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Alyssa Gregory

Pros and Cons of PayPal for Small Business

By August 6, 2010

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paypalIf you are a small business owner doing business online, you have probably looked into online methods for taking payment for your products and services. If you have, you undoubtedly found PayPal during your search.

According to PayPal.com, PayPal has more than 87 million active accounts in 190 markets and 24 currencies around the world.

Despite its popularity, though, PayPal isn't the perfect solution for every small business. Here is a look at the pros and cons of using PayPal as your primary online payment processor for your small business.

Pros of Using PayPal

  • It's easy to setup and use.
  • Your clients/customers may already be familiar with PayPal.
  • You don't need a merchant account.
  • Your clients/customers don't need a PayPal account to pay you.
  • You can create and send invoices right through your account.
  • PayPal's fees are less than many merchant accounts (currently 2.9% + $0.30 USD for debit and credit card purchases).
  • You can set up recurring payments.
  • You can integrate PayPal with a number of shopping cart systems.

Cons of Using PayPal

  • PayPal's Seller Protection policies do not cover digital goods.
  • There are hefty fees for chargebacks.
  • You are limited in terms of use and are subject to account suspension at any time which can result in frozen funds for months.
  • It can take four business days for withdrawn funds to clear in your bank account.
  • There are a number of people who refuse to use PayPal, which may result in lost business.
  • It can be difficult to contact PayPal's customer service department.

The decision to use or not use PayPal as your primary online payment processor is a big one and can certainly impact your business. It's always a good idea to explore your options before making a decision. Here are five online payment services (four in addition to PayPal) to review.

August 8, 2010 at 5:58 am
(1) 1000 Questions for Couples says:

Your information about Paypal is really ttrue because I have been using paypal for more than one week and I have discovered some cons on it especially when withdraw time , it takes to long and also the fee for the debit card it is very huge to pockets.

Thanks for the info. especially on five others online payment services. I will try one of them.

August 25, 2010 at 12:42 pm
(2) Rob says:

I use PayPal but I have also started using ProPay. I would love to know your thoughts on ProPay.

August 25, 2010 at 6:43 pm
(3) Alyssa Gregory says:

I haven’t used ProPay, Rob, but I have heard it’s a good service from others who have. I’m not sure they can compete with the likes of PayPal yet, but certainly one to keep on the radar.

August 26, 2010 at 4:46 am
(4) Victim of Paypal irrespect of their own conditions says:

Once, some years ago, I sent to a customer via UPS a parcel with a product I sold via PayPal ( it was a book ).

That customer paid with Paypal. Later, the customer said never received the parcel … ( however the official tracking and its signature proved the opposite ) and contested the payment he done.

Paypal requested the tracking number which I supplied, and … surprise ! Paypal refunded the customer payment he done via his bank account justifying that any merchant and any private person must count 5% of his money when dealing via Paypal …

Paypal done that despite the ALL written proves he requested and the very big $$$ account and transactions ( both private and business ) for at least 12 years with any issue.

Later, I hear directly from a Paypal employee that Paypal even don’t analyse the proves, he looks for keeping good relations with banks.

I was not so important, a bank is much more important. ;-)

So, the seller policy requesting proves for physical goods is for nothing as Paypal simply don’t respect.

Repeat : when dealing with Paypal, count for a minimum 5% lost.

Other day, I ordered via e-bay an item and the product I received was not the one I ordered and paid for, it was a CD copy only ! ( which is forbidden by the way, by both e-bay and paypal )

I contested my payment to Paypal, who sent me to E-bay, who sent me to paypal … 8 you get the picture ) and either Paypal neither E-bay don’t want to hear nothing.

My E-bay account ( also private and business ) are 100% positive.

So, the purchase policy of Paypal is not important neither.

Netherless to say, since those 2 ( bad ) experiences, I never used Paypal again … ( and don’t buy with e-bay, I look for local merchants I can see and only new stuffs )

Paypal, as the name says, is good to pay your pals only ! ( pals you trust and only pals type payments, for a beer for instance … lol )

I only request bank transfer when I sell and/or purchase. Both for private and business use… So since day, no problem.

And the company I work for and all my friend are doing the same, as they have had also the same type of problems.

However, Paypal still have a problem, because as seller, he lost some customer with big $ yearly fees ;-) and as purchaser, other payments fees he could took from who is in the role of a seller.

That’s it.

It’s seems that Paypal never heard about the principal rule of marketing : ONE unhappy customer is making bad publicity to other ELEVEN potential customers.

And other rule, saying that injustice is never forgotten… ;-) Indeed, we can forget good things we get, but never the bad ones.


October 3, 2010 at 1:21 pm
(5) Steve says:

I think Pro Pay is very annoying. Someone repaid part of a personal loan to me using Pay Pal. I had to ope an account which was no big deal. The money was supposed to be “pending” for less than 24 hours. On the 4th day, it was still pending. I called and they cleared it. Now it is 3 to 4 more business days before it is transferred to my bank account. It may be convenient for the person paying, but not for the one receiving it. If I knew the person, I would rather that they sent a check.

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