The Cheapest Way To Process Credit Cards Online – Paypal Advanced Vs Authorize.net

If you are looking to accept credit cards for your online store, you are probably considering using Paypal as your main payment processor.

Recently, Paypal released a brand new product called Paypal Advanced which allows you to accept credit cards for your online store for only $4.99 a month.

To put things in perspective, a typical credit merchant account and gateway will usually cost you between $20-30 in monthly fees. The fact that Paypal Advanced only costs 5 dollars per month makes it extremely attractive to new shop owners.

But as with all things, there are pros and cons to using Paypal Advanced for your store. It also doesn’t help that Paypal does such a poor job of explaining all of their different products.

So today, I’m going to explain in plain language what sets Paypal Advanced apart from the other credit card processors and hopefully help you determine whether Paypal Advanced is a good fit for your online business.

The Different Flavors Of Paypal

With the introduction of Paypal Advanced, Paypal now offers 3 different choices to accept credit cards on your site.

  • Paypal Standard
  • Paypal Advanced
  • Paypal Website Payments Pro

Unfortunately, it’s not very intuitive which one you should choose and what the advantages are for each. Therefore, I will start by summarizing Paypal’s 3 offerings below.

Paypal Standard

Paypal standard is completely free of charge and allows you to accept both credit cards and Paypal with your online store. However, there are 2 main disadvantages with Paypal Standard.

For one thing, Paypal Standard does not allow a customer to complete checkout on your website. Instead a customer is whisked away to Paypal’s website where they will be heavily influenced to use Paypal to pay for their goods.

Because a customer must leave your website to pay for their goods, a high rate of customers will abandon their purchase altogether.

And to make things worse, Paypal doesn’t exactly make it obvious how to pay by credit card once you make it onto their site.



The picture above shows what a customer sees when they try to checkout using Paypal Standard. As you can see, it’s not obvious how to pay by credit card. You have to click on the “Don’t have a PayPal account” button in order to be directed to a form where you can enter your credit card info.

I guarantee that you’ll shed many potential customers this way. As a result, Paypal Standard is not a good solution for an ecommerce store.

Paypal Website Payments Pro

On the completely other end of the spectrum, Paypal also offers a high end payment product called Website Payments Pro. With the pro version of Paypal, you can process credit cards directly on your site.

In addition, you have access to a virtual terminal in which you can process phone orders as well. Paypal Pro costs $30 per month and offers a complete solution to all of your credit card processing needs.

However the one big drawback is that since you are accepting credit cards on your own server, you must deal with PCI compliance. What the heck is PCI compliance? PCI compliance is a set of standards enacted by the credit card community to ensure that all credit card transactions are secure.

In order for your online store to be PCI compliant, you must follow a set of guidelines in order to process credit cards on your website or face fines or penalties set forth by your credit card processor.

Honestly, becoming PCI compliant is not that big of deal but the language that is used in the PCI compliance documentation is a nightmare to read and go through. In fact, it’s like reading a law document. As a result, many would be entrepreneurs are often confused and deterred by the whole process.

But nonetheless, if you use Paypal Pro on your online store, the payment transaction is seamless.


As you can see above, credit card processing is well blended with my website. To a customer, it appears as if everything is being processed natively.

Paypal Advanced

Paypal Advanced is kind of a hybrid solution between Paypal Website Payments Pro and Paypal Standard. Like Paypal Website Payments Pro, a customer can process their credit card payment online without leaving your website.

But unlike Paypal Website Payments Pro, the credit card information is not processed on your server but on Paypal’s instead. As a result, with Paypal Advanced, you don’t have to worry about PCI compliance.

Wait a sec…how the heck does that work? How can a customer still be on your website but not use your server to process and transmit their payment? The answer is that Paypal Advanced uses iframes to process the payment.

If you are not technical, an iframe is basically a piece of your website that is hosted somewhere else. So when a customer is checking out from your online store, everything about the webpage that they are on will be from your own website except for the credit card form fields.

Below is a screen shot of what the credit card form looks like as hosted on PayPal’s servers.



Everything you see in the box above can not be changed. However with some amount of work, you can usually blend the box in with the rest of your website.

What Are The Disadvantages Vs Paypal Website Payments Pro?

Does Paypal Advanced sound too good to be true? At only 5 bucks, it’s a bargain and you can process credit cards on your online store! Here are some of the disadvantages compared to Paypal Website Payments Pro.

  • You can not customize the way the credit card form looks on your site. Because the credit card fields are hosted on Paypal’s servers, you pretty much have to tailor your checkout page around their credit card form to make it look good
  • You do not have access to a virtual terminal – A virtual terminal allows you to process a credit card payment by hand which is useful when you take orders over the phone or when you have to conduct a special transaction

The biggest advantage of Paypal Advanced is the cost, the fact that you don’t have to worry about PCI compliance and the ability to process credit cards directly on your store without the customer having to leave your website.

Should I Use Paypal Advanced Or Get A Regular Merchant Account?

