June 29, 2010 AT 11:17 am

PayPal vs. Merchant Account fees

Pt 10162
This “could be” a useful tool if you’re running a business and what to compare Paypal vs Merchant account fees (credit cards).

While PayPal is a great option for getting your business off the ground, most e-commerce businesses can save on credit card processing fees by switching to a more robust merchant account. It’s easier than ever to get an internet merchant account, and many support processing Visa, MasterCard, Discover, and American Express right out of the box with no additional steps or fees.

Anyone use TransFS? The issue we have with the tool is the fees do not seem to be accurate, cute – but not quite accurate. It’s good to manually compare rates against this – at least a good starting point.

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3 Comments

  1. Hey – I am curious, why do you think the fees are not accurate? I did the math behind the calculator myself and am very confident it is correct. Email me if you want to talk through the details.

    One legitimate criticism is that the merchant account side of the equation does not reflect the average merchant account. It reflects the average merchant account that someone found via the TransFS marketplace, where the pricing is much better (and clearer) than outside the marketplace.

    We thought about ways we could include some notion of the variance in merchant account fees, but decided that was too messy from a UI perspective. We are working on another free web tool that addresses that issue.

    So the comparison is between a reasonably priced merchant account and paypal. Not between an overpriced merchant account and paypal.

  2. How would a online merchant get PIN debit rates? I mean this in a very practical manner: I have never seen a merchant with any way to use a card as Debit – only as a credit card.

    Also, it appears you are using only ‘qualified rates’ and not taking into account the many mid and non-qualified transactions that appear when one actually takes cards.
    http://en.wikipedia.org/wiki/Merchant_account#Third_Tier_-_Non-qualified_Rate

    There’s also PCI that can be major factors costing 100$ a month

    So: your math is totally correct if you believe the merchant account sales reps. It may not be if you are actually running a business that takes cards. :)

    (EDIT: I did a sample bid to check out the rates – they’re very good, but not 1.9%. I’d compare the costs to other merchant accounts not paypal as the contrast will be greater!)

  3. It isn’t just the PayPal fees which are higher, it’s the overall costs associated with PayPal transactions.

    When I sell something on my web site I pay the Google Checkout fee, put it in a box and send it via normal mail with free proof of postage.

    When I sell via PayPal I have to pay their much higher transaction fees and spend more on signed for recorded delivery in case the buyer decides to open a dispute with them. Unfortunately the ease with which you can open and win a dispute on PayPal makes it a prime target for scammers who just want something for free. I know people who always open a dispute as a matter of course on anything paid for by PayPal which they didn’t sign for.

    PayPal don’t seem to care when the buyer has 20 open “non delivery” cases.

    That isn’t even mentioning the way PayPal freezes your account the moment a dispute is opened, randomly decides to keep your money for 20 days but expects you to ship the item, or charges you for withdrawing less than £50 in one go.

    With Google Checkout you can still get chargebacks but they are much less common and easier to deal with. Proof of postage, which costs nothing, is usually enough. It is much easier to manage orders too and ties in nicely with a free Google Checkout based web shop.

    I sell stuff on eBay and have to add £5 for domestic sales and £7 for international ones just to cover the eBay and PayPal costs. It is preferable for both parties if people see the eBay listing and them come to my web site an buy from there anyway. 40p to list is not a cheap form of advertising but eBay is unfortunately the number one market place. If only it was cheaper to add your own stuff to Amazon…

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