When you’re just starting a brand new business, or switch from cash-only to also accepting credit cards, you need to consider your payment processor.With the eCommerce expanding, business owners may be enticed to explore other payment processing options . As a departure from traditional merchant services and credit card machines. Both provide online payment processing, but they cater to different areas of the market. Let’s explore the differences between a traditional merchant services account and PayPal.
Lots of entrepreneurs lean towards PayPal to accept payments in an effort to reduce their overhead. The irony is that while PayPal doesn’t have a monthly fee, its rates tend to be much higher than most traditional merchant accounts, so which one is better?
PayPal is one of the leading online payment processing services. It offers a host of benefits for business owners, particularly small business.
PayPal isn’t a merchant account provider. It is a third-party processor, and it aggregates all of its seller accounts into one large merchant account. PayPal has a different business model than traditional merchant account providers.
PayPal doesn’t spend that much time vetting applicants as a merchant account provider does.PayPal may be a lot of smoke and mirrors in comparison to a traditional merchant services account provider.
Traditional Merchant Services:
A merchant account is a kind of business bank account that allows a business to accept and process electronic payment card transactionsand most businesses strive to keep up with the continually changing marketplace, thus offering in-person and online sales.A merchant account is unique. When you apply, the company’s verification department will look at your industry, your personal credit ,your processing history (if any), your business’ creditworthiness, and other factors. The process never used to be so complicated but because of the third party aggregators such as PayPal it’s a lot more serious. Traditional merchant services will provide account which suits your requirement. Each and every business has different requirement.
How PayPal is Different
PayPal (and Stripe) are what are considered merchant account Aggregators. PayPal has ONE merchant account that they let millions of people use, instead of issuing a single merchant account to a single business.
The Paypal flat rate price is as shown below:
- Online transactions: 2.9% + $0.30
- Swiped transaction: 2.7%
- Keyed transactions: 3.5% + $0.15
- Invoices: 2.9% + $0.30
That’s it, for the basic package.
Cost PayPal vs. Merchant Account:
- Always the first thing merchant sees is the cost. “What’s the cost?”. Which is a wholly reasonable and very important question to ask.
- PayPal has standard fee structure. They do not charge PCI compliance fees and no statement fees. They do not access fee for chargebacks. There is no hidden charges.PayPal’s basic account doesn’t cost a monthly fee and charges a lower transaction fee than most other merchant accounts. But this account only allows you to refer customers to PayPal from your website and accept credit cards on your mobile phone. It doesn’t allow you to process PayPal on your site or accept payment via phone, fax or mail.
On the other hand, merchant account pricingdiffers considerably. Mostly they offer tier pricing. Tiered pricing are confusing and difficult to compare because of massive inconsistency from one processor to the next.A merchant account allows you to process credit card and debit card payments., also Merchant accounts may be available from banks, such as Chase, or you can obtain one through a third-party company that focuses solely on processing electronic payments for businesses. Depending on the type of merchant account you choose, you can process payments in person, by mail, over the phone or online. Some merchant accounts may allow more than one type of processing.
Merchant accounts are unique to your business. And the contract terms are based on your circumstances and financial history. If you choose a reputable processor, you’re going to experience a high degree of reliability. Unfortunately, it doesn’t mean that you’re totally immune to a hold or termination if their risk department suspects something odd. Not all merchant account providers may approve your application. It depends on a lot of factors.
Risk is a spectrum. It depends on which category your business falls under. High risk or low risk.
Which is Right For You?
PayPal and Stripe are great entry level options to accept cards as they comes with some flexibility built in, but they don’t provide much protection. When your business is very small or you want to add a payment option, PayPal and Stripe is the perfect option.
Once you have money coming in consistently though anything more than 10K/month, you want to have Traditional Merchant Accounts setup.
So how do you protect yourself with the right Merchant Account?
Setup multiple Merchant Accounts — each with their own member bank
Setup a gateway that automatically routes your sales across those Merchant Accounts
Even the best Merchant Account Providers can shut down your accounts on a whim and there are actually MANY reasons a provider could shut down your account that have nothing to do with your Individual Business.
It’s important to have the right gateway. Right gateway is the foundation of accepting payments this way. Without the right gateway, it is nearly impossible to setup Multiple Merchant Accounts.
Even if you’ve been rejected as high risk before, With our multiple bank partnerships – you are given the freedom to choose what solution is best for your business. IPayTotal enables you to perform transactions in the most popular currencies from around the world. Our dedicated team assists merchants by analyzing factors and facilitating dispute management and chargeback loss recovery.
Our high risk merchant accounts allow you to accept all major credit and debit cards and Our MOTO payment gateway allows accepting transactions on phone. Our MOTO solutions ensure that credit card transactions are handled swiftly, securely and accurately. IPayTotal is designed to extend your possibilities to easily accept alternative payments online using local and international payment systems. So what are you waiting for? Apply now in IPayTotal.