PayPal lets you take credit card payments directly, without needing a separate merchant account
PayPal accepts credit cards from customers and deposits the money into your PayPal account, which you can then transfer to your bank. You do not need to set up a separate payment processor or merchant account — PayPal handles the card acceptance and the deposit. The main trade-off is the fee: PayPal charges a percentage of each transaction plus a small fixed amount, which varies depending on which PayPal product you use and whether the payment happens online or in person.
The specific steps depend on whether you are taking payments online (through a website or invoice), in person (with a card reader), or through a payment link. Each method connects to the same PayPal account but uses different tools and has different fee structures.
Key Takeaways
- PayPal charges between 2.2% and 3.49% plus a per-transaction fee for online credit card payments, depending on your account type and payment method.
- In-person payments through PayPal's card reader cost 2.7% per transaction with no fixed fee, but require you to own or rent the reader hardware.
- You can send a payment link or invoice through PayPal, and the customer pays with their credit card without needing a PayPal account.
- Money from credit card payments lands in your PayPal account first; you must manually transfer it to your bank account, which typically takes one to two business days.
- PayPal holds funds for new accounts or flagged transactions, sometimes for up to 21 days, so budget for cash flow delays.
Online payments: invoices, payment links, and checkout buttons
If you sell online or send invoices to customers, PayPal's invoice tool and payment links let customers pay with a credit card without opening a PayPal account. You create an invoice or link in your PayPal account, send it to the customer, and they enter their card details on PayPal's payment page. The fee is 2.2% plus $0.30 per transaction for most small business accounts in the United States.
To send an invoice: log into PayPal, go to the Tools section, select Invoicing, and create a new invoice. Enter the customer's email, itemize what they are paying for, and send it. The customer receives an email with a link to pay. They can pay with a credit card, debit card, or PayPal balance — they do not need a PayPal account to use a card.
Payment links work the same way but are faster if you do not need an itemized invoice. You can generate a link in PayPal that you send via text, email, or social media. The customer clicks the link and pays. Both invoices and payment links show up in your PayPal transaction history and the money goes into your PayPal balance.
In-person payments with PayPal's card reader
If you take payments face-to-face — at a market, event, or retail location — PayPal sells a small card reader that plugs into your phone or tablet. The reader costs money upfront or can be rented, and the per-transaction fee is 2.7% with no fixed dollar amount added. This is lower than the online rate but only if you process enough volume to justify the hardware cost.
The reader connects to the PayPal app on your phone. The customer inserts, taps, or swipes their card, and the payment processes immediately. The money goes into your PayPal account the same way as online payments. PayPal offers different reader models; check their current hardware page to see which one fits your setup and what the upfront or monthly cost is.
How fees work and what you actually pay
PayPal's fee structure depends on your account type and how the payment happens. For online credit card payments through invoices or payment links, the standard rate is 2.2% plus $0.30 per transaction. If you use PayPal's virtual terminal (a tool for entering card details manually over the phone), the rate is the same. In-person card reader payments are 2.7% with no per-transaction fee.
The fee is deducted from the payment before it reaches your PayPal balance. If a customer pays you $100 through an invoice, you receive $97.50 in your PayPal account (100 minus 2.2% minus $0.30). You see the exact breakdown in your transaction history.
Some PayPal account types, like PayPal Commerce Platform for high-volume sellers, may have different rates. Check your account settings under Fees or contact PayPal directly to confirm your rate, because it can vary by business type and sales volume.
Getting money from PayPal to your bank account
Credit card payments land in your PayPal account balance, not directly in your bank. You must transfer the money manually to withdraw it. Log into PayPal, go to Wallet or Money, select Transfer Money, and choose Transfer to Your Bank. Enter the amount and select your linked bank account. The transfer typically takes one to two business days, though PayPal sometimes holds it longer.
PayPal may place a hold on funds from new accounts, high-risk transactions, or unusual activity. A hold can last up to 21 days. You can see any holds in your Resolution Center or by checking the transaction details. If you need the money sooner, some PayPal accounts offer instant transfer to a debit card for a small fee, but this is not available on all account types.
Setting up your PayPal account to take credit card payments
You need a PayPal account first. Go to paypal.com, click Sign Up, and choose Business Account (not Personal, which has different limits). Enter your business name, email, and phone number. PayPal will ask for your Social Security Number or EIN, your business address, and your bank account details. This verification step can take a few minutes to a few hours.
Once your account is active, you can immediately send invoices or payment links. If you want to use the in-person card reader, you will need to order it from PayPal's hardware store, which is linked in your account settings under Tools. The reader ships to your address and arrives within a few business days.
Your account is ready to receive credit card payments as soon as it is verified. You do not need to wait for approval or sign additional contracts unless you are a very high-volume seller or in a restricted industry.
When PayPal holds or delays payments
PayPal holds funds for several reasons: your account is brand new, the transaction amount is unusually large, the customer disputes the charge, or PayPal flags the transaction as potentially risky. A hold typically lasts 24 hours to 21 days. You can see pending holds in your Resolution Center under the Holds tab.
New accounts often have a 21-day hold on the first few transactions. This is PayPal's way of reducing fraud risk. After you have a clean history, holds become less common. If you are in a high-risk industry — like gambling, adult services, or high-value goods — PayPal may hold funds longer or require additional documentation.
You can still see the money in your account balance during a hold, but you cannot transfer it to your bank until the hold lifts. Plan your cash flow around this delay, especially when you are starting out.
Frequently Asked Questions
Do customers need a PayPal account to pay me with a credit card?
No. When you send an invoice or payment link, the customer can pay with a credit card, debit card, or PayPal balance. They do not need to create an account. PayPal handles the card processing on their behalf.
What happens if a customer disputes a credit card charge?
PayPal will notify you of the dispute and may hold the funds while they investigate. If the customer's bank sides with them, PayPal reverses the payment and deducts it from your account. Keep records of what you sold and any communication with the customer to defend yourself if a dispute happens.
Can I lower PayPal's fees?
Standard rates are set by PayPal and do not change based on volume for most small business accounts. If you process very high volume (thousands per month), you may be able to negotiate a lower rate by contacting PayPal's sales team. Otherwise, the published rate is what you pay.
How long does it take for money to show up in my bank account?
Transfers from PayPal to your bank typically take one to two business days. If PayPal places a hold on the funds, the transfer cannot happen until the hold lifts. Some accounts offer instant transfer to a debit card for a fee, but this is not available everywhere.
What if I want to refund a customer?
Log into PayPal, find the transaction in your history, and click Refund. You can refund the full amount or a partial amount. The refund goes back to the customer's card or PayPal account within a few business days. The original fee is not refunded to you.