If you have any inkling that your business can be categorized as high risk, it is in your best interest to avoid PayPal at all costs and apply for a high-risk merchant account with a processor that specializes in the industry. PayPal can look attractive because of no setup fees and the ease of opening an account, but like other things in life, if it seems to be too good to be true, there is a problem.
One of the biggest complaints about PayPal is their holding funds and taking such a long time to get them deposited into your checking account. With a traditionally high-risk merchant account, your money could be in your account the next business day. When requesting funds from your PayPal account, they clearly state that the transfer could take up to five days. This is unacceptable for a business that is relying on turning inventory in order to purchase more. Without a good, dependable cash flow, it is hard to run a business.
If you are in such industries as online adult dating or adult products, online firearms sales, nutraceuticals, penny auctions, online ticket brokers, credit repair, and many others, do not pass GO and do not collect your $200. Run, do not walk, away from PayPal. PayPal was designed to protect the buyer since it was introduced by eBay. However, even some buyers have complaints. The very bad news for a high-risk merchant is that PayPal shoots first and asks questions later. Your sales may be completely valid and above board. However, if PayPal’s risk department even thinks there may be some fraudulent sales due to chargebacks, they will freeze your account or shut it down and the money you have earned can be tied up for ages.
Another huge complaint about PayPal is its lack of customer service, or in many cases customer non-service. Phone reps are not well-trained and if you can speak to a live person they may not understand your question and really do not have any answers. When a retailer or service provider has a high-risk merchant account, he or she wants answers right now. And everyone wants the correct answer. It may not be what you wanted to hear, but it will be the correct answer.
Plus, do not be fooled by their open rate of 2.9% plus $.30 per transaction. For a traditional merchant account, this is high. For a high-risk merchant account, it does not matter if it is high or low if you run the risk of never seeing your money.
If you are in one of the high-risk categories, your best choice is to stick with a credit card processor that specializes in high-risk merchant accounts. Generally, there are no application fees and no setup fees. You are not required to have your own Visa and MasterCard registration. Accounts can be approved for those who have credit ratings of 500 and lower. If you keep your chargebacks under the 3% threshold, you have smooth sailing.