Score Breakdown by Category
PayPal scores poorly across nearly all categories, with particularly concerning provisions around fund control and exit rights.
Why this score: PayPal scores lowest among major processors due to: (1) 180-day minimum holds with no maximum (Section 4.5); (2) $2,500 per-violation penalties (Section 9.3) that can deplete your balance; (3) "permanent limitation" without explanation (Section 9.1); and (4) rolling reserves that can be extended indefinitely.
Industry comparison: Stripe: 35/100 (indefinite holds but no penalty fees) | Square: 58/100 (180-day max, appeal rights) | Category avg: 45/100
Why this score: Section 14 requires AAA arbitration (more expensive than JAMS) with a strict class action waiver. The opt-out window is only 30 days from signup (Section 14.3)—easily missed. As noted in Zepeda v. PayPal (2023), courts have enforced this "despite its one-sided nature."
Industry comparison: Stripe: 40/100 (JAMS, same 30-day opt-out) | Square: 45/100 (JAMS, clearer opt-out process) | Category avg: 42/100
Why this score: Section 10 contains one-sided indemnification—you indemnify PayPal, but not vice versa. The liability cap (Section 11) limits PayPal's exposure to $500 or fees paid, whichever is less. The "damages" clause (Section 10.2) allows PayPal to deduct claimed damages directly from your balance without court judgment.
Industry comparison: Stripe: 55/100 (mutual indemnity) | Square: 60/100 (mutual indemnity, higher caps) | Category avg: 52/100
Why this score: PayPal's Acceptable Use Policy is vague on many categories, using terms like "items that encourage...illegal activity" without clear definitions. Section 1.3 allows 30 days' notice for ToS changes but changes to fees or the AUP can happen with less notice. Per Section 9.1, PayPal is not required to explain account limitations.
Industry comparison: Stripe: 60/100 (clearer restricted list) | Square: 55/100 (good docs, less notice) | Category avg: 48/100
Why this score: The Privacy Statement allows extensive cross-family data sharing (Venmo, Braintree, Honey, Xoom, Paidy—see Section 4). Purchase data is shared for marketing and advertising. PayPal acquired Honey specifically to track shopping behavior across the web.
Industry comparison: Stripe: 52/100 (less cross-platform sharing) | Square: 55/100 (no Honey-style tracking) | Category avg: 50/100
Why this score: The lowest exit rights score among major processors. Section 4.5 allows 180-day post-closure holds with no maximum. The new $10/month inactivity fee (Section 4.6, effective Dec 2025) can drain dormant account balances. Per Section 10.4, negative balances can be sent to collections and reported to credit bureaus even after you close the account.
Industry comparison: Stripe: 40/100 (indefinite holds, no inactivity fee) | Square: 50/100 (90-day max, no inactivity fee) | Category avg: 42/100
Analysis