“If I have a Paypal account for my business, do I also need a bank account?”
A lot of entrepreneurs aren’t quite ready to jump head first into getting a bank account when they first get started because there are fees associated with bank accounts, and they aren’t sure if their business is gonna fly yet. One really good thing about Paypal is that you can get paid from clients as it’s a payment processor and you can hold on to the money there.
So, YES! You CAN use your Paypal account as a bank account.
The pro's of using Paypal as your business bank account
One feature that I am loving is that you can set up a bank feed into your accounting software with a Paypal account. This works just like a bank account, so there’s no discrepancy there. All the transactions will filter straight in so you don’t have to do any data entry. Super cool!
Another thing about Paypal that is like a bank account is that you can get a debit card. This is a newer feature but I think it’s pretty cool.
They also have credit cards that you can get fairly easily, but be aware that a credit card comes with high late fees. I have a client who has a Paypal credit card, and the minimum payment is $35, and the late fee is $35. If she pays even one day late, she is just paying the late fee, instead of paying down her debt. If you get a Paypal credit card, stay on top of that!
The con's of using Paypal as your business bank account
One is the statement. If you are using a multi-currency feature or the credit card, those transactions will also be on your PayPal statement which can be a little confusing. They won’t change your balance but just seeing them there can kind of freak you out so just be aware of that.
Another biggie is that Paypal is known for freezing accounts on occasion. This happened to me when I first started my business. I had a couple of hundred of dollars just frozen in my Paypal account that I couldn’t get ahold of, and when you’re first just starting your business, every penny counts, so you need that money. I needed that money, and I couldn’t get ahold of it.
There’s Bryan Harris from Video Fruit, and he talks about when he ran an eBay business, and they froze an account with $20,000 in it! That is just mind-boggling to me and crazy that that money can be sitting there, and he can’t get ahold of it. They will still occasionally do this, even if you are playing by the rules.
Just know that it IS a possibility.
The last thing that you do need to be aware of is that you need to keep your business and your personal separate. So, if you have a personal Paypal account, you do need to get a business account to make sure that everything is staying as it should- separate!
So that’s your one action item.
If you don’t have a business bank account yet, go ahead and sign up for a free Paypal account. At least this way, everything will be separate and at a later date, you can decide if you want a different bank account. That’s totally doable!
Do you have any questions about using Paypal as your business bank account? Let me know in the comments below!