We take our role in providing guidance and education regarding the card payment industry very seriously. At our own expense, we have vigorously defended our right to continue expose unethical and predatory practices in the industry, successfully defeating every attempt to silence us. However, fending off frivolous lawsuits is costly. To sustain these efforts, one of the ways we generate revenue is through affiliate partnerships with ethical providers. This means that some of our outgoing links connect business owners to trustworthy, low-cost payment processors, which is what most of our readers seek. We see this revenue channel as a win-win-win for everyone involved. Business owners find good processors, processors get good clients, and we are able to continue to provide a valuable service to the small business community. We also recommend and link to many services that do not compensate us. Our priority is to guide you to the best solutions for your needs, regardless of potential revenue. If you have questions, please feel free to contact us.
All mentions of rate and fee costs are estimations based on publicly available information and client feedback. Actual costs may vary based on a variety of factors unique to your business.
In this review of PayPal, we take a close look at its role in e-commerce and payment processing, focusing on how it serves small businesses and startups handling credit card payments. Our analysis covers PayPal’s rates, fees, contract terms, and user-friendly features such as its point-of-sale system, mobile payment options, e-commerce tools, business accounts, and PayPal Credit. We also address common challenges like fund holds, account freezes, and the need to transfer balances to linked bank accounts, while comparing PayPal to Venmo to highlight differences in cost, features, and user experience. Alongside its pros and cons, we examine PayPal’s security measures, international transfer capabilities, customer support, legal history, and employee reviews. This review provides a balanced view of PayPal’s services and reputation to help business owners decide whether it is the right fit for their payment processing needs.
About PayPal
Paypal Homepage
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:
PayPal originated as a subsidiary of eBay, primarily facilitating payments between buyers and sellers on eBay auctions. In mid-2015, PayPal separated from eBay to become an independent company. It is one of the most accessible electronic payment methods, allowing anyone with an email address to send and receive payments. Additionally, PayPal’s merchant services enable businesses of all sizes to accept credit card payments.
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.
Cost
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.
Products & Merchant Services
Credit Card Processing
Unlike traditional credit card processors, PayPal does not use typical credit card processing equipment. Instead, it offers services such as shopping cart integration, “buy now” buttons, and donation buttons aimed at online merchants. PayPal also provides a virtual terminal with an optional credit card reader that connects via USB to most computers, allowing merchants to manually enter credit card data.
Point-Of-Sale (POS)
PayPal offers an all-in-one POS solution called Zettle, which supports in-person chip, swipe, and contactless payments. Zettle focuses on small handheld POS devices but also offers larger register-style POS and inventory management equipment. The device can operate via customers’ smartphones and USB devices, integrating with PayPal merchant accounts as well as Apple Pay, Samsung Pay, and Android Pay. The advertised rate for Zettle is 2.29% + $0.09 per transaction, with additional costs for extra equipment.
Account Structure
A key difference between PayPal and traditional merchant accounts is the need for business owners to manually transfer funds from their PayPal accounts to their bank accounts. Most merchant account providers automatically transfer funds to merchants’ bank accounts within 48 hours of a business day’s close. PayPal also offers payment options by check and a debit card for purchases or ATM withdrawals. Businesses preferring automatic transfers might consider alternatives to PayPal.
Business Accounts
PayPal business accounts enable companies to accept payments online, in-person, or via mobile devices. Features include generating and sending invoices, accepting credit and debit cards, and enabling touch-free payments.
E-commerce Solutions
PayPal provides e-commerce solutions to streamline online transactions. Businesses can integrate PayPal’s payment processing into their websites or apps, allowing secure customer payments with a few clicks.
Mobile Payments
PayPal’s mobile payment option, through the PayPal app, allows users to send and receive payments, check account activity, and donate to charities.
PayPal Credit
PayPal Credit offers a “buy now, pay later” option, providing customers with payment flexibility while ensuring businesses receive payment upfront.
International Money Transfers
PayPal facilitates international money transfers, enabling users to send money across borders quickly and securely.
Security Measures Implemented
PayPal prioritizes security with advanced measures, including data encryption and fraud prevention tools.
Customer Reviews & Sentiment
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.
PayPal gives this notice when logging on to accounts with held funds.
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.
Industry Scores & User Ratings
Online Ratings Summary
PaymentPop
1.2
BBB Rating
1.14
Trustpilot
1.3
Google Maps
2.4
Average Rating
1.61
PaymentPop Rating for PayPal
Negative Feedback
PayPal provides no customer service and does not value their customers. I have had my account for over 2 years and deal with the same businesses. The same businesses have sent payments at least every 2 weeks for these two years. All of a sudden they change a policy that says funds from one PayPal account to another takes 7-10 days to process. I’ve had more headaches with PayPal then it’s worth! I would strongly advise anyone considering PayPal for anything to find a different company!
Positive Feedback
We’ve been accepting online payments through PayPal on our website for years now! Barely even think about it any more; it’s pretty much seamless.
