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Review of PayPal Merchant Services

2211 North First Street, San Jose, CA 95153

DISCLOSURE: Ads, Affiliates and Conflicts Merchant Negotiators accepts advertising via the Google Adsense platform, directly from advertisers, and has common parent ownership interests with other payments related companies leading to potential conflicts of interest. Read our Affiliate / Conflicts / Advertising Disclosure for a more detailed disclosure.


PayPal is a huge company that started out mainly specializing in web payments, and has since then grown into merchant services as well. They're a good option for new, small companies to get accepting credit card payments with. However, because their per transaction fees are relatively high, they're not a good fit for businesses doing more than about $1,000 per month in debit or credit card transactions.

PayPal has successfully been in business for almost 20 years. They started out specializing mainly in web payments, and quickly became the most widely accepted web payments brand, servicing millions of accounts. Since then, they've expanded into credit card processing as well.

Although they are one of the pricier credit card processors, they're very transparent with terms and pricing. So no worrying about unexpected fees, or being stuck in a contract, which is a plus. Additionally, there are no setup or early termination fees. In fact, overall, the fee list is very small. They make it easy for you to integrate other apps or programs, like accounting software that you might want to use with your PayPal account.

They're still pretty heavily focused on web payments, so PayPal isn't the best option for your primary credit card processor if you do anything more than an occasional credit card payment. But, if you just take a few credit card payments a month, this can be a good option, as setup is easy and free and the lack of monthly fees compensate for the fact that they charge higher per transaction rates.

Detailed Review

Below is a detailed review of PayPal Merchant Services offering. The review is broken down into the following categories.


Depending upon the type of business you own, some of the following features may or may not be important to you. To learn more about any given feature, just click on it.

Software Compatibility:
Intuit Quickbooks Yes
Sage 50 No
Microsoft Dynamics GP No
Hardware Compatibility:
Windows / Blackberry No
iPhone / iPad Yes
Android Yes
Alternative Transaction Types:
Phone Orders Yes
Internet Orders Yes
Wireless Orders Yes
Mobile Orders Yes
Snail Mail Orders Yes
American Express (AMEX) Yes
Add Tips to Bills Yes
eCommerce / Shopping Cart Yes
International Sales No
Recurring Payments Yes
EMV Chip Cards Yes
Contactless Cards Yes
Loyalty / Gift Cards No
eChecks / Electronic Checks Yes
Welfare Benefits (EBT/SNAP/TANF) Yes
Security / Fraud Prevention:
AVS Fraud Protection Yes
PCI DSS Secure Transactions Yes
Industry Specific:
HIPAA Compliance (Healthcare) Yes
Trust Account Debiting (Legal) No
Fleet Cards (Petroleum) No
Online Menu Orders (Restaurants) Yes
Countries Served:
U.S. Yes
Other Countries Yes
International Yes

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Almost every merchant account services company uses either Interchange Plus or Tiered Pricing (to learn the differences read here). Where companies allow us to disclose pricing information, we show the deals that our secret shoppers were able to achieve. When companies offer both Interchange Plus and Tiered Pricing, we try to get a quote on both options.

PayPal, like many large companies that offer merchant services as a sideline business to their primary service, is very transparent about fees, which is great. But they're also not particularly cheap, which isn't so great.

First things first, there's no monthly fee, startup fee, or early termination fee.

For online purchases, PayPal separates their pricing on a scale according to how much your business processes each month.

Online Only: (same rate for all 3 standard, advanced and pro plans)

  • $0 - $3,000 monthly = 2.9% + $0.30 per transaction
  • $3,000 - $10,000 = 2.5% + $0.30 per transaction
  • $10,000 - $100,000 = 2.2% + $0.30 per transaction
  • If you process over $100,000, you can call for exclusive pricing.

