PayPal was invented to create a method for people and business to transfer funds electronically without having to go through the hassle and cost of creating a merchant account. It quickly became the preferred payment mechanism for companies like eBay. Although PayPal has gained some traction outside of eBay, it is still more common for most business to accept credit card transactions over PayPal transactions.

 

In order to accept PayPal transactions, you have to create a PayPal account. It’s free and can be done in just a few minutes. With PayPal you can accept payments from other PayPal users. You can also upgrade to a business account and accept credit card payments from non-PayPal users. In this case, PayPal essentially becomes the merchant account for you.

 

PayPal charges a small fee for PayPal-to-PayPal account transfers and a larger fee for credit card payments through PayPal. For business with high volume of credit card transactions, it is worth comparing Merchant Account and PayPal rates.

 

There are some drawbacks of PayPal compared to credit card payments. Most importantly, PayPal payments go to a PayPal account and you will have to transfer the funds to your own bank account. While the funds are transferred around the PayPal system, and until the funds are transferred to your bank account, PayPal earns the interest, you don’t.

 

With PayPal you don’t have a credit card on file. This is an issue in cases where the business needs to charge outstanding deposits to the same card. With a credit card/merchant account, you can charge the balance due, but with PayPal you’ll have to ask the customer to initiate the funds transfer.

 

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