When you are just starting a new business venture, or perhaps wishing to switch from a cash-only business to accept credit cards, you will need to consider that payment processor you will be partnering with.
And with the e-commerce sphere constantly expanding, business owners have now numerous payment processing choices, including the traditional merchant services with credit card machines to the famous PayPal.
Both payment methods provide a reliable online payment processing, however, they to cater to various areas in the market. So, let us explore the differences between PayPal and the traditional merchant account services.
PayPal: For the Starting and Small Businesses
Considered as one of the leading online payment services PayPal offers a lot of benefits to starting business owners, especially small-scale businesses.
PayPal is not a merchant account provider. It’s a 3rd party processor and it combines all of its seller accounts into a single large merchant account. This payment processor has a different business model than the traditional merchant account provides.
Furthermore, PayPal does not spend too much time in selecting their applicants as a merchant account provider does.
What Makes PayPal Different?
As mentioned before, PayPal is called a merchant account aggregator. PayPal is a single merchant account allowing millions of their clients to use it rather than issuing a single merchant account to each business.
The flat price rate for PayPal is as follows:
- Invoices: 2.9 percent + $0.30
- Keyed transactions: 3.5 percent + $0.15
- Swiped transactions: 2.7 percent
- Online transactions: 2.9 percent + $0.30
This is for the basic package.
Merchant Account: The More Traditional Payment Method
Merchant accounts are a type of bank account that allows a business or organization to accept and process credit or debit card transactions— whether it is in-person transactions or online sales.
A merchant account is unique. When applying for an account, the bank’s verification department will strictly look at your industry, your processing history if applicable, your personal credit, your business’ credit, and other several factors.
A traditional merchant account will provide you payment processing services that suit your business’ requirements.
What Makes Merchant Account Different?
As mentioned before, merchant accounts are unique to each business. And the contract terms are usually based on the business nature and financial history.
Merchant accounts processors are very strict in terms of approving a merchant. Not all of them can approve your application and even if you already have a merchant account, you are not immune to termination of your business proves to be risky for the processor.
PayPal VS. Merchant Accounts: Cost and Pricing
The first thing that a merchant always see is the cost.
“What is the cost of this payment method?”
A question that is indeed reasonable and quite important to ask before you even consider choosing a payment processor.
PayPal has a standard fee structure. They don’t charge PCI compliance fees without statement fees. They also don’t have chargeback fees. There are no hidden charges.
The basic account for PayPal does not cost a monthly fee and even charges a lower transaction fee than merchant accounts.
However, this account only allows you to refer your clients to PayPal from your site and accept credit or debit cards on your smartphone. It does not allow you to process PayPal on your website or even accept payment via mail, fax or phone.
The price for merchant accounts, on the other hand, differs significantly. Most merchant account providers offer tiered pricing. This tiered pricing can be somewhat difficult and confusing to compare because of the huge inconsistency from a merchant account processor to another.
In addition, the prices of a merchant account can also depend on whether you are a high-risk or a low-risk business. High-risk is often charged with higher accounts and processing fees due to their high-risk nature.
A merchant account will allow you to accept and process debit or credit card payments. In addition, it may be available from banks like Chase or you can obtain it via a 3rd party company that focuses on processing electronic card payments for business.
Furthermore, depending on the kind of merchant account that you choose, you can process payments by mail, in-person, online or over the phone. There are even some merchant accounts that allow more than one kind of payment processing.
So, Which is Right For You?
PayPal is a great entry-level choice to accept cards since they feature some flexibility. However, they do not provide that much protection. If you have a small business, startup organization or just want to add another payment processing option, then PayPal is a great choice.
However, once you have funds and profits consistently coming in— say more than $10,000 per month— and want to give your customers a more reliable and secure payment gateway, then you will want to apply for a traditional merchant account.
Choose iPayTotal: A High-Quality Merchant Account Provider
If you are now planning to grow your business and want to apply for a reliable merchant account, then choose iPayTotal.
We offer reliable and customized credit card payment processing solutions that only suits your business model. Without multiple established bank partnerships, you’re given complete freedom in choosing the best payment processing solution for your business.
Our high-risk merchant accounts allow you to accept all major debit and credit card brands. In addition, we offer several payment gateway solutions such as MOTO payment gateway that allows you to accept payment transactions over the phone. We ensure a payment gateway that handles transactions securely, swiftly and accurately.
iPayTotal allows you to perform transactions in major currencies around the world including US Dollar, British pounds and more. Not only that, but our dedicated team also helps you in analyzing fraud factors while facilitating dispute management tools and chargeback loss recovery.
So, what are you waiting for? Don’t doubt us and apply now at iPayTotal!