International Fees: 2.9% transaction fee + 1% cross border fee and/or 2.5% currency conversion fee

Also, there's no monthly fee for a Standard account, but for Advanced, it's $5 per month, and $30 per month for Pro accounts. One main difference between accounts is with a Standard account, customers are redirected to the PayPal website when they checkout, which can be confusing. With Advanced and Pro accounts, they stay on your website the whole time.

PayPal Here (both in-store and mobile):

  • Swiped and check-in transactions: 2.7% per transaction
  • Keyed or scanned transactions: 3.5% + $0.15 per transaction

International Fees: 2.7% per swipe + 1% cross-border fee and/or 2.5% currency conversion fee

PayPal Virtual Terminal:

  • $0 - $3,000 monthly = 3.1% + $0.30 per transaction
  • $3,000 - $10,000 monthly = 2.7% + $0.30 per transaction
  • $10,000+ = 2.4% + $0.30 per transaction

They also offer discounts for non-profits and micropayments.

Our Take: We love the fact that PayPal is transparent in their pricing. We don't love how expensive they are. With an interchange or wholesale cost of say 1.85% on average, the 2.4% - 3.1% that Paypal is charging is on average probably interchange plus 1.0%. That's pretty steep compared to what dedicated merchant account services companies can offer. That said, the low monthly charges, particularly for small businesses are a benefit if you're doing low volume.

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Contract Fine Print

Fine Print Fees:
Termination Fee None
Setup / Application Fee None
PCI Compliance Fee None
PCI Inaction Fee None
Gateway Fee None
1099-K Fee None
Statement Fee $0 - $30.00
Online Reporting Fee None
Monthly Minimum Volume Fee None
Accept International Pymt Fee Per Transaction
Voice Authorization Fee None
Monthly Min. Process Fee None
Daily Batch Fee None
ACH / Direct Deposit Fee None
ACH Charge Fee Possible
ACH Return Fee Possible
FANF Fee None
Chargeback Fees $20.00

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Accept Apple Pay, Bitcoin, Credit and Debit Cards...all with an app.

While your transactions usually take place electronically, the actual device that you use to swipe a customer's card is referred to as "the equipment." This equipment includes hardware and, often, software or apps for that hardware to function properly.

PayPal isn't big on equipment, which makes sense because they're mostly known for their web payment solutions. Really the only equipment offered by PayPal is a small card reader for mobile phones or ipads. Other than that, you can use any hardware you need with PayPal programs, you just have to purchase or rent it from a third party yourself.

They also don't really offer software besides the mobile app (PayPal Here). Instead of downloading or purchasing software for an in-store option, you would log in to Virtual Terminal through their website. I'll explain that more below.


  • PayPal Here: This app/card reader is compatible with the iPhone, iPad, and Android devices. It allows you to accept credit or debit cards on your mobile phone or tablet. I like that the card reader is nice and small, not bulky.


  • Virtual Terminal: This is part of the all-inclusive PayPal payments Pro solution. It allows you to use your own computer as a terminal simply by logging into your Virtual Terminal account from When the customer pays, you get the money deposited into your PayPal account and you then have the option to leave it there or transfer to your personal bank account.
  • Braintree This is a brand-new client-side SDK and a simple way to set-up your gateway and processing for your mobile app or website. Accept debit and credit cards, Apple Pay, Bitcoin, and - of course - PayPal.
  • Online Invoicing: With this feature, you're able to create and send your own custom invoices with built-in payment options, to accept all payment types.

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Countries Served

PayPal Merchant Services can handle payments from and for merchants in the United States, Canada and abroad.

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Contract Length / Termination

I generally don't like long-term contracts or termination fees in merchant services agreements, because the ability to cancel keeps the credit card processor on its best behavior, including the willingness to make you happy if there's a dispute. Plus, this ability to cancel gives you the ability to move on if you find a better deal.

PayPal has no early termination fees and all their payment solutions are contract free.

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About the Company

The merchant account services industry is multi-layered. Understanding how those layers fit together can be confusing (Read More in this Article). A good thing to know, however, is whether or not your company is a direct processor (good if yes) or, if not, then to know who they process with and whether or not that processor is reliable. The second thing to know is whether or not the service or sales staffs are in-house or outsourced. In-house staffs are preferable for you, as these staff members may have more access to sources that can resolve your issues.

