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.

 
Click the links below for information on why your payment is on hold.

Why is my payment being held?
Why is my money on hold or unavailable?
What is funds availability or hold?

Why is my payment from a sale on eBay on hold?
My hold was released but I don't see the funds in my account yet. Why?
How do I get my money sooner for a transaction on hold?

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Why is my payment being held?
If your payment is on hold or not available right away, we’ll notify you via email or an alert on your Summary page.

Why are my funds being held, and when will they be available?Delaying funds availability is a common industry practice we implement to help ensure the secure use of PayPal by both buyers and sellers. By placing your payment on hold, we’re trying to make sure that there’s enough money in your PayPal account to resolve any issues that may arise with your account such as chargebacks or disputes. When subject to a hold, the money is temporarily not available to use.

If there aren’t any issues with your transaction or account, the payment will typically be released within 21 days after receipt. After your hold is released, it may take until midnight (but it's usually sooner) for the money to appear in your account.

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Why is my money on hold or unavailable?
There are several reasons funds may be temporarily unavailable:

1. You’re a new seller with PayPal or you’re an established seller but have opened a new account.
When you’re a new PayPal seller, it takes time to build up enough history to demonstrate a pattern of positive buyer-seller transactions. The good news is you can usually move out of this status by confirming your identity and building up a history of positive selling activity.
If you’re an established PayPal seller, but opened a new account, that account will be eligible for holds until a good history is established.

2. You haven’t sold in a while.
When your selling activity has been dormant for a long time, it will also take time to rebuild a history of positive buyer-seller transactions.

3. Multiple customers filed for a refund, dispute, or chargeback.
If multiple customers file for a refund, dispute, or chargeback, or if you receive a large number of refunds, disputes or chargebacks in a short period of time, it can delay the availability of your funds. The best way to resolve this is to work directly with your customers to prevent, or solve, disputes and chargebacks.
Sometimes it’s possible that your customer filed for a refund, dispute, or chargeback because someone illegally used their PayPal account to buy something. We ask that you hold off on shipping any items when this happens.

4. Your selling pattern appears unusual or has changed.
Unusual sales activity includes: an increase in sales or a change in average selling price, business platform, or type of item being sold.

5. You’re selling higher risk items.
Higher risk items can include tickets, gift cards, consumer electronics, computers, and travel packages.

Tip: After your hold is released, it may take until midnight (but it's usually sooner) for the money to appear in your account.
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What is funds availability or hold?
Delaying funds availability is a common industry practice we implement to help ensure the secure use of PayPal by both buyers and sellers. By placing your payment on hold, we’re trying to make sure that there’s enough money in your PayPal account to resolve any issues that may arise with your account such as chargebacks or disputes. When subject to a hold, the money is temporarily not available to use.

If there aren’t any issues with your transaction or account, the payment will typically be released within 21 days after receipt. After your hold is released, it may take until midnight (but it's usually sooner) for the money to appear in your account.


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Why is my payment from a sale on eBay on hold?
When you get paid for items sold on eBay, eBay may request that your payment be held temporarily. This means that the money won’t be available to use immediately, but is usually available within 21 days*.

Why is my money on hold?

Before we place a payment on hold, we consider information provided by eBay and other data to evaluate the situation and possible risk. Your payment may be on eBay hold because:
  • You’re a new seller on eBay;
  • Your current performance has fallen below the minimum standard for all eBay sellers; or
  • The payment you received may be considered unusual for your selling pattern.
How can I get more information about this eBay hold?

Contact eBay to learn more about why your payment is on hold and how you may be able to get your money sooner.

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My hold was released but I don’t see the funds in my account yet. Why?
It can take several hours for your held money to appear in your PayPal account. After your hold is released, sometimes it may take until midnight, but it's usually sooner.


How do I get my money sooner for a transaction on hold?
You can work to expedite the release of temporarily unavailable funds by processing your sales quickly and then providing the fulfillment details.

The timeframes listed below are for PayPal holds. If you have a hold placed by eBay you will need to contact eBay for more information.

Here are some specific actions you can take:

 
ActionTime to releaseWhat you need to do
Print shipping label with PayPal1 day after deliveryPrint shipping label with USPS or UPS on PayPal website and we’ll automatically update the tracking information for you.
Add Tracking1 day after delivery with supported carriersIf you didn’t print the shipping label for a supported carrier with PayPal, upload the tracking number of one of our Supported Carriers. PayPal will release the payment within 1 day of the courier confirming delivery.
Buyer ConfirmationImmediate release after buyer confirmation.Your buyers will have the option to confirm that they received the item if your transaction is held. They'll also receive the notification email after you upload tracking/print shipping label.
 
After your hold is released, it may take until midnight (but it's usually sooner) for the money to appear in your account.
 
Supported Carriers:

 
 
Country                 Shipping Carriers
CanadaCanada Post, UPS
FranceDHL, GLS, UPS
GermanyDeutsche Post, DHL Express, DHL Packet, DPD, Hermes, UPS
ItalyDHL, Post Italiano, UPS
SpainCorreos, DHS, GLS
United KingdomCollect+, DHL Express, FedEx, Parcel Force, Royal Mail, UPS, Yodel
United StatesDHL Express, DHL Global Mail, UPS, USPS, FedEx


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