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PayPal Review

Category Breakdown
Sales & Marketing rated A plus
Costs & Contract rated B
Complaints & Service rated C
BBB Rating rated C

Overall Rating

"B" Credit Card Processor Rating


Overview

PayPal Logo

PayPal Logo

This PayPal (paypal.com) 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—although it is expected to be split off into its own company by mid-2015—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: Best Processors For E-Commerce Overall

Sales & Marketing | 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

Related: Best All-in-One E-Commerce Platforms

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, nor will we be assessing PayPal’s value as an eBay payment method.

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.

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Complaints & Service | C

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

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 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 complain of experiencing holds often report difficulty in getting explanations of why the hold was established and 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 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 earns 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.

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BBB Report | C*

Key Points – BBB Report
Product/service: 3,256
Billing/collection: 1,559
Advertising/sales: 558
Guarantee/warranty: 146
Delivery: 95
Other: 27

As of this review, PayPal is accredited with the Better Business Bureau (BBB) and maintains an “A+” rating despite having 5,641 complaints filed in the last 36 months. Of the complaints, 3,256 are related to problems with the service, 1,559 with billing and collection, 558 with advertising and sales issues, and 268 with other issues. PayPal has also received three informal reviews, with one being positive and two being negative. 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.

* Denotes CPO-adjusted BBB score

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Bottom Line

PayPal Review
Rated 3.4 out of 5 Stars
Reviewed by Phillip Parker
Reviewed on 2015-01-01

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 traditional 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 1/1/15.

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Stripe Review

Category Breakdown
Sales & Marketing rated B
Costs & Contract rated C
Complaints & Service rated B-
BBB Rating rated B

Overall Rating

"B" Credit Card Processor Rating


Overview

Stripe Logo

Stripe Logo

Founded in 2010, Stripe (stripe.com) is a web application that allows merchants to accept credit card payments through their websites. The service is particularly tailored to merchants with access to web developers who want the ability to customize the application according to their specific desires. Stripe is similar to Braintree Payment Solutions in that it does not charge any setup fees, monthly fees or monthly minimum charges. Interestingly, the company has also received investment capital from the founders of another competitor, PayPal. Stripe was founded by brothers John and Patrick Collison, and Patrick currently serves as the company’s CEO. Stripe’s headquarters can be found at 3180 18th St Ste 100, San Francisco, California 94110-2042.

Video Introduction to Stripe

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Sales & Marketing | B

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

Stripe appears to rely primarily on its website to market its services. The company specifically caters its advertising to web developers who would like to add a payment application to their websites. Stripe appears to quote its rates transparently and truthfully on its website. However, the Stripe website does not prominently list any explanations of its cash reserve and account cancellation policies, both of which appear to be responsible for merchant complaints on this site and elsewhere. Any merchant who is potentially considering doing business with Stripe is encouraged to read the company’s Terms of Service, located here, with special attention paid to section B, item 5 and section C, item 12.

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Costs & Contract | C

Key Points – Costs & Contract Terms
Swiped rate: N/A
Keyed-in rate: 2.9% + $0.30
Termination fee: None
PCI compliance fee: None
Equipment lease: None

Stripe’s costs and fees are fairly straightforward with the company charging a flat per-transaction fee of 2.9% + $0.30, regardless of card type or locality. The company does not charge an early termination fee, a PCI compliance fee, or a fee for refunds or failed payments; however, there is a $15 Chargeback fee per incident. Overall, Stripe’s pricing and business model resemble that of the mobile credit card processing company Square, but for online businesses.

Like Square, the company’s standard policies regarding fraud prevention and prohibited business activities appear to be cause for complaint among several merchants. Two specific problems have been consistently reported in the complaints shown below this review and on other consumer protection websites. In one scenario, merchants apply for processing with Stripe and are informed that they are approved and ready to go. After processing one or more transactions, these merchants find that their payments have been frozen and their accounts cancelled due to their business’s engagement in prohibited activities of some kind. These cancellations appear to take effect with little or no warning, and merchants report difficulty resolving the unprocessed payments in a satisfactory and efficient manner.

In the second case, merchants express confusion over their payments being held in a reserve account. This is a common fraud prevention practice that we don’t tend to penalize processors for, but it seems that Stripe does not effectively communicate its reserve policies to merchants or warn them when a reserve amount might be withheld. Merchants should be aware that Stripe reserves the right to “change the Payout Schedule or suspend payouts to your Bank Account should we determine it is necessary due to pending disputes, excessive or anticipated excessive Chargebacks or refunds, or other suspicious activity associated with your use of the Service or if required by law or court order,” according to its terms of service.

Related: Best Processors For Subscription & Membership Businesses

Complaints & Service | B-

Key Points – Complaints & Service
Total complaints: 30+
Live customer support? No
Most common complaint: Fund holds

As of this review, Stripe does not appear to have a dedicated customer phone support number, which could be a drawback for some merchants. The company does, however, have a help section on its website, a community forum, and email support. We are currently able to locate over 30 negative Stripe reviews on this and other consumer protection websites, some of which express concern that Stripe is a scam or a ripoff. This represents a steady increase in complaints since our last review. Common issues include sudden cancellation of merchant accounts, reserves being withheld without notice, and difficulty reaching customer support in a timely fashion. Complainants who have signed up with Stripe through Shopify also seem to have some trouble activating the “Authorize Only” fraud prevention setting, with both Stripe and Shopify blaming each other for this setting’s malfunction. Overall, Stripe still maintains a relatively low complaint volume, but the trend since our last update is a negative one.

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BBB Report | B*

Key Points – BBB Report
Product/service: 43
Billing/collection: 24
Advertising/sales: 2
Guarantee/warranty: 0
Delivery: 2

Stripe has been accredited with the Better Business Bureau (BBB) since May 2013 and currently shows an “A” rating on its profile. The company has had 71 complaints filed against it since its account was opened in 2012, with 43 of those related to the product or service, 24 due to billing and collection, two having to do with delivery problems, and two related to advertising issues. All of these complaints were resolved with BBB assistance except four, which were not resolved despite what the BBB determined to be a good-faith effort by Stripe. Given the fact that Stripe has amassed over 70 complaints in the short time it has had a BBB profile, we have adjusted the BBB’s rating to a “B.” To better understand why we adjust BBB ratings, please see our rating criteria.

* Denotes CPO-adjusted BBB score

Related: Best Services For Combining Online and Brick & Mortar Sales

Bottom Line


Stripe Review

Rated 3.1 out of 5 Stars
Reviewed by Phillip Parker
Reviewed on 2015-01-01

Stripe rates as an average merchant services provider according to our standards. The company has seen an increase in complaints since our last update, but its overall complaint volume remains low. Stripe’s transparent pricing model appears to satisfy the majority of its clients, while its reserve policy, cancellation policy, and customer support are responsible for most of the company’s complaints. Merchants are encouraged to carefully read Stripe’s terms of service before signing up for credit card processing through this company.

This review was originally published on 7/17/12 and was last updated on 1/1/2015.

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