Banking Category Banking: the easy, simple banking guide

Advantages & disadvantages of using paypal

For millions of Internet users, PayPal is the de facto form of Internet currency accepted by many retailers and used as a trusted way for personal users to transfer money between accounts for online sales and auctions.

Many online shoppers use PayPal to transfer funds. Although it's a convenient way to allow your customers to pay for purchases through your business's website, PayPal is not a good fit for every business.

Advantage: Trusted

Many shoppers are, possibly wisely, wary about providing their credit card or current account information to businesses with which they are not familiar online. Because PayPal acts as an intermediary -- a customer's account information never reaches a website owner -- shoppers may buy your wares using PayPal without worrying that their accounts will be compromised.

Disadvantage: Locked Accounts

Because of security issues and U.S. regulations enacted to limit the transfer of money to terrorists, PayPal sometimes freezes an account because of a suspicious circumstance.

Accounts may be temporarily frozen because of suspected security breaches, or for a longer term as PayPal investigates potential improprieties. Accounts may be frozen for months on end, leaving merchants without the ability to extract the funds in their account.

Advantage: Easy to Implement

Setting up a secure e-commerce website can be tricky and expensive.

Many businesses with a small web design budget opt to use PayPal as a payment option simply because of its ease of use. PayPal provides the widgets a website operator plugs into a page, and PayPal code takes care of the rest, directing users to a secure server, creating invoices and managing the funds transfer.

Disadvantage: Corporate Access to Your Bank Account

Although PayPal serves as a buffer between the general public and privately held bank accounts, its terms of use provide it access to its holders accounts. Because of this, the service may deduct funds from your bank account without your authorisation if charge-back conditions are met by customers.

Advantage: Free to Implement

Although PayPay claims a portion of every payment made to you by your customers as a transaction fee, it allows small businesses to use its services otherwise without charge. Larger businesses may choose to operate under its Website Payments Pro plan, which allows payments to be made directly on your website without a redirect to the PayPal page for £19 per month as of December 2010.

Disadvantage: No Outside Arbritration

If businesses have a dispute with PayPal over charges of fraud, account freezes or other administrative problems, they have little resource. PayPal's terms of service grant the company dominion over all funds in its possession, and investigations into charges may be performed without having to provide documentation to account holders.