Processor: One good thing about PayPal is they process their own payments. Of course, this is a big plus for you because this eliminates an extra person/company to go through, saving you a lot of confusion and at times some money, though in this case that doesn't seem to be the case.

Account Sales: PayPal's account sales are all conducted with an in-house sales department. This usually means your sales rep will be more knowledgeable and therefore able to better service and cater to your needs. However, one of the common customer complaints is about poor customer service. It seems as though customers have either a great experience with PayPal's sales reps, or a horrible one.

Account Service: PayPal offers several different customer support options. They can be reached through phone/e-mail Monday-Friday 4AM - 10PM PST, as well as weekends from 6AM - 8PM PST. They have community forums and a pretty thorough customer support page on their website, as well as an active social media presence on Facebook. On Twitter, they have a special account called "AskPaypal," which was made specifically for customers to be able to ask questions and expect answers (in six different languages) from one of PayPal's customer service representatives Monday-Friday 9AM - 5PM CST. It might be best to use one of the options other than phone, as you'll see below the phone help is limited.

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Customer Service

As part of our review process, we try to test merchant account service companies' claims by placing test calls and working through the customer service process.


3/20/2015; TIME: 2:45 pm EST


Call to Customer Support

Our Experience:

It took 15 minutes for us to make a phone call, only to learn that phone calls are limited by four options. When I clicked on "Call Us" under customer support, I had the choice to either log into my account or make a call without an account. That second option led nowhere, as the page wasn't functioning. So, I logged into my account and received a pass code that was good for 60 minutes to make a call.

When I made the call and entered my pass code, I was greeted by an automated system that eventually told me I could talk with someone if I needed to: 1) change my account information; 2) had trouble with a password; 3) needed to talk about a refund, or; 4) I was involved in a claim or dispute. While those options are good to know, I could have spent less time sending an email with a question and moving on to other business while I waited for an answer.

Our Take: We can see why so many merchants might become frustrated over trying to work with PayPal's customer service.

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Common Customer Complaints / Our Verdicts

We scour the web to find past / current customers' comments / complaints about the merchant services processor. Then, we investigate those complaints that seem legit, and give our verdict on how well the credit card processor handled the issues.

We found several complaints overall for PayPal, but since they are such a big company, it's completely normal to see a high complaint volume. Most of the complaints are from customers who had problems with PayPal holding their funds, with complaints about their customer service as well.

Withholding Funds/Account Freezing:
Customer Complaint:

The majority of complaints are from customers who don't understand why their account was frozen and are now having trouble getting their money out of it. Apparently PayPal watches their accounts very closely for any suspicious activity, and if they suspect it, rightly or wrongly, they can freeze your funds.

Our Verdict:

If your business falls into the high-risk category, PayPal might not be the best processor for you. This type of problem happens pretty often for PayPal users and I'm sure it's very frustrating. Not only are merchants having to deal with their accounts being tied up, they are having trouble getting the issue resolved in a timely manner, which can be a nightmare as far as your business running smoothly.

Customer Service:
Customer Complaint:

Most of the customer service complaints are from customers who are frustrated with PayPal's phone service. PayPal's customer service can be inconsistent, sometimes you might get to talk to a rep that is very helpful, and other times it might be a rep that doesn't know what they're talking about at all.

Our Verdict:

PayPal offers several different options for customer service/support. It seems like phone is just the worst route to go. After reading responses on their help account on twitter (@AskPayPal), I thought they do a pretty good job at responding and resolving problems fairly quickly. People were posting and getting responses as I was refreshing the page, and this is only one of the several ways you can get in touch with a rep.

