How I use Paypal for my online transactions of iPoor T-shirts
Recently I have been exploring the highs and lows of Paypal.com while managing payments for my iPoor T-shirts. It’s not the world’s most perfect banking system, but in my opinion its a great online banking system that allows transactions to anyone or anywhere with a paypal account espically if your transactions are in small amounts.
Paypal started as an on-line escrow middle man for eBay payments where you can pull funds from your credit card AND your bank account for payment to someone else.
For small business it’s very ideal as it’s very low cost to operate the account. There is no minimum account keeping fee for very small amounts (even at $0). Operations wise, you can for accounting purposes, download transaction data into a spreadsheet or Quicken to track purchases or transactions. Also for each of my T-shirts sold, I can print out shipping receipts to insert with each of my transactions for easy reference of delivery information and order details. On the whole very professional if you ask me.
If your business conducts the majority of sales online, you can receive money from your buyers from either their Paypal account or from their credit card. This means you do not need to setup expensive credit card merchant accounts nor require minimum monthly transactions as Paypal is now your middle man. There is however a small commission about USD$1-2 depending on amounts, which I forgot to charge for my iPoor T-Shirts! How ignorant of me! But this is how Paypal makes money.
Also Paypal works in only a few major currencies such as US dollar, Euros and British Pounds, so if your local currency is not of their major currency, you will have currency exchange risks. However after comparing their exchange rate with XE.com, I find their rates pretty fair, but you will just have to deal with the ups and downs of the global currency market.
For example when I calculated my pricing for my T-shirts I calculated it based on 1US$ = 1.70SGD$, the Singapore Dollar has since strengthened and it’s now in the high 1.58SGD$ eating into my already low margins.
There are however quite a few limitations.
One is the ability to pay someone without a Paypal account. If that person needs to receive money, he/she needs to setup a Paypal account, other wise there is no way to receive the money. But in most cases I just transfer the monies from the paypal account to my personal account and pay conventionally.
However let me warn you, setting up the linking banking account is “Nasty”. I suggest you read all the instructions carefully before you set-up you Paypal account as your Paypal account and your Bank Account name needs to be exactly the SAME.
Another problem as mentioned is customer support. I made a mistake in my Paypal account and account name and have been sending emails to them to change it. They still have not done anything to date after 2 weeks of 5-6 emails sent.
In the end, with the help of my designer friend, I’ve decided it’s easier to set up multiple papal accounts which you can transfer money to each other just like having multiple accounts in a bank.
The last and biggest problem is I constantly worry about how safe your money is on this online “bank”. A bank securely holds your money in a “pool” and unlike traditional banks there are no “bricks or mortar” institutions or government backing on your money. Some advice that has been given to me is pay thru Paypal, but when you recieve payment, get your money out ASAP dont leave it in the account.
Check out Paypalsucks for some more horror stories. Good site for more information on the short comings of Paypal.
At the end of the day it does take some getting use to, as well as a change in mindset and getting over the online issues and horror stories. This is especially if you are the type, like me, that gets frustrated easily and want to pick up the phone to yell at someone. But after getting over the “teething problems” I find the pros do outweighs the cons.