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

Your account security is important to us. After filing a claim for unauthorized use of your PayPal account, please allow up to 10 business days for us to conduct an investigation. If the claim is decided in your favor, all unauthorized transactions and fees will be refunded to your account.

Here's how to check the status of your claim:
  1. Go to the Resolution Center.
  2. Select Cases being reviewed by PayPal from the "View" menu, or select Closed cases (last 15 days) if your case has recently been closed.
  3. Click Details next to the claim.
We'll never ask you to reveal your password. There are no exceptions to this policy. If anyone claiming to work for PayPal asks you for your password, do not provide it.
Here’s everything you need to know about refunds. Click the following links for information about how to ask for a refund, where your money goes when you receive a refund, timeframes involved and how to issue a refund.

If you have sent money and are trying to get it refunded:
• When should I request a refund?
• How do I request a refund?
• When should I expect my refund and where will my money be sent?
• How can I see the status of my refund request?

If you have received money and would like to provide a refund:
• How can I issue a refund?
• Can I issue a refund to close a dispute filed on a transaction?
• What will happen to the fees on the transaction if I issue a refund?

T


When should I request a refund?
You might want or need to ask for a refund:You can request a refund up to 180 days after you pay for your item.

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How do I request a refund?
We encourage you to work with the person to whom you sent the money, and initially request a refund by emailing the recipient. Ask them to go to the Transaction Details page for your transaction and click Issue a refund.

Here’s how to find the recipient’s contact information to request a refund:
  1. Go to the Activity section of your PayPal account.
  2. Use the filters to find, and then click on, the payment you’d like to have refunded.
  3. Find the recipient’s email address and send your request from your email account.
If the recipient refuses to refund your money, but you feel you’re entitled to a refund, you can open a dispute in the Resolution Center, as long as it is still within 180 days of the payment date, and provided your issue meets certain criteria.

*Canceling or refunding a bank funded transaction will not stop it from processing from your bank account.

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When should I expect my refund and where will my money be sent?
How and when your money is refunded depends on how you made the original payment: 
 
What you paid withWhere your refund goesWhen you'll get it
Credit Card (including PayPal Credit)Credit Card
Up to 30 days

*if the card you paid with is closed or a prepaid card, please contact the card issuer as the money will still be refunded to your credit card account.

Bank accountBank account3 to 5 business days
Your PayPal balancePayPal balanceSame day the refund is issued
PayPal balance and Credit CardThe amount paid with your card will be refunded to your card. The remaining amount will be credited to your PayPal balance.Card-Up to 30 days
PayPal balance-Same day the refund was issued.
Debit CardDebit Card
Up to 30 days
*If the refund can't be applied to your debit card, it will be sent to your PayPal balance.
 

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How can I see the status of my refund request?
You can view the status of your refund in the Activity section of your PayPal account:
  1. Click Activity at the top of the page.
  2. Click Advanced search to see the dropdown menu.
  3. Select Refunds.
  4. Select the desired date range to see your refund.
  5. Click the refunded transaction to view the details.
Here’s what those statuses mean:
 
Refund statusWhat it means
Pending:Your refund has been issued, but the bank is still processing it. It usually takes 3 to 5 business days for the money to arrive.
Refunded or partially refunded:Your refund is complete. The money should be back in your PayPal balance or on your credit or debit card.
Temporary hold:Your refund was sent before your original payment cleared your bank. This usually takes 3 to 5 business days to process and the refund will be credited to your bank account once complete.
Completed:Your refund has been sent and completed on the seller or recipient's side. If you paid with your bank account, you still may not see the money as it can take an additional 3 to 5 business days to process, even if it's marked as Completed.

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How can I issue a refund?

Refund within 180 days of payment
Here's how to make a full or partial refund within 180 days following the date of the original payment:
  1. Go to the Activity section of your PayPal account.
  2. Click the transaction you want to refund and then click Issue a refund.
  3. Enter the refund amount and click Continue.
  4. Confirm the information and click Issue Refund.
The refund is credited in the same currency as the original payment. The same conversion rate is used as appropriate.
*Refunds cannot be issued through the PayPal mobile app.

Refund after 180 days of payment
To make a full or partial refund after 180 days following the date of the original payment, go to the Transfers section of your PayPal account.
In such instances, the payment will be credited to the PayPal balance of the recipient. However, fees for this transfer and any fees incurred during the original transaction will not be refunded.

If a buyer receives a refund using "Send money" while the 180-day period has not yet passed, they can decline it and ask the seller to use the link Issue a refund described above.

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Can I issue a refund to close a dispute filed on a transaction?
To resolve a transaction dispute, you can issue a full or partial refund to the buyer. Here's how to issue a full refund:
  1. Go to the Resolution Center.
  2. Select Open Cases and find the transaction.
  3. Click the Case ID in the Case column.
  4. Click Issue a full refund on the case details page.
You can issue a refund within 180 days of receiving a payment. Issuing a full refund automatically closes a dispute.

Remember: the case must be in the dispute phase or waiting for the seller's response to complete this action. If it is under review, you must contact PayPal to take this action.
If your PayPal account balance does not have enough money in it, the entire refund will be issued from the primary bank account linked to your PayPal account.

You can also offer a partial refund for your dispute. Here’s how: 
  1. Go to the Resolution Center.
  2. Select Open Cases from the list and find the transaction.
  3. Click the Case ID under the Case column.
  4. Click Offer a partial refund on the case details page.
  5. Enter the amount you want to offer and click Calculate to figure out the net refund amount and fee refund.
  6. Click Offer refund.
You can issue a partial refund within 180 days of receiving a payment. When you issue a partial refund, PayPal credits a portion of your original transaction fee.

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What will happen to the fees on the transaction if I issue a refund?
You receive credit for your original transaction fees based on the kind of refund you issue.
  • When you issue a full refund using the Issue Refund link on the Transaction Details page, we credit your full variable transaction fee.
  • When you issue a partial refund, we credit a percentage of the variable transaction fee, based on the amount of the refund.
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