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Selling Online with Credit Cards vs. PayPal

By Virginia Lawrence

A client recently asked whether her online bookstore should be set up so that customers pay with PayPal rather than with a credit card. As a consumer she feels safe with PayPal. She knows that when she has a problem with a purchase, she can contest the purchase through PayPal.

My response to that store owner was my usual response to clients who are considering PayPal instead of a credit card merchant account: PayPal is most helpful for person-to-person sales, as on eBay.

I don't know of any professional online stores that use PayPal as the main payment method. PayPal merchants tend to be individual eBay sellers and little craft sites where mom has painted a few pretty plaques and is selling them from her kitchen. Of course, eastern European sites use PayPal too, and if I wanted to buy from an eastern European or Russian site I would certainly use only PayPal there.

When it comes to an online bookstore backed by a known publisher, the sales should be by credit card through the store’s merchant account. If the store owner is sure that her target market includes potential buyers who really want to use PayPal, we can add PayPal as a second payment option.

Why Do Some Consumers Like PayPal?

Some consumers feel that it’s easier to get their payment back with PayPal. That’s true; PayPal tends to decide in favor of the buyer. However, people who make credit card purchases can also get their money back when the merchant has not fulfilled his promise. Any purchaser who uses a credit card can dispute that credit card purchase and get his money refunded if he is in the right.

Why Do Some Merchants Dislike PayPal?

If the buyer complains to PayPal that she didn't get the package, PayPal takes the money from the merchant and gives it back to the buyer, no more questions asked. This can lead to the buyer having both the ordered product and her money, the merchant having nothing.

In addition, PayPal gets direct access to the merchant’s checking account so that payments and debits can be made. Not every merchant is willing to grant checking account deposit and debit authority to another company. Yes, PayPal belongs to eBay, a respected company, but a merchant using PayPal is setting up one more place where his financial info might be accessible by others.

Why Are Credit Card Transactions Better for Merchants?

Although buyers using credit cards can get a refund when disappointed in the purchase, the merchant collecting payments by credit card is better protected from unscrupulous buyers. For the merchant selling by credit card, when a delivery dispute arises, the merchant has a chance to provide the tracking number to show that the product actually arrived at the buyer's house. If the buyer says that he didn't receive the package, but UPS has a signature on the package, the merchant keeps the payment for the order.

Online merchants should always provide the most attractive payment options for their target market. That’s part of the package of quality products and excellent service. At the same time, the online merchant should emphasize the payment options that best protect his bottom line.

–© 2006 Virginia Lawrence, Ph.D. is a professional Web Developer and Online Marketing Consultant. She routinely places client sites on the first page of a Google search. Contact her at or visit her Web site at



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