Payment Processing – Pros And Cons Of Using PayPal

Posted by in Online Business

Pros and Cons Of Using PayPalPayPal is the most popular merchant account vendor for e-commerce websites to offer online sales via PayPal account, credit or debit cards online. Some companies love them, others hate them.

In an effort to provide you with sufficient information to make the decision whether to use this vendor or not, here are some of the most common pros and cons of PayPal.

PayPal Pros

Perhaps the biggest benefit of doing business with PayPal is that they are a very established and recognised company worldwide. It got its start via a preferred relationship with eBay and has used that exposure to become the global leader in payment processing services. When potential customers visit your online store, a PayPal logo provides comfort and peace of mind.

As far as fees go, PayPal offers two options: a free merchant account or the upgraded Website Payments Pro. Their discount rates and fees are no more than most other vendors; which type of account you select depends largely on the needs of your online business and how many sales you expect to make.

Of course the Payments Pro account offers the most features but even the free merchant account includes some nifty extras such as the ability to create and send professional looking invoices and view transaction reports based on a number of variables.

PayPal Cons

Receiving prompt and relevant customer support from PayPal can be a challenge. The company prefers all communications to be sent online via a form, meaning that a response to your concerns is not immediate. This can be quite frustrating, especially if you are dealing with a customer disgruntled due to some fault of PayPal.

PayPal can lock out your account for up to six months if they feel you, as the merchant, have performed any questionable actions. There is little that can be done to refute this assessment, particularly since communication is often limited to the online form. There is a phone number available on the PayPal website but it can be quite difficult to actually reach a customer service representative and even then your side of the story is not guaranteed to be heard or considered.

Some customers have reported that they could not even get an explanation of the reason the company locked out their account, only that they had to wait for the account to be reviewed before their funds could be released.

PayPal also charges a rather hefty discount rate, usually about 4%, for accepting merchant payments that are not funded through a credit card. This is certainly something an online business needs to take into account when setting pricing levels on their website; every transaction will be subject to at least a 4% fee and more if it is processed as a credit card.

Some merchants look to speak with PayPal before a major product launch in order to thwart frozen accounts and some will find more than one payment processor so that they have options on a per scenario basis.

While we have gone through some of the pros and cons of PayPal, remember that no company is perfect. The important to thing to remember about PayPal is that it is universally recognised and widely trusted.

There are other options for processing credit and debit cards through your e-commerce business, but none of them are guaranteed to provide better or more comprehensive service. Compare companies and make an educated decision based on rate and fee schedules as well as services provided.

About Sean Rasmussen

Sean Rasmussen is a full time Aussie internet marketer and blogger since 2005. When he's not blogging, he's playing with his kids.


  1. David Kingi says:

    Sean, ebay owns paypal and if you look at the info blurb paypal displays all the great benefits but NO I mean NO downside for the whole of their operation!! As an example it is expensive,
    it is less safer than your own bank [in Australia anyway] by a long shot, the communication from paypal is frustrating and unhelpful, I still have $23.00 buried in their vaults and I have [almost] given up trying to get it back.

    Regards Dave

    • Sean Rasmussen says:

      Hi Dave
      I appreciate your comment mate. Like the article says, there are pros and cons of using any service. Paypal may work for some people and not others unfortunately.
      Regards – Sean

  2. Hi Sean,

    I use PayPal all the time and I’ve never had a problem with them. That’s from a customer perspective though. I haven’t used them on my website as yet.

    I’m not sure I like the cons. I think as a business owner you should be able to easily contact them. Especially if one of your customers has a problem. I love how Hostgator handles their clients. Anytime I have a problem I can easily use their live chat service and the problem is fixed.

    It sounds like there is a gap in the market for someone who can offer the same service as PayPal but with better customer service.
    .-= Jazz Salinger´s last blog ..Learn and Earn – It’s a Marathon Not a Sprint =-.

  3. Hi Sean

    As yet, I have only dealt with Paypal as a customer and from that point of view I have enjoyed the simplicity, ease and reliability of my transactions being taken care of.

    From a business point of view, the cons do not paint a pretty picture in some instances like being locked out of my account. I would have thought that would be illegal and seen as a restriction of trade? Is it deemed guilty first and then the trial comes later? What would this mean for my business if this happened?

    I am grateful for this information and will look into this, perhaps take these questions to Paypal administration.

    What other ‘secure’ payment alternatives are there?

    .-= Elly´s last blog .. =-.