How PayPal credit card processing works for your business.

May 17 2019 | PayPal editorial staff

PayPal facilitates online payments for hundreds of thousands of ecommerce ventures. Explore why you should use or pay with PayPal and how it can work for you.
How PayPal works.
If you sell goods online, you’ve probably heard of PayPal. We offer an online payment service that enables you to accept bank or credit card payments for the items you sell. When a customer pays for his or her purchases, we process the payment and transfer the funds to your PayPal account.

PayPal facilitates online payments for hundreds of thousands of e-commerce ventures, as well as traditional brick-and-mortar companies with an online presence. Read on to learn how it can work for your business, too.

A step-by-step guide to PayPal.
PayPal’s mission is to “build the web’s most convenient, secure, cost-effective payment solution.” But what is it that PayPal does, exactly?

A typical PayPal transaction sequence:
1. The transaction starts when a customer (let’s call her Mary Ann) comes to your website. Let’s say Mary Ann finds a sweater she wants to purchase and clicks the Buy button on the product page. At this point, PayPal gets to work behind the scenes.

2. Mary Ann sees a shopping cart or checkout page next. Depending on the type of PayPal service you choose, she might see a shopping cart page integrated with your website. In other instances, she’ll see a shopping cart or checkout page hosted at the PayPal site (branded with your business’s logo).

3. After reviewing the checkout page, Mary Ann clicks the Pay Now button. This directs her to a payment page, hosted by PayPal. If you choose PayPal Payments Standard, your customer will be taken to the PayPal site to complete the transaction. With PayPal Checkout or PayPal Payments Pro, that process is integrated into your site, so Mary Ann never leaves it.

4. If she has a PayPal account of her own, Mary Ann can simply enter her username and password, and the rest of her personal information – address, phone number, etc. – is retrieved from our database and automatically entered onto the payment form. (If Mary Ann doesn’t have a PayPal account, she can create one.)

At the PayPal login, she’ll also see the option to “Stay logged in for faster purchases.” Called One Touch, this feature keeps her logged in on the device she’s using, so if she comes back to your site or another site using PayPal, buying is even faster and easier.

At this point, her PayPal transaction is complete. If she chooses to pay with a credit or debit card, she’ll continue through the following steps.

5. If Mary Ann chooses to pay with a credit or debit card, she’ll enter her contact and card information in the web form and then click the Pay button to authorize payment. Behind the scenes, Mary Ann’s credit card information is encrypted and transmitted to PayPal, and then we contact the issuing bank for Mary Ann’s credit card. Assuming that her credit line can cover the purchase, the issuing bank authorizes the transaction, and the sale is approved. This process only takes a few seconds.

Note: All PayPal transactions take place on web pages that utilize Secure Sockets Layer (SSL) encryption. This protects your customer’s personal data from prying electronic eyes and identity thieves.

6. Mary Ann sees a confirmation page with a message (sent by us) that says her purchase has been completed. At that point, we’ll notify you of the purchase via email.

7. Once notified of the purchase, you can start processing the order. You can also opt to send a confirmation email of your own, letting Mary Ann know the purchase has been put into your system and notifying her of the approximate ship date.

8. When the funds are confirmed from the credit card company, they’re deposited into your PayPal account – minus applicable fees (2.9% + $0.30 per transaction). This infographic  has an easy-to-understand breakdown of how exactly the money gets to you.

9. Once the money reaches your PayPal account, which usually happens within minutes of making the sale, you can leave it in your account for use in paying business expenses or withdraw it to your bank account (which usually takes 2-3 days).

The whole process is easy for the customer to understand and navigate, which means buying from you is a great experience. And it’s easy for you to use, too, so you can keep driving your business forward. 

The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.

Frequently asked questions.

PayPal powered by Braintree makes it easy to accept payments. Our payment gateway is similar to the credit card terminal you swipe your card through at the grocery store. We'll make sure your customer's payment information gets to the right place and stays secure.