PayPal BBB Rating
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 11,487 of these 33,516 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.
PayPal has a 1.14 out of 5 star rating based on 1,525 user reviews on the Better Business Bureau website.
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
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.
Trustpilot Rating for Paypal
Paypal has a 1.3 out of 5 star rating based on 32,086 user reviews on Trustpilot.
Positive Feedback
I have been using PayPal for over 10 years. PayPal has always been helpful in solving problems with sellers and only thanks to PayPal have I always received a positive solution.
Negative Feedback
Fraudulent company, with horrible customer support. Dealing with PayPal is comparable to pulling teeth
Google Maps Rating for PayPal
PayPal has a 2.4 out of 5 star rating based on 1,236 user reviews on Google Maps.
Positive Feedback
I just want to say this:
PayPal customer support is amazing. I have been a member for well over 10 years, when ebay and PayPal were still one in the same. I have called many times with odd situations and not all ended in my favor, but even the worst experiences have been handled better than any other company I’ve had to contact about anything. I feel that PayPal really works hard to train their employees and chooses them wisely, very well done PayPal, very well done.
Negative Feedback
There is no recourse if a fraudulent charge is made to my account. A fake charge was made to my account without doing the 2 step required verification. When I disputed it, within 2 minutes the computer decided that I am wrong and fake charge was not reversed. No human intervention. Your money is not safe here
Processing Rates & Fees
PayPal’s Merchant Services
In this section, we’ll focus solely on PayPal fees, rates, and contract terms for accepting credit card payments. We won’t cover personal accounts or evaluate PayPal’s value as an eBay payment method.
This account type doesn’t permit business owners to manually enter credit card data on their computers but enables customers to purchase products via credit card through a business’s website. Clients with a PayPal Here account can accept credit cards directly through the mobile app. For those seeking a simple way to accept online payments, PayPal offers this basic setup with several advantages over traditional merchant accounts.
Basic Pricing
PayPal Standard entails no setup cost, monthly fee, time commitment, PCI Compliance fee, or cancellation fee. Businesses can easily accept payments through their websites using buttons like “buy now,” “add to cart,” and “donate,” as well as recurring payments from other PayPal users ($10 monthly fee). Although this account is compatible with most popular shopping carts, a disadvantage is that customers must leave the merchant’s website and be redirected to PayPal to complete the transaction, potentially reducing conversion rates and confusing customers. Despite no monthly fees, PayPal’s credit card acceptance involves a higher-than-average processing rate. As of now, 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. Registered 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 from PayPal to bank accounts are deposited on the next business day. Businesses using PayPal can also transfer their balances to a bank account instantly, with transfer limits of $50,000 per transaction, $100,000 per day, $250,000 per week, and $500,000 per month. Each instant transfer incurs a 1% fee, capped at $10.
The next tier up from the standard account enables businesses to keep the entire checkout process on their own site. Similar to PayPal Payments Standard, businesses can’t manually enter credit card data but receive all the same features with full control over the user experience during online sales. PayPal Payments Advanced has the same rates as PayPal Payments Standard but incurs a $5 monthly fee. PayPal also offers additional services for data handling, PCI compliance, and customer support, though these come with extra costs.
Professional Setup (aka: PayPal Payments Pro)
PayPal Payments Pro includes all features of PayPal Payments Standard and PayPal Payments Advanced, with two additional features. The first feature allows for custom design and self-hosting of the checkout page, primarily beneficial for high-volume e-commerce retailers and web developers seeking full control over the checkout process. Business owners interested in this feature can also explore 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 needing to manually enter credit card data for face-to-face, mail, or telephone orders. Business owners interested in this service must undergo an additional application process, even if they already have a PayPal account. Approval for a virtual terminal account typically takes about 48 hours. The cost for this service is relatively high compared to the best virtual terminals and merchant account providers, with a $30 per month fee for PayPal Payments Pro clients, plus 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
Although PayPal’s virtual terminal clients can use an optional credit card reader that plugs into nearly any computer, the processing rates seem 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.
Lawsuits & Legal History
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.
Employee Reviews & Sales Practices
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.
PayPal Competitors
Compare PayPal to competitors that earned top marks.
PayPal is a recognized provider of credit card processing and merchant services, mirroring traditional processors but with a distinct digital-first approach. Despite its widespread use, customer reviews often cite poor support and unclear communication of policies. Nonetheless, PayPal remains a popular choice for its ease of use and the convenience it offers for accepting electronic payments, particularly appealing to very small businesses and newcomers to the marketplace.
While PayPal’s setup process is straightforward and quick, attracting less experienced business owners, it can also lead to misunderstandings about the service’s suitability for their specific needs. This ease of entry is a double-edged sword, as it often results in complaints from those who do not fully grasp the financial implications. In terms of cost, PayPal aligns with many traditional merchant setups but is generally more expensive than those using the Interchange Pass-through pricing model. It is essential for business owners to carefully evaluate PayPal in the context of other payment processing options to ensure it meets their business and financial requirements effectively.
