PayPal is great for many things, from online purchases to sending money to friends and family. What PayPal is not good for, however, is acting as a merchant account. Many e-tailers do this – and it is one of the worst business mistakes they can make. While the ease of PayPal can be comforting to a new merchant, what typically ends up happening is not comforting.
PayPal has very stringent rules when it comes to acting as a merchant account, and these rules are not looked over by many merchants. First, did you know that PayPal can freeze your account for any reason? It’s true! They can suspect any little thing and freeze your account. One chargeback or challenged charge can leave you in a big jam: If your account is frozen, you cannot access your money, and you cannot refund any money, and you cannot get ahold of information in regards to your customers.
PayPal may work for those who have small side businesses, for those who sell on Etsy. But for those who want to DIY their business, you need to consider other options – especially if you fall into one of the dreaded “high risk” categories. Be it from your personal credit, or the industry you are in, the “high risk” label is hard to stomach in the merchant account industry – and by PayPal. High risk businesses often have a higher percentage of chargebacks, which makes PayPal a terrible idea. Instead, you need to look for a merchant account provider who has experience dealing with your type of business, and that understands the issues that may arise from these businesses.
So, what do you do if you have your PayPal account as your merchant account? Look around for a new merchant account – if you need to. Most merchants should, but those who have Etsy as a backup are typically okay to just stick with PayPal (especially since it is the only actual “guaranteed” method by Etsy). For everyone else, do your research before signing with another merchant account provider.