systems,” and violated the Gramm-Leach-Bliley Act’s Safeguards and Privacy Rules, the complaint alleges.”
Although we consider Venmo one of the best mobile apps for sending money, it is clear that it faces some of the same criticisms as its parent company.
A “C” Performance So Far
The BBB justifies its rating by citing 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 the fact 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.
PayPal Fees, Rates & Costs
A Closer Look at The Contract
|Monthly & Annual Fees||No|
PayPal’s Merchant Services
In this section, only PayPal fees, rates, and contract terms associated with accepting credit card payments are being considered. We will not be covering personal accounts in this review, nor will we be assessing PayPal’s value as an eBay payment method.
Basic Client Setup (aka: PayPal Payments Standard)
This account type does not allow business owners to enter credit card data manually using their computers but does allow for customers to buy products by credit card through a businesss’ website. If a client has set up a PayPal Here account, they can accept credit cards directly through the mobile app. For customers looking for an easy way to accept online payments, PayPal offers this basic setup with a few advantages over traditional merchant accounts.
PayPal Standard comes with no setup cost, no monthly fee, no time commitment, no PCI Compliance fee, and no cancellation fee. PayPal Payments Standard allows businesses to easily accept payments through their websites using “buy now,” “add to cart,” and “donate” buttons as well as recurring payments from other PayPal users ($10 monthly 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 Payments Standard charges 2.7% plus $0.30 for all domestic in-store transactions, 2.9% plus $0.30 for all domestic online transactions, 4.2% plus $0.30 on all international in-store transactions, and 4.4% plus $0.30 on all international online transactions. Businesses registered as 501(c)(3) nonprofit corporations receive a discounted rate from PayPal of 2.2% plus $0.30 per transaction domestically and 3.7% plus $0.30 for international transactions.
Transferring from PayPal Merchant Accounts to Bank Accounts
Transfers made to bank accounts from PayPal will be deposited on the next business day. Businesses using PayPal can also transfer their balances to a bank account instantly. Instant transfers do have limits of $50,000 per transaction, $100,000 per day, $250,000 per week, and $500,000 per month. Each instant transfer is subject to a 1% fee which may not exceed $10.
Advanced Merchant Setup (aka: PayPal Payments Advanced)
The next account up from the standard account allows businesses to keep the entire checkout process on their own site. Like PayPal Payments Standard, businesses 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 Payments Advanced rates 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 feature allows for custom design and self-hosting of the checkout page, which is primarily of interest to high-volume e-commerce retailers and web developers who want full control over the checkout process. Business owners who are interested in this process can also consider using one of the top merchant accounts for web developers.
A Virtual Terminal Option
With the second extra feature of the Pro account, PayPal offers a virtual terminal for businesses that need to enter credit card data themselves for face-to-face transactions and/or mail orders and telephone orders. Business owners who wish to use this service will need to go through an extra application process even if they already have a PayPal account. 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 the best virtual terminals and merchant account providers. In addition to a $30 per month fee, PayPal Payments Pro clients will pay the following fees:
- 2.9% plus $0.30 per domestic transaction through their websites
- 3.9 plus a fixed fee per international transaction through their websites
- 3.1% plus $0.30 per domestic transaction through the virtual terminal
- 4.4% plus a fixed fee per international transaction through the virtual terminal
- 3.5% per American Express transaction
Volume discounts may also be available on an individual basis. PayPal also has a “micropayment” fee of 5% + $0.05 for transactions under $10.
Virtual Terminal Swiped vs. Keyed
Even though PayPal’s virtual terminal clients 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 through PayPal’s virtual terminal. This is unusual because nearly all other merchant account providers offer lower processing fees for swiping a credit card through a reader.
PayPal Employee Reviews & Sales Tacitcs
Should You Work For Them?
|Uses Independent Resellers||No|
|Discloses All Important Terms||Yes|
Full Pricing Disclosure
PayPal scores well in this section because the company does not use independent sales agents or misleading sales tactics. The company clearly outlines its pricing on its website and does not alter its fees for each individual seller. In many ways, PayPal has become a household name and stands out in a crowded field of e-commerce payment processing options. The company’s policies and pricing are transparent and easily understandable for anyone who takes the time to read them.
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