A typical merchant account and gateway will run you between 20-30 dollars a month. But the big advantage is that a normal merchant account will offer a much lower transaction fee.

For example, Merchant Plus, a credit card processor that I recommend, will allow you to process credit cards with only a 2.15% transaction fee. In comparison, PayPal charges 2.9% which can make a difference if you process a volume of payments everyday.

Right now Merchant Plus charges a $30 monthly fee ($24 if you use coupon code:MYWIFEQUIT). Let’s say the difference in monthly fees between Merchant Plus and Paypal Advanced is $25. If you process more than $3333 worth of transactions, then Merchant Plus would be cheaper.

In addition, using Paypal has many other drawbacks as well which I outline in my article below.

Why Paypal Freezes Or Limits Accounts And How To Prevent This From Happening To You

But if you want to use Paypal as your payment processor, Paypal Advanced offers an extremely attractive solution to your credit card needs. At only 5 bucks a month, it is the cheapest way to process credit cards online from a monthly fee perspective. And in addition, you won’t have to worry about PCI compliance either.

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29 thoughts on “The Cheapest Way To Process Credit Cards Online – Paypal Advanced Vs Authorize.net”

  1. For everyone who is reading this comment, please read this carefully.

    If you decide to go with MerchantPlus over Paypal make sure you ask them to set you up on Interchange Pricing vs Tiered Pricing (They are only quoting tiered pricing on their site and only showing ONE rate).

    After doing a lot of research on the industry, and speaking with someone who has over 12 years experience in the business, this is how most credit card processors take advantage of you without you even knowing it.

    Most of the time the rates they quote you up front (When on tiered pricing) are for a swiped pin debit transaction …and then when you get your statement you come to find out that you are being charged a higher rate than you were quoted because the majority of the credit card transactions that you process fall in your mid and non-qualified rate that they don’t mention to you when signing the contract.

    Here is the bigger joke…

    Depending on what processor you go with…they determine what credit cards you take fall into what rate…They can do this because there are over 300 types of credit cards and because most entrepreneurs are not savvy enough to really know what they are buying when it comes to credit card processing, it allows the processing companies to take advantage of you right under your nose.

    The fairest pricing model is Interchange Plus…It is the fairest because you pay only the interchange rate on the card you are taking. (This part of the fee gets paid by you to the issuing bank who gave the customer the card). After paying the interchange rate, you also pay a basis point fee on top of the interchange fee that is determined on your average yearly processing volume.

    There are other fees associated with this pricing as well such as transaction fee, batch fee, dues and assessments etc… but these fees also come with tiered pricing as well.

    I hope this helped you out and will save you a lot of hassle and headache when setting up your merchant account.

    If you have any further questions please don’t hesitate to contact me.

    1. Hey Scott,
      I’m not sure what you are referring to exactly, but I’ve used Merchant Plus and the rate is as advertised. Note however that this rate only applies to Visa/MC. Accepting American Express is a completely different story. If there were any anomalies with the rate, especially if it changed from credit card to credit card, we definitely would have noticed.

      1. Hi Steve –

        That is good to know.

        The reason why I thought it was different (As I described above) is because on their pricing page it says Simplified 3-Tier Rate Plan with a quoted rate.

        When I saw that, I immediately assumed that the rate quoted on the page was the rate you typically pay for qualified transactions…Where the mid-qualified and non-qualified rates are not shown (normally this is done on purpose, because they vary from processor to processor).

        Normally most advertised rates are not what you will really be charged for the majority of your transactions.

        I was looking at a merchant statement from my friend the other day…and even though they got a 2%ish rate on qualified transactions, they were paying a whopping 4.4% on non-qualified transactions (Because most of the transactions fell into this bucket they were really being taken).

        When you have 3 tiered pricing, once a credit card is swiped it falls into one of the three rates. Qualified / Mid-Qualified / Non-Qualified.

        Even though Visa Card #1 may fall into the qualified bucket, Visa Card #2 may fall into the Mid-Qualified bucket. It all depends on the card type, and the details associated with the card.

        For example…

        Say today I pay for products in your online store with a Visa card that gives me free airline miles, and then tomorrow I pay for some more stuff with a Visa card that is just issued with my bank that doesn’t give me any perks for using it.

        The “bucket” the first credit card would fall into, would be different than the second credit card would fall into … even though they are both Visa. More than likely the first card would fall either into the mid or non qualified bucket, where the first one would fall into the qualified bucket and obviously be charged a different rate

        Does that make sense?

        Normally when looking at your merchant statement, most companies make it so confusing for entrepreneurs to distinguish what they are really being paid, and more times than not when you calculate the true effective rate they are paying…it is far higher than they should be paying.

      2. Regardless, I’m going to contact them to get further clarification. Thanks for the heads up.

      3. COMMENT EDIT:

        I just re-read my last comment in the thread, and there is a mistake I want to clarify.

