Reserves affect both, but most users experience no issues
Given how easy it is to sign up with either company, it comes as no surprise that they can impose rigid (read: frustrating) security protocols down the line.
For Square, this means the sign-up is super-easy, but if your business activities fall under a restricted category or you process a suspicious-looking transaction, you can experience a sudden account hold after you have started using the service. In that case, transactions can be withheld while Square requests information from you. Most merchants will accept payments without hassle, though.
PayPal imposes reserves on transactions. For example, there may be a $500 weekly limit on swipe and keyed-in transactions, where money above this threshold is held for 30 days before releasing it in your account. This doesn’t apply to EMV or contactless payments, since those are more secure. The reserve limits are personalized, and transactions can be held for less obvious reasons if PayPal’s algorithms deem them suspicious.
Who is least likely to cause account holds? Customer reviews and complaints talk about similar issues, but there are also many more positive ratings for Square. PayPal’s ratings tend to be lower than Square’s – sometimes much lower.