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Thursday, September 7th, 2017
Best Payment Providers

What We Like

PayPal is a great payment option to start with, and there’s no question you should keep it around as a backup form of payment if you sell online.

What We Didn't Like

As your business grows, and you exceed $10K per month in revenue, it may be more worthwhile to pursue a traditional merchant account.

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Accepting PayPal is a no-brainer. Almost everyone has a PayPal account these days (in fact, PayPal claims 192 million active users in more than 200 markets), it’s incredibly easy to setup and use, and it can get you up and running in a very short amount of time (i.e, immediately).

PayPal is extremely transparent with its terms and pricing, and it doesn’t lock you into a contract with an early termination fee. The number of integrations offered is unreal, so you can be certain that PayPal will sync with your shopping cart, accounting application, or shipping software. PayPal even offers an mPOS app (PayPal Here) for mobile merchants (you can check out our full review of that here). The company also owns Braintree Payments, but the user experience is very different if you sign up with Braintree.


Most people think of PayPal mostly as a P2P payment app or the default payment method for eBay. But PayPal offers a lot of different features and capabilities, and it’s expanding and diversifying a lot now that it’s a publicly traded company in its own right. I’m honestly excited to see what PayPal is going to do next because the company seems to genuinely get what merchants need, and it keeps up on changing trends.

The company breaks down its processing options into three categories:

  • PayPal Express Checkout
  • PayPal Payments Standard
  • PayPal Payments Pro

PayPal Express Checkout is a simple add-on for businesses that already accept credit cards and just want to let consumers pay with PayPal as an alternative. It’s very low investment and easy to implement. You’ll pay the same rates as the other PayPal options.

Standard is a basic payment processing plan for merchants who don’t already have a way to accept payments on their website. It’s just a percentage plus a flat fee per transaction, with no monthly subscription. Customers are routed to PayPal’s site to enter their payment information before finishing the transaction.

With the Pro version, you can handle the entire checkout process on your site, with no need to redirect to PayPal’s site. For some business owners, that hosted payment page could be a huge plus. There are other perks you get with the Pro plan as well.

You can go here to compare the payment solutions in more detail.

Additional services offered by PayPal are:

  • PayPal Here: This is PayPal’s mobile payments app. Check out our review here.
  • Payflow Payment Gateway: If you already have a merchant account but need a payment gateway, then you can use PayPal’s stand-alone Payflow Gateway. The gateway supports nearly every major processor and a whole host of other applications including shopping carts, accounting & billing software, shipping & labeling software, etc. It also charges just a flat fee per transaction, not a monthly subscription.
  • Virtual Terminal: If you need to process mail/phone orders, then you can do so through PayPal’s virtual terminal. It’s $30/month on its own, or included for free in the Pro plan (which is also $30/month).
  • Online Invoicing: Consultants and contractors can use PayPal’s invoicing features to invoice their clients for the same rate as regular web transactions.
  • Bill Me Later: This credit offering gives you the ability to offer no-interest financing to your customers.
  • Recurring Billing: If you offer a subscription-based service, you can set up monthly payments for your customers. You’ll have to add this feature to your Pro Plan for Virtual Terminal subscription for an additional fee.
  • Pre-auth: You can capture the funds on a customer’s card and charge them later. This is great for appointment-setting and other services that require reservations. 100% of the funds are guaranteed for only 3 days, but you can run a pre-auth up to 30 days in advance.
  • Digital Goods: If you’re in the business of selling digital goods or content, you can accept micropayments, subscription payments, and pay-as-you-go payments.

PayPal also offers a “One Touch” feature. Originally launched as a mobile feature so that smartphone users did not have to continually sign into PayPal to make purchases on their phones, it’s now available for websites as well. One Touch allows users to skip entering payment and shipping details, which means one less step for your customers. And having a convenient checkout process is a huge deal for businesses since it can decrease shopping cart abandonment.


The best thing about PayPal is that its sales and advertising is very up-front. All of the rates are listed in plain sight, so there’s no hidden agenda. It has, over the years, gotten even better about disclosing pricing and fees (such as its chargeback fee, which used to be hidden in the fine print).

Most of its business comes directly through the website or via referrals. PayPal doesn’t have the traditional sales team “pounding the pavement” and luring in potential customers with too-good-to-be-true deals the way you’ll find with some merchant account providers (and yes, some are far more guilty of this than others). There’s no doubt that PayPal offers real value, particularly for new merchants without a sales history, and it doesn’t make any outrageous claims or promises about the nature of its services.

It bears mentioning that the Consumer Financial Protection Bureau filed a complaint against PayPal on May 19, 2015. In the complaint, it alleged that PayPal was responsible for a myriad of sketchy practices, such as false advertising, refusing to provide consumers with information, and even signing consumers up for credit accounts without their knowledge. PayPal settled up pretty quickly (as in, the very same day), agreeing to pay $15 million to consumers and another $10 million in fines to the CFPB.

This mostly affects PayPal customers, not merchants, and it appears to be an isolated incident. While I am frustrated by this as a PayPal user and a consumer, this doesn’t automatically lessen my opinion of PayPal’s merchant services. I’ll still tell you to be on your guard because every merchant should be paying close attention to their monthly finances and statements, regardless of who they process with.


