Sunday, January 10, 2010

The problem with PayPal : Reasons for a Merchant Account.

Although PayPal has certainly made it easy for online merchants to accept credit cards, it is not without it's share of problems. If you are going to accept credit using PayPal it would be a good idea to sign up through a separate bank account. Pay Pal has a history of siding with the customer much more than a bank would with a traditional merchant account. Reading through PayPal's agreement may surprise you ( and not in a good way) and few ever do. This way if they Pay Pal decides to debit your account they won't get much until the issue is resolved. I have heard many horror stories about PayPal freezing funds for a merchant for several months. Although this could certainly happen with a traditional merchant account (i.e. if you did something that would raise a red flag for fraud) it seems to happen a lot more often with PayPal. Another problem many client's tell me is that it's very difficult to get anything resolved with PayPal when things go wrong. Many credit card processors have 24/7 customer service so should an issue arise you can always get a live person on the phone.


  1. We had our own problems with Paypal Merchant Services. We had heard rumors about Paypal freezing accounts, but were told that if that ever happened, they would contact us first, and we would have an account manager who would work with us to resolve any issues. After using Paypal for about three months, we had a questionable transaction (Paypal flagged the transaction as fraud). A week later Paypal froze our account and our money. The account manager who was supposed to help us never materialized, and there is basically no one to talk to about the problem. All we get are requests to submit documents, which we do, and then never hear anything more. We called the sales rep who sold us on on their system, and he basically blew us off, saying it wasn't his problem. He flat out refused to give me the name and phone number of any kind of supervisor. Paypal still holds $20,000 plus of our money. And no explanation.