PayPal's Mobile Credit Card Reader: What You Need to Know Credit: Sukharevskyy Dmytro (nevodka) / Shutterstock.com

PayPal is best known for its payment-processing solutions for online merchants and shoppers. But did you know that the company also has a processing solution for in-store and mobile merchants?

Introduced in 2012, PayPal Here is a credit card reader and accompanying app that allows businesses and individuals to accept a wide range of payments — from credit cards to checks— on iOS and Android devices.

Here's a breakdown of what reviewers are saying about Paypal Here.

[For a side-by-side comparison of the best mobile credit card processing services visit our sister site Top Ten Reviews.]

Fair pricing

Credit card processing can be pricey, but the costs associated with using PayPal Here's credit app and reader are reasonable. It's free to sign up for the service, and there are no contracts or monthly fees. Businesses or individuals simply sign up for a premier or business account with PayPal — or upgrade their existing accounts — and then download the PayPal Here app (also free) on a mobile device.

If you sign up for PayPal Here directly through PayPal, you'll receive a free card reader in the mail within five to seven business days. Alternatively, you can purchase the card reader for $15 (free after mail-in rebate) at participating retail locations, including Staples and AT&T stores.

The cost of using the card processing service is fair, with a card-present discount rate of 2.7 percent and no additional transaction fees. Keyed-in credit and debit card payments are a bit pricier (due to the greater risk of fraud with card-not-present transactions) and will cost you 3.5 percent of the total sale, plus a 15-cent transaction fee. [25 Ways to Accept Mobile Payments]

Merchants can also accept other forms of payment with PayPal Here, including direct payments from a customer's PayPal account. This payment option, called PayPal Check-in, also carries a discount rate of 2.7 percent. Accepting checks, cash or invoice payments is free.

For detailed information about the merchant fees associated with PayPal Here, visit the company's merchant page.

Smart hardware

If you've ever used a mobile card reader, then you know just how important the design of the devices can be. Unlike some competing devices, PayPal's card reader receives fairly good reviews from merchants.

While the PayPal Here reader isn't as sleek as some of its competitors' (namely, the tiny white cube distributed by Square), reviewers like David Pogue — who writes a technology column for the New York Times — have noted that it's more practical to use. The reader, which plugs into the headphone jack of a smartphone or tablet, is composed of three blue triangles.

The smallest triangle (in the front of the reader) is hinged and can be swung down over the front edge of your device, helping to keep the reader in place when you swipe a customer's card. PayPal gets extra design points for this little detail, as card readers that swing around in the headphone jack tend to be a big turnoff for merchants.

And while PayPal's card reader is a bit bulky compared to the competition, its extended length makes it easier to get a good swipe of a credit card every time. Not having enough surface area for a swipe is another complaint that merchants level against Square's little white cube.

But as tech reviewer Joshua Sherman — who compared PayPal Here to Square and Intuit GoPayment for Digital Trends — points out, PayPal's card reader doesn't "sit" as well on top of a device as other card readers do, making it slightly awkward to use. The New York Times' Pogue has a similar complaint, saying that the reader covers the sleep/wake switch of some iPhone models, which can be inconvenient for merchants trying to process a transaction. 

PayPal Here is compatible with the iPhone 3GS and later, and a more feature-rich version of the app is also available on iPads running iOS 5.0 or later. You can also use PayPal Here on an Android smartphone running version 2.3.3 (Gingerbread) or later.

However, Android smartphones also need to meet other requirements to use PayPal Here. Android smartphones will need a 3.5-millimeter headset jack, support for location services and Internet access via Wi-Fi or a cellular data network. PayPal does not yet have an app for Android tablets.

Merchant-friendly software

PayPal also receives good reviews in the software department. Not only is the PayPal Here app designed for maximum security, it's also easy to use, said Ben Dwyer, who reviewed PayPal Here and Square for CardFellow, an online marketplace for credit card processing.

Like most mobile payment apps, PayPal Here uses end-to-end encryption (in addition to an encrypted card reader). But it's PayPal Here's unique features that really set it apart from the competition.

