PayPal: Should You Use It For Processing Payments?

PayPal: Should You Use It For Processing Payments?

PayPal credit card processing can be a good solution for some online merchants looking for an easy way to start accepting payments. However, services by Square and Helcim can offer more competitive pricing in certain situations. We encourage business owners to obtain quotes from all three processors before settling on a single one, or read our comparisons below for a more detailed look.

Review: Is PayPal A Good Credit Card Processor?

PayPal offers good and quick solutions for integrating credit card processing into your company’s website. However, if you are looking for something more sophisticated, PayPal is more expensive than other online options, like Square or Stripe. These alternative solutions provide you with a free API that allows you to integrate credit card processing and checkout into your website. That means your customers can be kept in your web environment, and not be sent of to a third-party website, as is the case with PayPal. You can have a similar feature through PayPal as well, though you’ll have to pay $30 per month for its PayPal Payments Pro solution.

Good For…Bad For…
Businesses that want to quickly set up a way to accept credit cards for e-commerceRetail and offline solutions due to few card reader options
Those seeking to integrate payment processing directly into their own website

PayPal leaves a lot to be desired when it comes to handling medium-to-high volume retail credit card processing. It offers two mobile credit card readers. One accepts just magnetic stripe payments and the other, more advanced model, handles chip and NFC payments as well. Given recent regulations regarding fraud liability in the United States, no merchants should be getting the magnetic stripe readers. Otherwise, you will be held responsible for any fraudulent purchases made at your store, without an ability to recoup the cost. Therefore, PayPal effectively offers just one credit card reader worth getting. Square, a direct competitor, allows you to get more advanced terminals that can be better at accepting larger volumes of customers. Square's top-tier terminals also don’t rely on your employee having to use a iOS or Android device.

Bottom Line: If you don’t have the resources to code a custom payment interface on your website, PayPal is a good quick-and-dirty way to start accepting card payments. However, if you are looking for either offline credit card processing or to have a checkout built directly into your website, we recommend going with another processor.

PayPal Credit Card Processing Fees, Features and Benefits

PayPal charges 2.7% per US card swipe (in-person), 3.5% + $0.15 for keyed-in transactions, and 2.9% + $0.30 per online transaction within the U.S. If you accept payments online from outside of the country, the fee per transaction goes up to 4.4% + some fixed rate that changes depending on the currency you accept.

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PayPal Credit Card ProcessingDetails
Transaction Cost
  • Swiped, dipped, or tapped 2.7%
  • Online: 2.9% + $0.30
  • Online (received from outside the U.S.): 4.4% + fee that varies by currency
Networks Accepted
  • Visa
  • Mastercard
  • Discover
  • American Express
Monthly FeeNone
Monthly MinimumNone
Equipment Cost
  • Magstripe Reader: First one free, then $49 for each
  • Chip Card Reader/Contactless Reader: $79

How Much Can PayPal Credit Card Processing Cost Your Business

To give a better idea of the cost and fees associated with picking PayPal as your credit card processor, we ran it through a few simulations for a handful of sample business profiles. These were the results. The following are based on an average transaction size of $75, and swiped/dipped transactions for retail.

Transaction Volume (Monthly)RetailE-Commerce

*Note that you may be able to get discounts for high volume processing, starting at $50,000 monthly transactions. This will differ on an individual basis, and may also depend on the average size of your transactions.

PayPal Payments Pro for Online Credit Card Processing

PayPal offers a “pro” version of its online interface that costs $30 per month. The per-transaction fee does not change with this service. The main draw of the pro service is that it allows businesses to integrate PayPal processing directly into their website. This enterprise-class solution is good for firms that want to keep their branding consistent throughout the entire user experience, from purchase to checkout.

Without PayPal Payments Pro, your only solution is to send users to PayPal’s website, and checkout through there. This isn’t necessarily a major downside, since the PayPal brand is well known. You will need to independently make the call as to whether such a user experience is ultimately hurting your final sales and conversions.

How Does PayPal Compare to Other Credit Card Processors?

Before you settle on a single credit card processor, it’s always best to shop around and obtain multiple quotes. To help you, we compared PayPal to a few other popular credit card processing options.

PayPal vs Square

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Square will, in most cases, be the better credit card processor of the two. On the per-transaction cost side of things, both processors are relatively similar. However, the major advantage provided by Square is its cheaper online integration. As we explained above, PayPal charges users $30 for the service that allows you to build a checkout directly into your own website. Square, on the other hand, simply offers that service complimentary with its e-commerce solution. You can hook into an API and build it yourself. PayPal’s advantage, on the other hand, is that it also offers a solution for those without the ability to build a custom checkout. You can still process credit card payments through its website, without much need for technical know-how.

Square can also be faster at getting funds deposited directly into your bank account once a sale is made. PayPal will deposit a sale instantaneously into your PayPal account. If you want that money then transferred to a bank account, the process can take 3 days or more. With Square, sales are deposited into your bank the next day. You can also pay a premium to have Square deposit instantaneously. No such service exists through PayPal.

When it comes to offline retail transactions, Square is the clear winner. As mentioned, it comes with similar transaction fees, but it offers more card readers at more affordable prices. Square’s chip reader costs just $29 each, compared to PayPal’s $79 device. Square also offers a stand for $99 that can be better for larger stores. This is not something PayPal offers directly.

Square Highlights

  • 2.75% per offline transaction & 2.9% + $0.30 for online
  • No monthly fees
  • Free access to API for integrating into your website
  • Our Square Review

PayPal vs Stripe

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Stripe is a lesser-known online credit card processor that is a direct competitor to PayPal. This service doesn’t offer any offline or retail solutions. Therefore, if you want a single credit card processor for your retail and online transactions, PayPal will be the winner by default.

When it comes to handling online transactions, PayPal and Stripe are comparable. They charge the same fee per transaction – 2.9% + $0.30. Funds arrive in your bank account within 2 days, which can be a bit faster than what you get with PayPal. Like Square, Stripe has the ability to be integrated into your e-commerce site without an added cost. This has the same upside and downsides. While there is no additional cost, it does require you to have the ability to hook-up your site to an API and build a check-out environment. If this is available to you, Stripe is a great and affordable solution. If you are looking for something simpler, we recommend PayPal’s non-pro solution.

Stripe Highlights

  • 2.9% + $0.30 per online transaction
  • No retail credit card processing solution
  • No additional cost for API

PayPal vs Helcim

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Helcim is a credit card processor that is less entry-level, and geared more towards businesses that process over $17,647 in monthly transactions. Keep in mind you should always obtain a quote, as this average is based on our best estimate, and not what you may necessarily end up paying. Note this only applies to retail transactions. PayPal is the winner when it comes to online credit card processing, because it offers rates lower than Helcim.

According to our estimates, you will pay Helcim, on average, 2.61% + $0.12 per card-present retail or mobile transaction, which is generally lower than PayPal. However, while this is lower, you must pay $12 per month for retail and mobile processing, and $25 per month for e-commerce. That is why, despite the higher per-transaction costs, PayPal is cheaper at lower-volumes.

Helcim Highlights

  • Monthly fees between $12 and $25
  • Per-transaction fees range. We estimate an average between 2.61% + $0.12
  • 3.05% + $0.12 per online transaction
  • Our Helcim Review

Yowana is a former product analyst at ValuePenguin, specializing in credit cards, rewards programs and travel. He previously covered mortgages, banking and insurance for the website. Yowana graduated from Columbia University with a B.A. in Political Science.