To PayPal, or not to PayPal?
PayPal is an extraordinarily powerful tool which lets merchants accept payments with ease.
PayPal manages over 184 million accounts worldwide, making it the dominant force in payments acceptance.
PayPal Pros
1. Pricing- PayPal uses straightforward flat-rate pricing which makes it better than many merchants which use tiered or ERR pricing (huge rip-offs) but not better than merchant accounts that also have flat rate pricing or interchange plus pricing.
2. Cost- For many businesses starting out, PayPal may be the cost effective payment processing option. However, once volume gets higher, it becomes more cost effective to switch to a traditional merchant account provider. Use the PayPal Upgrade Calculator to quickly see whether it’s time to consider a merchant account. Learn more about switching to merchant accounts here.
3. Recognition- PayPal is universally recognized and can therefore reduce customers’ fears of fraud.
PayPal Cons
1. Poor Customer Service- PayPal has been known to be unresponsive and downright evasive when it comes to customer service. Good luck trying to find a customer service phone number on their site. (We found it on this site)
2. Customization- PayPal has standard options that don’t have many of the features of a traditional gateway. For example, some gateways have APIs with more specialized capabilities like tokenization and/or the ability to qualify for industry specific interchange categories.
3. Rules- When you play with PayPal, you play by their rules. They can freeze your account, withhold funds, or take money out of your account for no reason. Also, funds are deposited into your PayPal account instead of a personal bank account which you control.
In conclusion, sometimes PayPal may not be the best choice to meet your payment processing needs. Doing a careful analysis and researching alternatives may save you money in the long run. If you have any questions, please don’t hesitate to reach out to me at Stella@TransFS.com
TransFS.com is the comparison shopping site for credit card processors. Just like getting multiple quotes for airfare using Expedia, TransFS lets business owners compare top quality processors on an apples-to-apples basis and makes sure they get the best deal by not having any cancellation or hidden fees, and only interchange plus pricing.
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Five Steps to Not Getting Ripped Off on Credit Card Processing
The following is a guest post by Sean Harper, one of the co-founders of TransFS an online comparison shopping website that helps business owners quickly and easily compare credit card processors. Here Sean shows you how to be an informed shopper when shipping from credit card processing.
The majority of businesses now accept credit cards, and for many it is the most important financial service – the one that is most mission-critical and most expensive. Unfortunately, the majority of business owners get a really lousy deal on their credit card processing. According to a Federal Reserve publication (P.20) The Merchant-Acquiring Side of the Payment Card Industry: Structure, Operations and Challenges businesses with less than $1M in credit card receipts / year pay between 0.69% and 1.82% more than the wholesale (interchange) price that Visa and Mastercard pay for transactions. Here are my 5 steps for getting a good deal on your credit card processing.
1. Be Professional and Know What you are Looking For
If you need a particular processing setup to work with your POS system or internet gateway know that in advance, you will sound like you know what you are talking about and it will screen out processors that are not expert at dealing with that situation (which costs more in both the short and long run).
2. No Cancel Fee
Never, ever, ever agree to a cancellation fee. The majority of processors will waive their standard cancel fee to seal a deal. Having a cancel fee which often range from $300 to $several thousand gives the processor a terrible incentive to provide you good service and keep your fees constant.
3. Interchange Plus Pricing
- there are a number of structures for credit card processing contracts. Interchange plus is the best because you are charged the visa/mastercard "interchange" or wholesale rate and then a predetermined, constant markup above interchange. It’s like buying a car for a set markup over the invoice price, you know that the car dealer is selling you the car for $500 more than they bought it from the manufacturer so you know you are getting a decent deal.
As a friend of ours who runs a software company said: "saying interchange plus is like saying – ‘I know better, so don’t try to rip me off’". Steer away from ERR (Enhanced Recover Reduced) and Tiered pricing schemes. This blog article has some quotes from an executive at Global Payments, a bit credit card processor, about how they make less money on interchange-plus because it is less confusing .
4. Shop Around
Interchange plus offers are easy to compare to each other, so shop with at least 5 processors, make sure they understand that you are shopping around and they need to be competitive.
5. Don’t Rent or Lease Equipment
For the most part credit card processing equipment is quite cheap now. Those little black terminals that you see in small retail stores usually cost $100 – $300 and a full-fledged POS system is a little more than a desktop computer, less than $2000. If you own your own equipment there is less chance for them to sneak in extra profit by padding your lease payments and it also makes it easier to switch if something goes wrong in the relationship.
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