Most people who have experimented with different methods to accept online payments recognize that Paypal is not one of the best ways — but it is one of the most convenient. Most buyers seem to trust the little Paypal logo, knowing they are making their purchase through a secure and reputable website. For that reason, many small business owners and solopreneurs accept credit card payments through Paypal, which is a lot cheaper than setting up your own credit card merchant account.

But, according to some small business owners and technology experts, if Paypal is your only method for accepting online payments, you could be losing sales.

One solopreneur, Debbie Mahler, who runs Mice Training & Technology and also hosts the BlogTalk Radio show Technical Tidbits Wednesday mornings, discovered that PayPal is not accepting certain credit card payments from random customers who don’t have a Paypal account. You can read her story here.

No Paypal for Citibank Visa Customers

In essence, Mahler was on-site doing tech work for a customer who then attempted to pay her through Paypal. His Citibank Visa was being rejected by Paypal for no apparent reason.

A Paypal representative revealed to Mahler that Citibank was no longer permitting their Visa card to be used for Paypal payments. Very odd considering:

1. Citibank offers Virtual Account Numbers for safer and more secure online shopping. If the company has faith in their Virtual Account Number system, why would they be concerned about Paypal payments?

2. Citibank has their own online payment service. Is the company trying to steal Paypal’s customers by forcing them to look for other payment options?

A few months later, Mahler found out out the credit card restrictions don’t end there. And it’s not only Citibank placing restrictions on Paypal credit card payments. Paypal is guilty of the same thing!

Paypal Security Measures

Another customer of Mahler’s attempted to use several different credit cards to make a payment through Paypal. The customer does not have a Paypal account. Each card was rejected, with no reason given. A call to Paypal’s customer service revealed that the service often rejects credit cards from non-Paypal account holders as part of Paypal’s Security Model.

The answer to a question in the Help section of Paypal’s website reveals a similar answer.

Question: I do not have a PayPal account and my debit or credit card is being denied. Why?

Answer: PayPal’s process for accepting credit cards payments is rigorous. This helps prevent people from paying for things with stolen or unauthorized cards. The screening process is complex and, on rare occasions, it will impact valid cards.

If you know your card is valid but your payment still doesn’t go through, we suggest that you try another credit card or try your transaction again later.

Another option is to pay with your bank account. Paying with your bank account is a quick and easy way to keep track of spending and avoid using your credit card….

In other words, to skirt Paypal’s Security Model, the company recommends you sign up for a Paypal account.

Impact on Shoppers and Business Owners

If you don’t want to sign up for a Paypal account, you may find your online shopping possibilities limited to online retailers who accept other forms of payment.

If you are an online retailer or service provider, chances are your customers won’t tell you why they decided to shop elsewhere. Your best option, if possible, is to sign up for a credit card merchant account service, which will permit you to accept Visa, Mastercard, American Express and Discover easily. You’ll have to pay for the monthly service, as well as paying fees associated with accepting credit card payments, but you won’t be losing sales!