Integration with a PayPal powered by Braintree merchant account is available through many of our ecommerce and shopping cart partners via a single application process. Several of our partners even allow you to create a trial or provisional account which requires minimal information to get started. Once you have a merchant account you will have access to your new payment gateway via the PayPal powered by Braintree Control Panel. Completing the application process will allow you to receive payments to your bank account.

Merchant Account
A merchant is what PayPal powered by Braintree uses to route payments from your customers' accounts to your bank account. A merchant account is similar to a line of credit, so you'll need to fill out an application. Until your application is complete, you'll be given a provisional merchant account.

Provisional Merchant Account
If your partner supports it, PayPal will provide you with a provisional merchant account until you complete your full application. You can accept up to $2,500 USD or 25 transactions from customers. You won’t receive your funds to your bank account until your account is fully approved. Approval usually takes just 1 business day if we don't need to request any additional information from you. After approval, there are no processing or disbursement limits.

Control Panel
The Control Panel will give you access to monthly statements and reports to assist with reconciliation. In addition, a Disputes portal, where you can manage your chargebacks, retrievals, and pre-arbitrations on credit card transactions. If you choose to accept other payment types such as PayPal you can see and report all of your transactions from the Control Panel.

PayPal account
Accepting PayPal alongside credit cards is easy. As part of your full application, you'll either link your merchant account with an existing PayPal account, or create a PayPal account. Either way, you'll be able to manage your PayPal processing settings and disputes from your PayPal account.

Need more help?
I received a chargeback on my Braintree control panel, what do I do?
How do PayPal powered by Braintree disbursements work?
Why am I receiving reminder emails from Braintree?
How do I void a payment through my PayPal powered by Braintree control panel?
How do I enable fraud filters on my PayPal powered by Braintree account? 
How do I refund my customer through my PayPal powered by Braintree account?
As a PayPal customer, you may be eligible for one of several PayPal card products.

PayPal Credit

PayPal Credit is a digital line of credit that allows you to shop everywhere PayPal is accepted. PayPal Credit is for online purchases only; you won’t be provided a physical card. You can apply for PayPal Credit online. Learn more about PayPal Credit.
* PayPal Credit is subject to credit approval.

PayPal Cash Card

The PayPal Cash Card is a Debit Card that’s used with a PayPal Cash Plus account. The PayPal Cash card allows you to cash a check, load cash, do a bank transfer, and direct deposit. Learn more about the PayPal Cash card. Apply now for the PayPal Cash card.

PayPal Business Debit Mastercard

The PayPal Business Debit Mastercard is a Debit Card that works with your Business PayPal account. Learn more about the PayPal Business Debit Mastercard. Apply for PayPal business debit Mastercard.

PayPal PrePaid Mastercard

You can order a PayPal Prepaid Mastercard online or purchase a temporary card at retail locations. Once you receive your card you can load funds and start shopping. Learn more about the PayPal Prepaid Mastercard.

PayPal Extras Mastercard

The PayPal Extras Mastercard is a credit card that allows your to earn points for the purchases you make every day. The points can be used for gift cards, travel vouchers and more. Learn more about the PayPal Extras Mastercard and the benefits it offers. Apply for the PayPal Extras Mastercard.

PayPal Cashback Mastercard

The PayPal Cashback Mastercard is a credit card that allows you to earn 2% cash back on every purchase. Learn more about the PayPal Cashback Mastercard and the benefits if offers. Apply for the PayPal Cashback Mastercard.


Get started with PayPal Credit

Other PayPal Credit questions

Get Started with the PayPal Cash Card

PayPal Cash Card transactions 

Get Started with the PayPal Business Debit Mastercard

Card information 

Get Started with the PayPal Extras Mastercard

Card information

Get Started with the PayPal Cashback Mastercard


Get Started with the PayPal Prepaid Mastercard

What’s changing?
The Payment Card Industry Security Standards Council (PCI) issued a new security standard that must be implemented by June 26, 2018. By this date, all entities must stop using Secure Sockets Layer (SSL)/ early Transport Layer Security (TLS) as a security control in their systems and completely transition to a secure version of TLS encryption protocols, such as TLS 1.2. You can read more about the security standards on the PCI website.