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Who Should / Shouldn't Use this Processor


  • Low - Risk Merchants: PayPal is known to shut down an account pretty quickly after they even suspect suspicious activity. If your company is considered low risk, you shouldn't have to deal with any problems.
  • Online Merchants that Currently Use PayPal: PayPal started out and built their brand on web payments. They have made is super convenient and secure for customers to make online purchases with just a few clicks. If your business has an online store that already uses PayPal payments, adding their merchant services makes sense, as it's a seamless transition.
  • Small Online Businesses: If you're just processing a few hundred dollars a month in credit card payments, using PayPal merchant services is a good option. Their no monthly charges outweighs the fact that they're more expensive than most processors on a per transaction basis. That said, if you start to increase your volume of sales, it's time to move on.


  • High-Risk Merchants: As I said earlier, PayPal doesn't play around when it comes to suspicious activity. They watch carefully and don't hesitate to hold your money or even shut down your account if they feel it's necessary (whether it really is or not). If your business is considered to be high-risk, you would be better off going with a high-risk merchant service so you don't have to deal with what could be a pretty frustrating issue.
  • Merchants with no online store: Since PayPal is primarily known for web payments, it wouldn't be a good processor for those businesses who are mostly in store, not online.
  • Mid-Sized or Large Businesses: If you're an online business that processes more than, say, $2,500 per month, you'll want to look elsewhere for online merchant services. That's because at that point, you'll want the Advanced or Pro accounts so as to increase your conversion rate by not having to redirect customers to PayPal's website. But once you go that route, you're now paying monthly fees. Those monthly fees plus PayPal's higher per transaction charges means that there are better options for you with other merchant account services companies.

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PayPal Merchant Services
Customer Service
Customer Reviews
2.4% - 3.5%
  • No Monthly Fee
  • No Startup Fee
  • No Termination Fee
Monthly Fees Breakdown
Setup Fee$0.00
Monthly Fee$0.00
PCI Compliance Fee$0.00
Online Reporting Fee$30.00
Batch Fee$0.00
Gateway Fee$0.00
Chargeback Fee$20.00
Termination Fee$0.00
Contract LengthMonth-to-Month
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DISCLOSURE: Advertising, Affiliate and Conflicts of Interest: Merchant Negotiators accepts advertising via the Google Adsense platform, directly from advertisers, and has common parent ownership interests with other payments related companies leading to conflicts of interest. Read our Affiliate / Conflicts / Advertising Disclosure for a more detailed disclosure.

About the Reviews: These reviews, and for that matter any reviews, are inherently subjective, and should be regarded as our opinion, not as a statement of fact. Selecting a merchant services provider is an important decision, and we urge you to use no single source of information as the basis of that decision.

About the Pricing: This pricing is an estimate based on limited available information. In some cases, the Processors' pricing information was provided directly by the company, in others, we obtained it from public information, through calls to the company, or through past or current clients of the company. Where, despite these efforts, we were unable to obtain any information about certain fees, we used estimates based on similar providers in the industry. While we're working, in some cases, with the company directly to get more accurate pricing, even in those circumstances, we can't guarantee the pricing's accuracy. Complicating all of this, is that for some companies individual salespeople are given authority to modify terms on a deal by deal basis. In any case, if you know of an error, please let us know and we'll fix it.

About the Calculations: With respect to your estimated savings, this is based on a lot of factors and some hard math. The reason we do it, along with the "Actual Gross Rate" calculation is that every Processor prices their product differently (e.g. interchange v. 3 tier v. 4 tier v. flat v. membership, etc.) and some make it intentionally complicated or opaque. Trying to convert their pricing structure to a consistent "Overall Cost of Processing" is the only way you, the merchant, can do an apples to apples pricing comparison and know whether an offer is actually a good deal. Our system isn't perfect but we're trying.

Conclusion: In sum, these rankings, ratings, and scores are inherently subjective, and should be regarded as our opinion and not as a legal statement of fact. Moreover, use these prices and estimates at your own risk, and make sure to verify the pricing you see here in any formal contract you receive. Finally, if you do find something wrong in our pricing, terms, etc., tell us and we'll try to fix it. is now offline.

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