PayPal gives you three ways to take credit card payments, depending on your business size and sales volume

PayPal processes credit card payments through three separate products: PayPal Checkout (for online stores and invoices), PayPal Here (for in-person card readers), and PayPal Virtual Terminal (for phone or mail orders). Which one you use depends on whether you're selling online, in a physical location, or taking payments over the phone. Each charges different fees and connects to your PayPal account in a different way.

You don't need a separate merchant account or payment processor. PayPal holds the merchant account itself, so the customer's card never touches your systems. The payment goes directly from the card to PayPal, and PayPal deposits the money (minus fees) into your linked bank account.

Key Takeaways

  • PayPal Checkout works for online sales and invoices; PayPal Here is for in-person payments with a card reader; Virtual Terminal is for phone or mail orders entered manually.
  • Fees vary by product: Checkout charges a percentage plus a fixed amount per transaction, while Here and Virtual Terminal have different structures depending on how the card is presented.
  • You must link a valid bank account to your PayPal account before you can receive payouts from card payments.
  • Funds typically appear in your bank account within one to two business days after a payment clears.
  • PayPal holds dispute resolution and chargeback authority, so you cannot override their decisions even if you believe the customer is wrong.

Setting up PayPal Checkout for online payments

PayPal Checkout is the standard way to accept cards on a website or through invoices. When a customer clicks to pay, they see a PayPal login screen, but they can also pay with a credit or debit card without creating a PayPal account. The payment window is hosted by PayPal, not your site, so your server never processes the card data.

To set this up, log into your PayPal account, go to Settings (the gear icon), then Payments, and turn on PayPal Checkout. If you use a shopping cart platform like Shopify, WooCommerce, or Square Online, PayPal Checkout is usually already built in—you just authorize it and connect your PayPal account. For a custom website, you'll need to add PayPal's code (called an SDK) or use their API documentation. If you're not a developer, your web host or a freelancer can do this in an hour or two.

PayPal Checkout charges 2.99% plus $0.30 per transaction for domestic US credit and debit cards. International cards cost 3.49% plus $0.30. These fees are deducted automatically before the money lands in your bank account.

Accepting in-person card payments with PayPal Here

PayPal Here is a mobile card reader that plugs into your phone or tablet's headphone jack (older models) or connects via Bluetooth (newer models). You swipe, insert, or tap the customer's card, and the payment processes immediately. This is useful for pop-up shops, farmers markets, service calls, or any business that moves around.

You buy the card reader from PayPal's website or from retailers like Best Buy. Prices range from $20 to $100 depending on the model. Once you have the reader, download the PayPal Here app, log in with your PayPal account, and you're ready to process payments. The app shows your transaction history and lets you email receipts to customers.

Fees for in-person payments are lower than online: 2.7% for swiped or inserted cards, and 3.5% for contactless or keyed-in cards. There is no per-transaction flat fee like Checkout has. If a customer's card is declined, you're not charged.

Processing phone and mail orders with Virtual Terminal

PayPal Virtual Terminal lets you enter a credit card number manually when the customer reads it to you over the phone or you receive it by mail. You log into your PayPal account, go to Tools, select Virtual Terminal, and type in the card details, amount, and customer information. The payment processes instantly, and you get a confirmation number.

Virtual Terminal is not a separate product you activate—it's available to most PayPal Business and Premier accounts automatically. If you don't see it in your Tools menu, contact PayPal support to enable it. There is no setup fee.

Fees for Virtual Terminal are 2.2% plus $0.50 per transaction for keyed-in cards. This is higher than in-person swiped cards but lower than online Checkout. Virtual Terminal also carries higher chargeback risk because the customer is not present and the card is not physically verified, so PayPal may hold funds longer or require additional documentation if disputes arise.

How money reaches your bank account

When a customer's card payment clears, PayPal deducts the transaction fee and holds the remaining balance in your PayPal account temporarily. By default, PayPal transfers the money to your linked bank account once per day, usually overnight. The transfer itself takes one to two business days to appear in your account, so a payment received on Monday morning might not show in your bank until Wednesday.

You can change the payout schedule in your PayPal settings. Some account types allow you to request an instant transfer to your bank for a small fee (usually 1%), or you can keep the standard daily transfer at no extra cost. Weekends and bank holidays delay transfers by one day.

