Pros and Cons of Using PayPal as Your Credit Card Processor

PayPal is probably one of the most convenient ways to take payments on your website. Sign up, verify your account and convert it to a business account -- that's all it takes to get started. In a couple of days, you'll be ready to take orders on your website. Even with its popularity, PayPal still has some downsides to its convenience. Before you decide to go with PayPal as your credit card processor, here are some of the good and bad points to consider.

The Pros

One of the biggest benefits of using PayPal is that most people already have an account, so paying you is as easy as logging in and accepting the payment. As a merchant, you can accept several types of credit cards, and you have several ways you can invoice the customer.

Several years ago, PayPal also created an application programming interface (API), so web developers could integrate payments directly within the application. Have you ever been to a website that redirects you to PayPal and then sends you back to the merchant site? This is one of the PayPal API integration methods, and it's one of the most secure. Instead of storing sensitive data on your web server, all credit card numbers and billing information are stored at PayPal. You only need to store the confirmation number after PayPal processes the payment to ensure that the credit or debit card was charged. This is good for your customers and your own security.

Another benefit is that there are no monthly fees. Most merchant processing sites charge you a monthly fee to use their processor, and then they charge you another fee depending on the type of credit card used. For a new startup, these fees can dig into your revenue.

PayPal also allows you to simply setup up monthly or reocurring payments as well. This is very useful for people who want to setup any form of subscription service. This is a major PRO over other payment processors when it comes down to the simplicity of getting the system setup.

Finally, since you must sign up as a business account to work with large amounts of money, you also have the added benefit of transferring money directly to your bank account with no hassles. It usually takes about a day or two for the cash to show up in your bank account. Incidentally, you can also use the PayPal account to pay other merchants, so it provides a payer platform for you to pay for services.

The Cons

PayPal has been around for years, and with millions of customers come some complaints and unhappy users. Losing a PayPal account can be devastating if you use it primarily for your business.

PayPal can suspend your account without warning if it receives too many complaints from customers. They also can limit the account and freeze your funds for 180 days; so if you have thousands of dollars in your account, you don't have access to it until the account is unfrozen. For a new business, a limited PayPal account can cripple your budget.

If you sell virtual items, PayPal will likely side with the buyer if any issues arise because you have no way of tracking virtual items. The company also requests shipping and tracking numbers during a dispute if you send products to your customers; if you don't keep track of shipments, you will likely lose. Too many disputes can jeopardize your PayPal standing, and PayPal gives you no warning when they limit the account.

PayPal is now owned by Ebay, so if you sell items on Ebay, your two accounts will be linked. Lose your PayPal account and you might have problems with your Ebay account too, even if it is unrelated to your online business.

Remember, PayPal takes a fee when you receive payments, so don't forget to calculate fees when you integrate it into your service. Some merchants forget the fees included when taking PayPal payments, since it's free to sign up.

When your account gets limited, you'll need to quickly find another method of payment and integrate it into your site. For this reason, it's best to have multiple methods of payment, so you can just remove PayPal and leave the other option open to your customers. Always have payment options on your site in case you run into account trouble.

Finally, PayPal isn't offered in all countries, so solely using it puts limitations on your customer base. If you sell globally, you'll need to find another solution to cater to customers who can't get a PayPal account.

You've probably noticed more merchants use PayPal. The pros outweigh the cons, but you should always have a backup plan. Integrate PayPal but have another payment method on hand in case you have any issues. It's best to mitigate customer complaints with great customer service to avoid issues with limitations. Always keep track of shipments; if documentation is requested, send it immediately.

Are you looking to accept payments online? Not sure which payment gateway to use? Contact Emagine today and we will help you choose the best solution that fits your needs.