Sunday, August 1, 2010

Merchant Account Fees Higher than Paypal

I run a series of websites so I'm now in a position to compare the use of Paypal as a merchant account credit card vendor with a commercial old style online one that I use.  Here's the deal.

PayPal charges a fixed 2.5% cost for processing credit cards.
My bank along with the fees from visa, mastercharge, and amex for credit card processing total 3.8%.

This is a pretty significant finding. I'm wondering, since I process in the millions, whether I should switch entirely to PayPal.  The 1.3% difference is $13K per million per year.  On a five million dollar business, thats $65K per year.  That's a lot.

1 comment:

Jestep said...

Your cost seems abnormally high, but I agree that most merchant accounts won't beat Paypal. I often find fellow merchant service providers touting that they are lower cost than Paypal. But, when you take into account that Paypal has no downgrade fees, monthly fees, or any additional fees than the base rate and transaction fee, it is very difficult to beat Paypal strictly on a cost basis.

As far as customer service, and what a business's customers want to pay with, it's still not difficult to see the value in a merchant service provider or bank.