PayPal holds the bank account information you provide during signup. If you change banks, update your account details in Settings > Payments > Transfer to your bank. Transfers to a new account may take an extra day or two the first time.

Understanding fees and what they cover

PayPal's fees are non-negotiable and do not vary by volume unless you have a custom enterprise agreement (which requires sales over $250,000 per year). The fee structure depends on which product you use and how the card is presented. A swiped card in person costs less than a keyed-in card over the phone, which costs less than an online payment, because swiped cards have lower fraud risk.

Fees cover payment processing, fraud monitoring, and dispute resolution. They do not cover refunds you issue to customers. If you refund a payment, PayPal refunds the customer's card but does not refund your fee. For example, if you charged $100 and paid $2.99 in fees, and then refund the $100, you keep the $2.99 loss.

PayPal also charges separate fees for services outside of payment processing: invoicing (free), currency conversion (2.5% for international payments), and instant transfers to your bank (1% of the transfer amount). These are optional and only apply if you use those services.

Disputes, chargebacks, and what happens if a customer contests a payment

If a customer disputes a charge or their bank issues a chargeback, PayPal investigates and makes a final decision. You can submit evidence (order confirmation, tracking number, delivery proof, customer communication) through the Resolution Center in your PayPal account, but PayPal has the authority to rule against you even if you believe you're right. If PayPal sides with the customer, the payment is reversed and the fee is not refunded.

Chargebacks from credit card companies bypass PayPal entirely—the customer's bank contacts PayPal directly, and PayPal must respond within a set timeframe (usually 7 to 10 days). If PayPal loses the chargeback, you may also be charged a chargeback fee of $20 to $100 depending on your account type. Repeated chargebacks can result in account limitations or closure.

To reduce disputes, send order confirmations and tracking information to customers immediately, keep records of all communications, and use clear product descriptions. For high-risk items (digital goods, services, or items that are easy to claim as "not received"), consider requiring a signature or delivery confirmation.

Linking your bank account and verifying your identity

Before PayPal will transfer money to your bank, you must link a valid checking or savings account and verify your identity. During signup, you provide your bank routing number and account number. PayPal then deposits two small amounts (usually under $1 each) into your account within one to two business days. You log back into PayPal and confirm the exact amounts to verify the account is yours.

If you don't verify within 30 days, PayPal will not process payouts. You can re-verify at any time by going to Settings > Payments > Transfer to your bank and selecting your account. If you've moved money or closed the account, you'll need to add a new one.

PayPal also requires identity verification for the account owner. You may be asked to provide a government ID, Social Security Number, or business tax ID depending on your account type and sales volume. This is a one-time process and is required by federal banking regulations, not a PayPal policy.

Frequently Asked Questions

Can customers pay with a credit card without a PayPal account?

Yes. With PayPal Checkout, customers see a login screen but can skip it and pay with a card directly. They enter their card number, expiration date, and CVV without creating an account. PayPal calls this the "Guest Checkout" option and it's enabled by default.

What happens if a payment fails or the card is declined?

PayPal notifies you immediately and does not charge a fee for a declined transaction. The customer can try a different card or payment method. You can resend the invoice or payment link, and the customer can attempt payment again. PayPal does not retry declined cards automatically.

Do I have to use PayPal's payout schedule, or can I keep money in my account?

You can hold money in your PayPal account indefinitely and transfer it to your bank whenever you want. Go to Wallet, select Transfer Money, and choose your bank account. There is no fee for standard transfers, though instant transfers cost 1%. You can also use PayPal balance to pay invoices or make purchases.

What's the difference between PayPal Business and PayPal Premier accounts?

Both accept credit card payments at the same rates. Business accounts are designed for companies and include invoicing, reporting, and Virtual Terminal by default. Premier accounts are for individuals and small sellers. Both require identity verification and a linked bank account. The main difference is branding and reporting tools, not payment processing.

Can I accept payments in currencies other than US dollars?

Yes. PayPal automatically converts foreign currency at its exchange rate plus a 2.5% conversion fee. You can also set your account to accept payments in multiple currencies and hold them separately. Conversion happens when you transfer to your bank or when you spend the balance. Check PayPal's current exchange rates before accepting international payments, as they change daily.