When does the upgrade need to be completed by?
Action required by June 26, 2018.
If your PayPal integration uses an older encryption protocol, you must upgrade your PayPal integration(s) to the TLS 1.2 cryptographic protocol by June 26, 2018.

How do I upgrade to TLS 1.2?
Here's how to upgrade and test your system:
  1. Visit our security website to view the requirements.
  2. If your website is hosted by a third-party, work with your web hosting company or ecommerce software provider. *Otherwise, please contact your in-house web programmer or system administrator to make these updates.
  3. Use our testing environment to confirm that your servers support the latest security standards. The testing environment will present a ‘PayPal_Connection_OK’ message if you’ve completed the server update correctly. Note that you must test your API using your server, not your web browser.
*Note for merchants using a downloaded shopping cart: Whoever hosts the connection to PayPal is required to meet the PCI-DSS encryption requirements. We encourage you to contact your web host or a developer to evaluate your compliance with our encryption requirements, and then take the appropriate steps to address any potential vulnerabilities.

Testing periods
Before June 26, 2018, PayPal will conduct weekly test to emulate the upgraded security experience. The testing dates are published on our security website.

These tests will help you understand the areas of your integration that still require security protocol upgrades. If your systems have been upgraded to support TLS 1.2, you shouldn’t be impacted during the testing periods. However, if your system integrations aren’t upgraded, you may experience interruptions to PayPal services, such as payment processing and reporting. Please be advised that each testing period could last several hours.

Make the necessary security protocol upgrades now to make sure you’re ready before the June 26, 2018 deadline. If you need additional support, please contact your web hosting company, ecommerce software provider, in-house web programmer, or system administrator.

What happens if I don't upgrade to TLS 1.2?
If you don't upgrade your integration by June 26, 2018, you may not be able to accept any PayPal transactions, process credit card payments with PayPal, or access the funds in your PayPal Business Account.

What’s Store Cash and how does it work?
Powered by PayPal Shopping, Store Cash is an automatic discount from an online store that accepts payments by PayPal. The discount is redeemed when the shopper returns to your online store and makes a purchase with PayPal before the offer expires. With a Store Cash campaign, PayPal can send Store Cash offers to your targeted shoppers to help recover sales that might otherwise be lost. 
How do you target shoppers for a Store Cash campaign?
We select PayPal shoppers who left your online store before making a purchase with PayPal during the past 30 days. We won’t include PayPal shoppers who have opted-out of offer notifications.
Can I limit how many shoppers are targeted for a Store Cash campaign?
While we recommend that you offer Store Cash to all the PayPal shoppers we can target, you can set the number of shoppers who are sent a Store Cash offer and you can change this setting at any time.
Are there fees to run a Store Cash campaign?
There are no extra fees to use Store Cash. You will pay the normal PayPal fees on the order total amount before the Store Cash offer is applied. For example, if the item purchased is $100 and your Store Cash offer is $5, the shopper will pay $95 and the PayPal processing fee will be based on the order total amount of $100.
How many Store Cash campaigns can I run at a time?
You can run one Store Cash campaign at a time on each website. You can start and stop the campaign whenever you like.
How long does my Store Cash campaign last?
Once a campaign is started, it will run until you stop the campaign. 
How can my Store Cash offer be used?
The Store Cash offer amount is automatically applied when the shopper makes a purchase with PayPal on your website before the offer’s expiration date. The Store Cash offer amount that’s applied to the purchase will appear in the PayPal receipt (and may not be displayed during checkout).
What happens if a shopper purchase amount is less than the Store Cash offer amount?
If the order total in a single transaction is less than the Store Cash offer amount, the discount amount will be equal to the order total. Any balance remaining from the Store Cash offer will be available for another purchase from your store until its expiration date. 
When do Store Cash offers expire?
Store Cash offers expire 7 days from the date they are sent.
Where can I see how the Store Cash campaign is working?
After setting up a campaign, you can track results in your Store Cash dashboard. Among other reports, the dashboard will show how many Store Cash offers were redeemed and the amount of sales that were made to shoppers who redeemed a Store Cash offer.