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Use PayPal to Accept Credit Cards

Updated on October 18, 2017
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Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache.

Business is tough in the best of times. Escalating costs work at destabilizing a well thought out business plan. Keeping costs under control can mean the difference between staying in business or going broke.

After payroll, bank charges are one of the major expenses of any business. Credit card acceptance fees are rising at several times the rate of inflation. A small business can cut bank charges, including credit card acceptance fees, by more than two-thirds with a little planning.

Even individuals can use a credit card acceptance service now and again. If you sell on eBay, PayPal makes it easy to receive payment. The cost of accepting credit cards is too high for the occasional needs of individuals and small home-based business that sell outside the eBay universe unless you know the secrets of PayPal.

Merchant services, the companies that sell credit card processing to virtually all business, set many of their own fees. Choosing the right merchant services vendor can make or take thousands of dollars from the bottom line of a business. Not only do merchants face normal processing fees, but monthly fees, compliance fees, and low or inactivity fees. Total fees can suck more than 5% from a merchant’s bottom line. Customers that use cash-back cards can inflict fees approaching 10%. Small businesses cannot survive these usurious fees.

PayPal has options for small home-based businesses to the intermediate sized firm. Even individuals that only need to accept credit cards once in their life can do so with PayPal for less than most merchants pay.

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PayPal Choices – Merchant Services

PayPal has a solution for every merchants needs. Payments via websites get the added bonus of PayPal’s name recognition. You can add a “Donate” button to your blog or webpage; “Gift Certificate” button, too. With PayPal you can accept credit card by phone, on your website, email invoicing with a “Pay Now” button, and by regular face-to-face business transactions.

PayPal fees are now the same across the board. You are charged 2.9% or less per transaction, plus 30¢. Once you collect more than $3,000 in a month through PayPal, your percentage fee declines to as low as 1.9%.

People can still pay you even if they do not have a PayPal account. PayPal’s invoicing features are manna from heaven. Get paid sooner and invoice in less time with PayPal’s invoicing services. There is no additional cost to you or the buyer. The buyer receives an email from PayPal with the invoice and a “Pay Now” button. Your customer knows it is safe and secure from the PayPal name.

Payment work smooth, too. When a client pays, you get an email in seconds letting you know who and how much was paid. You can transfer money from PayPal to your checking account or shop online and pay with PayPal.

Small Home-Based Businesses

Due to the high cost of credit card processing, many merchants either went without the credit card payment option, risking non-payment, or paying excessive merchant services fees. PayPal is a major savings to the very small and home-based business. Example: A home-based photographer may only need credit card acceptance a few times a year. Credit card processors would charge the normal discount fee (the percentage) and the ticket charge, plus a monthly fee, compliance fee, and minimum use fee. For the little guy, it did not work.

Now, with PayPal, the home-based photographer can invoice through PayPal and only pay the discount and the 30¢ ticket fee. If the business grows and credit card use increases, the merchant will see a reduction in the discount fee that starts at 2.9% and can drop to 1.9%. Since most credit card processors charge small businesses 3-4%, this is a major savings.

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Personal Transfers

You can also use PayPal for personal transfers. If you need to send money to a friend, PayPal provides an easy venue for transfer. Money transferred from a bank or PayPal account receives this service free. Money transferred from a credit or debit card is charged a 2.9% fee, plus the 30¢ tickets fee. You can decide who pays the fee.


I use QuickBooks in my office and PayPal has a QuickBooks plug-in payment wizard. This is a thing of beauty for the small business owner. Invoices get emailed on time every month and clients have an easy way to pay without writing a check or snail mail. PayPal also has a virtual terminal for merchants where credit cards can be swiped in your establishment. PayPal now has the same pricing without contracts and all the other fees credit card processors have been abusing small business with for years.

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Check It Out

PayPal fees are lower than all but the largest retailers pay. PayPal is an excellent cash management tool for individuals and businesses. A short article can not cover everything PayPal offers. Go to to review the large selection of tools to manage accounts receivable in your business. You can speed up client payments, manage invoicing, transfer money, and save a boatload of money in reduced bank charges.


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