A light introduction to using Paypal as a payment processor

If you want to sell stuff, you'll want to get paid! If you have a retail shop you can always accept good old cash but online, you'll need to figure out a way to accept funds. You'd think this would be really simple but there's a few of things to watch out for.

Simplest: "Buy Now" Buttons

For ultra-beginners (selling your first item) we suggest going with paypal as a payment service. Its very simple and you can use Paypal Buttons (now called Website Payments Standard). For every item you have, assign a name and price. That is encoded into a clickable button (they have a tool to do it for you) that you place next to the item for sale. When the user clicks the button it adds it to their 'cart.'
Then the paypal site takes care of the cart and such but there's no inventory handling so you need to watch out how many items you have and deal with backorders manually. It's very basic but is instant to set up, you just need to have a paypal account, no application and people can use any kind of credit card.

Advanced: API Integration

Once you have your paypal buttons working out, you may decide you want to upgrade to a shopping e-cart. Carts can handle inventory, variable pricing and shipping, etc. Then you can integrate the paypal API with the cart. We wont discuss this in detail because every cart worth using has paypal already integrated. When the user is ready to check out, they are sent to paypal to finish the log in. This way they have the security of not typing in their credit card information into an unknown store.


Paypal makes money by taking a piece of the total cost of the transaction (items plus shipping) as a fee. These fees vary from how much you process per month.
WARNING the $3,000+ fee rates need to be applied for, it's NOT automatic!

(I totally got fooled by this. I was selling over $3,000 a month of goods but didn't realize I had to ask for a better rate to get it!)
You'll also have to pay an extra 1% for international payments.
Overall, expect to pay about 4% overhead just to use paypal. This is pretty much competitive with most starter merchant accounts so its not like its a total ripoff.


A handy trick that we discovered is that you have have paypal "auto-sweep" all your funds in the paypal account into you bank account daily. This is great because you will always have cash at your disposal instead of having to remember to transfer when you need $. You can sweep into a high interest savings account or money market account and, get a little interest on the money since its sitting around anyways!

Click here after logging in to get to the auto-sweep page. We had to call up paypal to have them activate it (and you need a business account with them) but that was many years ago, and it may not require hand-activation. If you do have to call up to activate it be persistant, the first few people we spoke to had no idea what we were talking about!

This guide was first published on Feb 27, 2013. It was last updated on Feb 27, 2013.

This page (Paypal Payments) was last updated on Feb 20, 2013.

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