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PayPal versus Credit Card Processing

From time to time, we are asked if it's better to take PayPal versus credit card processing.

We recommend that you set up your own credit card processing account (ie. merchant account) for taking guest payments, not just PayPal.  You can still accept PayPal at the same time, but having credit card processing has a number of advantages:


Credit card processing means you actually have access to the guest's card on file.  When they make a payment, the card info is encrypted and stored on the booking.  The second payment and security deposit automatically happens on the correct date without you or the guest having to do anything.  The guest isn't nagged with reminders and the system will just process it automatically.  If it fails, you and the guest are notified, and the guest is asked for new card info.  You can also bill the guest for other charges (shipping lost items back or extra fees mentioned in your renter agreement) without the guest having to enter new card info.

With PayPal, the card info is not passed to our system (PayPal does not do that) so every time there is a charge, the guest has to re-enter and submit their payment from the PayPal website.  This also applies to security deposit holds.   Our forms make that easy - you can request payment from OwnerRez - but it's a manual process every time - just more work for you and the guest, and more opportunity for something to get overlooked or go wrong.

Direct access to the funds

PayPal holds the funds in your PayPal account until you manually withdraw them.  You can set up an automatic withdrawal depending on your type of account and whether PayPal allows it, but this is not enabled for everyone.  They can also hold/freeze money or other reasons.

With credit card processing, the funds are put in your regular bank account every day based on the settlements from the previous days.  There is no middle account holding the money.  The funds pass directly from the cardholder's bank to yours.

Better rates

PayPal processing rates are high and fixed across the board - they charge about 3%.  Even with low volume, you should be able to get 2.6-2.7% from a credit card processor.  If you have higher volume, you can get 2.3-2.5% or even lower.

Standards compatibility

Because ordinary PayPal accounts use a unique processing system, they cannot be used for payments via other systems that are expecting a more standard method of exchanging the credit card numbers and associated information.  In particular, PayPal accounts cannot be used with our API connections that allow you to collect payments directly from guests, such as Vrbo and Booking.com.

Just to be clear

PayPal is a giant company and offers many services.  This article and its caveats apply specifically to ordinary PayPal accounts.

PayPal (the company) also offers payment accounts of other types, such as PayPal Payments Pro and PayPal Payflow Pro.  These accounts are not ordinary PayPal accounts - they are actual full credit card merchant processor accounts, fully supported by OwnerRez and as such can be used for all card processing purposes.  The restrictions and issues discussed here do not apply to those types of accounts.