Paypal vs Merchant Account

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Selecting the Best Payment Solution for You:
PayPal vs. Merchant Account
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Which is better, PayPal or a merchant account? We get asked this question... a lot. Each has its benefits and its drawbacks. To make your choice as easy as possible we've created a side-by-side comparison below.

The first thing you need to know is that there are two components to processing credit cards with a web site. There's a gateway which connects your web site with the credit card processor, and the credit card processor which actually processes the transaction. You always need both elements to accept credit cards on your web site.

Now that you know that, let's compare both below and see what's best for you and your situation.
Low budget, easy to install.

What is PayPal?
PayPal is an all-inclusive external payment solution. This means that people leave your web site to pay their bill, and then come back to your web site when they're done. PayPal handles all the security for you which is nice. All you have to do is tell PayPal how much to charge, and they do the rest.

How much does PayPal cost?
PayPal doesn't have any upfront costs. There is no application fee, no setup fee and no monthly fees for the basic package. PayPal will deduct a percentage from each payment people make. This way if you don't make any money, you don't spend any either.

How does shipping work with PayPal?
Shipping can be a problem with PayPal. The number one complaint we get from PayPal users is the inability to calculate specific shipping amounts. While PayPal offers several shipping packages, real-time shipping calculations with UPS or FedEx is not available.

What are PayPal's benefits?
PayPal is extremely easy to use and it's a name that people trust. If you are starting a brand new business, people will trust making a payment through PayPal. Accepting international payments is also a breeze with PayPal. Last but not least, the operating costs are low and it's easy to install.

What are PayPal's drawbacks?
The shipping issue is a symptom of PayPal's biggest drawback... flexibility. Because PayPal is a self-contained 3rd party system, you have to work with the tools they give you. You can't create coupon codes that give 5% off. You can't highly customize your email receipts and so on and so forth.

Overall opinion of PayPal:
PayPal is an excellent payment solution for a business on a low budget that wants to get up and running quickly and easily. In the long term you may outgrow it and move to a more flexible merchant account solution.

Invisible, highly flexible.

What is a Merchant Account solution?
A merchant account solution can be provided by one company or two. Either way you'll need a gateway and a processor. The end result will be an internal payment solution where you control the entire process and customers never leave your web site. Your site handles security and manages all the data.

How much does it cost?
Application fees range from $99 to $600 here and monthly fees can also vary widely. Our advice is to never apply at your bank for a merchant account. They are always too expensive. In addition to those fees, there will be per transaction fees that vary.

How does shipping work?
Shipping works any way you want it to. We can create a real-time shipping situation where you get accurate UPS calculation for example. We can do tiered shipping, flat rate shipping or any other shipping because merchant accounts are flexible.

What are the benefits?
The biggest benefit is flexibility. You can offer coupon codes, you can create customer accounts, you can create mailing lists... anything. If you can think it, you we can do it for you.

What are the drawbacks?
The biggest drawback is cost. Additionally, accepting international payments with merchant accounts can be very tricky. Other than that, there's the customer trust factor. If you are a brand new business you have no track record of trust although there techniques we can use to build trust in those situations.

Overall opinion of merchant accounts:
The merchant account is a supremely flexible solution that will grow as your business grows. In the short term it will cost more to get up and running but in the end it's usually worth it.

Help is waiting for you.
Our experienced consultants will be glad to help you figure out what the best solution is for you. If you have an existing web site or you're planning on building a new one, choosing the perfect payment solution for your needs will be an important part of your success. Contact us with any other questions you may have and we'll be happy to help.

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