PayPal is a financial services company that accepts payment from customers online and in person. A merchant account is a business bank account that lets you collect and process credit card payments from patrons. Funds collected from customers are held in your merchant account until they’re transferred to your company’s bank account. Show
Here’s a look at how PayPal differs from a merchant account and how to determine which is right for you. What’s the difference between PayPal and a merchant account?PayPal differs from merchant accounts because it functions primarily as a digital wallet, with all of your business accounts – whether composed of proceeds from credit card transactions or cash deposits for paying vendors – combined into a single account. Editor’s note: Looking for the right credit card processor for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs. PayPal is also different because, while it offers credit card processing services and can function similarly to a merchant account, it is more expensive than most major credit card processors. In most cases, if your company processes a large volume of credit card transactions – such as retailers and restaurants – you will want to sign up with a dedicated small business credit card processing company other than PayPal, even if you plan to use PayPal for paying vendors. Keep in mind, however, that it is possible to use both a PayPal and a merchant account. PayPal vs. merchant accounts at a glance
What is PayPal?PayPal is a financial services company that functions primarily as a digital wallet and money transfer service. The platform is typically used for sending money to friends and family, but you can use PayPal to invoice clients and receive payments, even if your business is primarily online. PayPal can also be used as a payment processing platform, including credit and debit card transactions. When you process credit card transactions using PayPal, the proceeds – net of fees – are deposited into your company’s PayPal account. Key takeaway: Unlike other payment processing companies, PayPal is designed more for personal use, with core business functionality focused on invoicing clients and receiving payments in the form of direct transfers.How PayPal worksGetting set up with PayPal is straightforward. All you need to do is visit the website and sign up. You’ll get access to a digital wallet for your business as soon as you’ve registered, and can start sending and receiving funds immediately. You can also link existing bank accounts to the platform, though this can take a few days to confirm. These are some of the services that you can access through PayPal once you’ve signed up:
Here’s a sneak peek at the PayPal tool: PayPal invoiceSource: PayPal Did you know? One of the nice things about PayPal is that you don’t need to know exactly how you want to use it before signing up. You can register and then decide how best PayPal can support your business.Pros and cons of PayPalThese are some of PayPal’s pros:
These are some of the drawbacks of using PayPal:
What is a merchant account?A merchant account is an account that you set up so your organization can accept the proceeds of transactions processed through a third-party payment processing company. Most merchant accounts are set up directly with a credit card payment processing company to hold the proceeds of credit card transactions until they’re transferred – after fees have been deducted – to your business checking account at a bank or other financial institution. How merchant accounts workWhen a customer attempts to make a purchase with a credit card, the merchant services provider confirms the availability of funds and then authorizes the transaction. The customer’s funds are then transferred to the merchant account. Once the funds are transferred, the payment processing company deducts its processing fees – typically from 3% to 5% of the transaction amount. Funds are then held in the merchant account until they’re transferred to your company’s checking account – typically within one or two business days. While most merchant services providers charge between 3% and 5% of a transaction amount for processing – composed of a flat fee per transaction plus a percentage of the total – these fees vary by provider, transaction type and industry. Merchant services providers often charge additional costs, including application, setup and monthly fees. Pros and cons of merchant accountsHere are some of the upsides of working with merchant accounts:
Here are some of the downsides of working with merchant accounts:
What are the cons of PayPal business account?Cons of using PayPal for small business. High chargeback fees.. Higher fees than a typical merchant (credit card processing) account.. Account suspension for terms and conditions (T&C) violations that can freeze your funds for months.. May take 2 business days to get your money.. Customer service can be hard to reach.. Can I use PayPal business account for personal?PayPal business accounts include everything a personal account does and more. Business accounts offer a robust suite of services to everyone from moonlighters to SMB owners who need a no-hassle, affordable payment processing solution.
Should I do a business or personal PayPal account?Personal PayPal accounts are best for those who like to shop or get paid online or for folks who like to split bills between more people. Business accounts are ideal for merchants or businesses as it offers additional features for them.
What happens if I change my PayPal to a business account?Your business can accept payments for goods and services through PayPal. Using a PayPal business account, you can accept online payment via PayPal, as well as in your store or business office, through a mobile card reader, and by phone. Many people, especially those shopping online, prefer to pay using PayPal.
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