My name is Matthew Bredel and as of March, 2007, I am a full-time, work-at-home internet marketer.
For close to 10 years, I worked for a defense company which was an OK job, but I was so uninspired in life and frankly, I needed some more money. That is when I first discovered internet marketing! Now I admit that I didn't start making thousands in my first couple of months (in fact, I lost my shirt!), but I finally saw the "internet light"...
“Should I use Paypal or a Merchant Account to process credit cards on my website?”
Great question! And it is one that I have struggled with in the past, as well. The answer is simple: both. But at the beginning, which one should you focus on? Let’s break them down briefly with a few pros and [...]
“Should I use Paypal or a Merchant Account to process credit cards on my website?”
Great question! And it is one that I have struggled with in the past, as well. The answer is simple: both. But at the beginning, which one should you focus on? Let’s break them down briefly with a few pros and cons:
Advantages of Paypal:
- For merchants with accounts, very easy and quick to set-up
- For customers with accounts, very easy to make purchases
Disadvantages of Paypal:
- High transaction fees
- Limits on flexibilty (though, they do have API capability)
- Can hurt conversion for customers without Paypal accounts
- Suspended accounts can affect your other businesses
***
Advantages of a Merchant Account
- Lower rates and fees
- No need to have a third-party account (payments are made without a login)
- More flexibility with customer management and direct access to your own gateway
- Deep API capability (including custom payment pages)
Disadvantages of a Merchant Account
- Setting up an account may take a few weeks and a lot of paperwork
- Limited to credit card companies you sign up (and pay!) for
- Credit card transactions only (versus debiting options with Paypal)
***
As you can see, both have their advantages and disadvantages. In my opinion, conversion is key and providing your customers with the easiest way of making a payment is most important. For those WITH Paypal accounts, that is the simpliest way of buying. For those WITHOUT Paypal accounts, the merchant solution is much easier.
The rates are usually a little bit cheaper working directly with the merchant banks, but there are usually higher initial monthly rates for having processing capability of credit cards such as American Express, Discover and even eChecks. As your monthly sales increase, these monthly rates become less significant and you will find Paypal costing you much more money than a merchant account.
Further, the flexilibility of creating custom sales pages and interactivity with your own brand and website is much more limiting with Paypal accounts.
This is all leading to the simple conclusion that for those just starting out, using Paypal is a great place to begin. It is quick, easy and low risk. In the meantime, you can start initiating your merchant account creation and integration and hopefully you can blend the two together into your website for the ultimate balance and flexiblity for both your clients and yourself.
cheers…matt
SUGGESTED MERCHANT ACCOUNT SERVICES:
Powerpay - They are perhaps one of the most well-known and respected credit card processing companies in the business. Many of the “internet gurus” use Powerpay exclusively. They seem to be quite flexible with adapting to your sales volume while providing competative rates in the business. I personally have not used them, but many of my internet friends swear by them. Learn More about Powerpay…
e-OnlineData - I found these guys through my hosting company for NetWebVideo (Pair Networks) and for the year that I have used them, I have had no issues at all. They are associated with Authorize.net (perhaps the most known gateway system out there) and they have always been very good about answering my questions and providing other customer service requests. Again, very low rates. Learn More about e-OnlineData…
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I’ve used both, and you are right, I’ve noticed a deep decline in conversion rates when I offer paypal for payment options only. A merchant account usually raised the conversion rates by about 20% in some cases! Another caveat to consider though is be sure to get a merchant account that integrates easily with your shopping cart, wasting away time in the coding process never really helps the bottom line either! best of luck!
December 13th, 2008 at 10:43 pm
I never did the actual percentages, but 20% would not surprise me here. For those of us WITH paypal account, it is easy to do, but if you don’t have one, you are more than likely NOT to buy the product just because of the hassle with creating an account.
I think this is what happened with Google Checkout. It works great but those just using this as their merchant suffered terribly…not because it was bad, but they just did not want to create another stupid account somewhere else.
cheers…matt
December 15th, 2008 at 7:51 am
Lower rates and fees with integration can really help in some cases. Paypal can really limit your conversion rate, I’ve seen multiple product type conversion sales jump dramatically after an independent merchant account was setup. If your margin is there, and your volume is there, it is worth it to make the leap. good luck!
April 18th, 2009 at 9:55 pm
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November 28th, 2009 at 5:42 am