Comparing Traditional Merchant Account and PayPal Fees
Fees are the number one issue that comes with accepting credit cards. They eat into the merchant's bottom line, much more so than a fraudulent card or charge back. PayPal's fees are graded, meaning that they charge less the more you process. Traditional merchant account fees have a wide range of cost because of the amount of companies offering credit card processing.
The typical fee structure of credit card processing is thus: a monthly access fee, a per-transaction fee, and a percentage of each transaction. All vary widely depending on the processor and the purchase volume.
Here's a look at PayPal fees:
- No monthly fees for all but one card processing service.
- 2.9% + .30 per transaction on volume up to $3000 per month.
- 2.5% + .30 per transaction on volume between $3001 - $10,000 per month.
- 2.2% + .30 per transaction on volume between $10,001 to $100,000 per month
- 1.9% + .30 per transaction on volume above $100,001 per month.
PayPal's Website Payments Pro charges a $30 monthly fee for access. However, there are value-added services that are not available in any other payment arrangement.
As mentioned before, traditional merchant accounts vary widely in fee structure. What follows is an average derived from various merchant service providers:
- Gateway fees for accessing the service every month - $10.00
- Statement fees - $8.00. Providers send a statement every month, and charge for the paperwork.
- 2.1% removed from overall sale.
- Average processing fee - .22
- Monthly sales minimum - $20.00
One major difference between the two is the cost to set up an account. PayPal is a "free" service in that it costs nothing to set up the merchant account. Opening a traditional merchant account starts at $100 and goes up from there, depending on what type of services you need. A terminal of some sort needs to be purchased for a merchant account, but refurbished units can be purchased and set up with a minimal investment.