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How and When to use PayPal

Contributed by James Hold    Dec 14, 2004
James is eVerity's President and Lead Account Manager.

Sign up for PayPal and start accepting credit card payments instantly.

How and When to Use PayPal

As a general rule, its best to use PayPal when your monthly sales average less than $1200. Depending on your industry and the rates you are able to get, it may be best to use a standard merchant account when your monthly sales exceed $1200.

About PayPal

With PayPal there is no setup fee and no monthly minimum so you have nothing to lose by opening a PayPal account. Also, there are fewer different types of fees. On the downside, these fees can really add up. Also, you may find that some customers refuse to pay you using PayPal because they do not trust it as much as they would trust being able to use their credit cards directly on your site.

About Your own Merchant Account

Having your own merchant account is rarely as expensive as PayPal's web site claims. Accepting credit cards in your name, without having to use a 3rd party, is significantly more professional. You will have greater credibility in the eyes of your customers and potential customers. It could also be less expensive, depending on the rates you are able to negotiate. The downside is that it may be a little more complicated to integrate with your site, and its harder to keep track of all the different fees. Visa/ Mastercard charge different fees than American Express and Discover. (There is not a flat rate like PayPal.) In general, you will not pay more than 2.4% average, whereas with PayPal you will pay 2.9% to 3.9%.

The extra 0.5% to 1.5% that you will pay with PayPal can REALLY add up. Yes, there are lots of fees with your own merchant account, but most of these do not change regardless of your sales volume or number of transactions. So the higher your sales volume, the better off you will be with your own merchant account.

Making a Decision

A good first step is to analyze your monthly sales. What do you think will be the average amount of each sale? How many sales will you do per month? Add up those transaction fees (30 cents each), take out PayPal's standard rate (which can be as high as 3.9%), and make a rough determination of what it will cost to accept payments through PayPal.

Next, estimate your monthly fees from your own merchant account. To get an idea of what a competitively priced merchant account would cost, please visit our partner: https://www.e-onlinedata.com/evws. (eVerity used to be an authorized provider of merchant accounts, but we have decided to outsource this and focus more on our core hosting business.)

Now, look at the two figures in front of you. If PayPal is significantly less, and appearing professional is not critical at this stage of your business, I'd suggest going with PayPal. If your own merchant account is less, then go ahead and contact a few different providers (including the link above) and see what kind of deals are available.

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