It was originally built for individuals trying to auction off their stuff on eBay who needed a way to take payment from other individuals looking to buy.

The major advantage to using the service is that it lets anyone accept credit cards with no up-front costs and none of the normal setup required to become an authorized credit card merchant.

Instead, PayPal just charges the seller a small percentage of the total amount and a small transaction fee each time a purchase is made. In essence, you are using PayPal's merchant account and they are charging the seller a fee to do so.

And, when compared to the upfront fees, recurring costs, development times and overall hassle of setting up credit processing using the traditional method, it wasn't long before small businesses realized the benefits of using PayPal's service as well.

Today, PayPal claims to have over 42,000 Web sites using their payment services. And, they have expanded the product line to include easy-to-configure "Buy Now Buttons" to place on your site, full shopping carts, subscription and recurring payment services and a feature specifically made for taking donations online.

However, you may not want to rush to PayPal's Web site and sign up just yet.

While everything so far sounds pretty good, there are some pretty major downsides to using the PayPal service.

In fact, when I did a search for PayPal on the Google search engine, their Web site was immediately followed by PaypalWarning.com and PayPalSucks.com ˜ not a good sign.

These Web sites offer a collection of information ranging from law suits to personal horror stories to warnings about specific things to watch out for when using the PayPal service.

I believe the root of the problem is directly related to what makes the service so appealing. The fact that you don't have to go through the rigorous process of qualifying with a bank to become a full merchant authorized to take credit cards opens the PayPal system up to people with fraudulent or illegal intentions.

Furthermore, the terms of service that a seller agrees to when signing up leaves the small business open to some major financial concerns.

One of the most common complaints for sellers is for little or no reason their account will be frozen for weeks, months or forever. During this time, customers can continue to place orders and money will continue to go into your PayPal account but you can't access it until the situation is resolved.

This leaves the seller in a situation where they have to either ship new orders knowing they may not get paid or not ship them, resulting in more negative feedback from customers, making it that much more difficult to regain access to your account and money. This lovely situation is known as the PayPal domino effect.

And, if that is not enough, another agreement you make in the terms of service states that even if you have a legitimate claim against PayPal, you waive all rights to be able to sue them to compensate for your loss.

So, that leaves you with the PayPal customer service team. And, as you may have guessed by now, customer service is one of the biggest overall complaints with PayPal and has a notorious reputation in the industry as being unhelpful and incredibly frustration to deal with.

If you are sold on the idea offered by PayPal but want a different solution, there are many to choose from. These, listed on PaypalWarning.com, offer similar services but are at least backed by FDIC-insured banks: ProPay.com (http://www.propay.com), c2it.com (https://www.c2it.com) and Yahoo! PayDirect (http://paydirect.yahoo.com).

However, even though their track record and customer service may be much stronger than PayPal, I still believe the system is inherently flawed because of how easy these services make it for just about anyone to anonymously open an account and perform fraudulent and illegal transactions.

So, if you are considering online credit card payments for your business, be aware of the risks and limitations when dealing with transaction companies like PayPal and consider spending the extra time and money for the features, service and protection that come with having a full merchant account through your bank.