PayPal has a bunch of different customer service and support options, including:

  • Community Forum
  • Knowledgebase
  • Phone/Email (Mon-Fri 5 a.m.-8 p.m. PST, Sat/Sun 6 a.m.-6 p.m. PST): Judging from the online chatter (see “Negative Reviews and Complaints”), PayPal’s phone support is very inconsistent. Sometimes you’ll get a rep who knows what they’re doing, other times you won’t. My advice is to avoid calling them if at all possible. Answers to most common problems can be found with just a little bit of searching. Between the knowledge base, community forum, and quick answers sections, you should be able to find a solution. That said, PayPal does offer some of the best support hours I’ve seen outside of 24-hour support.

PayPal is also very active on social media sites like Twitter and Facebook, as well as its blog. There’s even an AskPaypal Twitter account where they’ll field your service and support questions Monday through Friday, 9 a.m. to 5 p.m. Central Time. All of this is pretty much exactly what I expect from a company that caters to startups and small businesses in the 21st century, but it is nice to see.

One major benefit to using PayPal is the sheer volume of users. Any time you encounter an error or a problem, you can Google it and the odds are good you’ll find a solution from another merchant who has already dealt with the same issue.


I’ve listed the most important fees below, but you can find a full list of PayPal’s fees here. All PayPal services come with no annual fee, no setup fee, and no cancellation fee. The company also offers volume and non-profit discounts.

PayPal is very straightforward about its fees, even if they are a bit higher than most traditional merchant accounts. And its pricing structure is absolutely competitive with other pay-as-you-go and payment aggregating services.

Monthly Fees

Remember there are two options for accepting PayPal on your site that charge nothing beyond transaction fees. But If you opt for Pro, you’ll be paying a monthly subscription fee on top of standard fees.

  • Paypal Payments Standard: $0 per month
  • Paypal Payments Pro: $30 per month

The biggest advantage, as we noted before, is that the Pro account lets you keep customers on your page to finish the checkout process. You can even design your own checkout page. In addition, Pro subscribers get access to the Virtual Terminal to accept payments by phone, mail, and fax. Frankly, I’m a bit confused by the terminal is $30/monthly on its own and included in the $30/month Pro plan, but you might as well go for the Pro plan and get that hosted payment page, too.

Unfortunately, that doesn’t include an option for recurring billing. Subscription services are hugely popular — and if you want to offer them with PayPal, that will run you an extra $10 per month on top of your Virtual Terminal or Pro plan. Still, PayPal does give you a decent assortment of options for customization, though my impression is that Braintree (and yes, Stripe) are more robust.

Finally, it’s worth noting that PayPal offers its own gateway to process payments. It has a high degree of compatibility, so it works with most options. The basic version costs you just $0.10 per transaction — but for $25/month you can get a fully customizable setup.

Transaction Fees

Regardless of which plan you are on (Standard or Pro), your transactions fees will be as follows:

  • For all web transactions, you pay 2.9% + $0.30 per transaction.
  • For all swiped mobile and in-store transactions, you pay 2.7%.
  • For all keyed-in mobile and in-store transactions, you pay 3.5% + $0.15.
  • For virtual terminal transactions, you pay 3.1% + $0.30 per transaction.
  • For mass transactions, you pay 2% up to $1.
  • If you are a 501(c)(3), you pay 2.2% + $0.30 per transaction for web transactions.
  • For any chargebacks, there is a $20 fee.

Something else that PayPal offers for merchants who consistently deal with microtransactions (as in, your tickets are under $10 apiece) is an alternative payment rate: 5% + $0.05.

With consistently small transactions, you can wind up saving money on the per-transaction fees, which tend to be very problematic for small-ticket businesses.

Using PayPal’s own numbers, with a $2 average payment, you would pay $0.15 per transaction using the microtransaction plan, and $15 total on 100 payments. Compare that the $0.36 per transaction/$36 per 100 payments with the standard payment plan.

PayPal’s micropayments option might appear to complicate matters for some merchants, but it is a great way to cater to artists and musicians and others who want to sell digital products — especially low-cost digital products. So I actually really like it. I also like that PayPal offers nonprofit and mass-payment discounts and volume discounts. Not many aggregators offer any of those options.

In PayPal’s case, I think it helps to be a very big fish in a medium-sized pond. It can afford to take risks and experiment with features and pricing that leaner operations can’t.

PCI Compliance Fees

Something we haven’t discussed is PCI compliance. With merchant accounts, it’s not uncommon to pay an annual PCI compliance fee. If you are using PayPal Payments Standard, you are already PCI compliant. PayPal hosts the payment page, so it handles all those concerns for you.

If you use PayPal Payments Pro, things are a little different. With the addition of the virtual terminal and other tools, you’re not automatically PCI compliant. However, PayPal says it offers tools to simplify PCI compliance, but unless you dig, you won’t find more information about it. I did dig into the information and found out that the key aspect of this is a (free) Transparent Redirect feature. Learn more about PayPal and PCI compliance here.

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