As Tom DeSimone wrote in his PayPal Here review for Merchant Mavericks, the app features credit card recognition software that allows merchants to accept a credit card payment by taking a picture of the card with their smartphone. This comes in handy when you've forgotten your card reader or need to process an impromptu payment.

The PayPal Here app also features check recognition software, which allows merchants to snap a picture of a check to deposit it directly into their PayPal account.

Merchants running the app on iPad 2 or later can also use PayPal Here to scan bar codes for faster checkout. The tablet version of the app also includes more options for inventory listing, which can help speed up the sales process. And PayPal Here for iPad can be fully integrated with other point-of-sale hardware, like cash drawers and receipt printers, making checkout easier for small retailers.

More ways to get paid

Like most mobile payment processors, PayPal Here lets merchants accept all major credit and debit cards, including Visa, MasterCard, Discover and American Express. In addition to accepting cards, merchants can record and track cash payments through the app, making accounting easier.

PayPal Here lets merchants accept up to $3,000 of check payments every month with PayPal Here, and all of these checks can be deposited into a merchant's PayPal account directly through the app.

Customers using PayPal's mobile app on their smartphones can also choose to pay through the app. They simply sign into the app on their phones, check in with a business and confirm their payment to a merchant's PayPal account.

PayPal Here also allows you to send customers invoices directly through the app, making it easy to keep track of accounts receivable.

While PayPal Here's wide range of payment options is a big draw for many merchants, some companies prefer not to use PayPal as their payment processor because of the company's alternative method of depositing merchant funds.

Unlike traditional card processing companies, which deposit the funds from credit card and other payments directly into a merchant's bank account, PayPal deposits merchant funds directly into a merchant's PayPal account. As Heaven Stubblefield points out in her PayPal Here review for CompareCards.com, if you don't use PayPal regularly, you might not appreciate the extra step of transferring funds to your bank account on a regular basis.

But using PayPal does have its advantages. For one, merchants receive funds almost instantaneously, which is rare in the credit card processing world. Traditional credit card processors take two to three days to deposit funds from credit card payments into merchants' bank accounts. Transferring the funds from a PayPal account to a bank account takes the same amount of time.

However, other mobile payment processors do offer faster deposit times to bank accounts. Payments made through Square, for example, are typically available in a merchant's bank account within one business day.

On the plus side, funds deposited into a merchant's PayPal account are available even sooner than one business day — almost immediately after a payment is made — and the money can be used to make online transactions right away.

Furthermore, merchants can register for a PayPal debit card, which enables them to use their PayPal funds to make purchases in person or withdraw cash from their account at any ATM. 

Great customer service

One of the benefits of using a well-established payment-processing company like PayPal to accept mobile payments is that you have access to a wide array of support and troubleshooting resources. If you have trouble with PayPal Here, you can reach out to PayPal via email, telephone and even social media.

The company has a Twitter account just for troubleshooting (@AskPayPal), where it answers customer questions in English, Chinese, French, German, Japanese or Spanish. PayPal also has various sites for troubleshooting and answering questions about its products, including a help center and a community forum.

But its solid customer service doesn't seem to make up for what some merchants view as PayPal's overly suspicious approach to fraud detection. PayPal receives a lot of negative feedback from merchants who have had their funds withheld or their accounts frozen or terminated because of suspected fraud or suspicious processing activity. 

Many other credit card processors are accused of the same thing. After all, merchants are susceptible to credit card fraud, and payment processors are generally a cautious bunch. However, as DeSimone pointed out in his review of PayPal Here, the company does seem to be a bit cautious about withholding funds and freezing accounts. Other mobile card processors, like Square, have also been accused of being overly vigilant.

Because having your funds withheld or your account frozen is more common when using a mobile card processor (the risk of fraud is considered greater), merchants looking for a payment-processing solution that's less prone to these glitches may want to consider traditional credit card processing companies that also offer mobile solutions for business.

Originally published on Business News Daily.