        In this paragraph there is an error…

        The “bucket” the first credit card would fall into, would be different than the second credit card would fall into … even though they are both Visa. More than likely the first card would fall either into the mid or non qualified bucket, where the first one would fall into the qualified bucket and obviously be charged a different rate

        The edit is marked in CAPS…

        The “bucket” the first credit card would fall into, would be different than the second credit card would fall into … even though they are both Visa. More than likely the first card would fall either into the mid or non qualified bucket, where the SECOND CARD would fall into the qualified bucket and obviously be charged a different rate.

        Sorry for the possible confusion.

    2. Vince D says:

      I agreed with what Scott described. If you take a very close look at your monthly statement, each transaction is being charged with different rates if you were in a multi-tiered rate structure. I found out a long time ago that most of my transactions were being charged more than 4% which is higher than the non-qualified rate of 3.7%. By the way, I’m not using Merchant Plus, so my experience does not apply to them. I’m using a different merchant but wondering if there are any better ones out there that would not throw in some hidden charges to us sellers?

      Thanks for the article and Scott’s comment.

  2. Sounds like an excellent option from Paypal – thanks for the thoughtful advice.

  3. Such an important piece of information you provided my friend. I don’t have a store yet but I use 2checkout for accepting paypal and other CC’s for my web design clients.

    I am on my way to offer a couple of digital goods on my website and I am using a simple paypal plugin for the payment method.

  4. We are interested in switching, but I’ll wait for the clarification.
    Thanks, Steve

  5. Brian says:

    Thanks Scott and Steve. I’ll be signing up for a merchant account and payment gateway within the next week, and already planned to go with an Authorize.net reseller. Steve, if you can work out a better qualified rate I’ll gladly sign up under you. The monthly fee and transaction fee are otherwise competitive.

    1. Hey Brian,

      I’m negotiating right now to get 50 basis points knocked off the rate. I’ll let you know

      1. Ok. Its done. Everyone who signs up with coupon code: MYWIFEQUIT gets 20% off the monthly fees in addition to 50 basis points off the mid qualified and non qualified rate. All previous signups will be converted to this new rate as well. In addition, if your sales volume is large enough, then you are also eligible for interchange plus as well.

  6. Ibrahim says:

    Hi,

    Since there’re no dates mentioned anywhere, I’m not sure when was article written, but I’d love to know how to be PCI compliant if you say its really not that complicated or expensive.

    So basically, I’m looking for a merchant account + gateway API that I’ll use with app to charge customers. Ideally I’d like to store cards, but I’m fine with storing card data with the provider.

  7. Thanks so much Steve and Scott. This discussion has proven very helpful, as I am now able to know enough to negotiate with merchant account providers. And they do just quote the lowest rate, and you have to push them to give you the whole story. It’s kind of scary; had I not read this, I would have been totally taken advantage of (and possibly I still am, but less so :).

  8. We haven’t used it yet but Stripe seems to be a pretty good option for accepting online transactions with a flat fee and no PCI compliance issues. Implementation seems fairly easy for a competent developer. We are planning on using it for some of our subscription billings and possibly more down the line.

    As part of another business I am in, I do use a standard merchant account, and the transaction fees are all over the place. I long ago gave up trying to shop that around as everyone gets you either coming or going!

  9. David says:

    Thank you for this synopsis but… why is there no date? How can I tell if I am looking at information that is likely to be accurate, or 5 years out of date?

    Without a date on this article, it is unfortunately fairly useless…

    1. I get a lot of traffic to this post, so I always keep it up to date. Is there any specific question you have?

  10. So which site is giving the discount with your coupon code? And will that discount come out better for a low volume sales site than PayPal? Thanks for taking the time to sort all this out.

    1. Yep, Stripe definitely works and is easy but it will end up being more expensive than PayPal in the long run.

      1. badrelmers says:

        why!? both have the same fees 2.9% + $0.30, and paypal we need to pay the 30$ of monthly fee to be able to integrate it with our site (there is the new product called PayPal Payments Advanced with only 5$ per month but I couldn’t find any decent cart that support it yet,there is only magento witch is a heaven to use and need a VPS at less,prestashop opencart virtuemart woocomerce doesn’t support it yet)
        so the prices I think are like this now
        stripe: 0/month 2.9% + $0.30 per transaction
        paypal: 30/month 2.9% + $0.30 per transaction

        paypal will be good only if our sales volume is
        $3,001+ to $10,000 2.5% + $0.30*
        $10,001 to $100,000 2.2% + $0.30*

        and there is hidden things in paypal (international fees is not 2.9% + $0.30 )

        1/ “International Sales: 1.0% Applies to payments from another country. cross-border fee and/or 2.5% currency conversion fee”
        look at this huge per cents https://www.paypal.com/us/cgi-bin/marketingweb?cmd=_display-xborder-fees-outside&countries=

        2/American Express© card usage fees: 3.5% per transaction

        while stripe doesn’t charge anything for this,i copy past what stripe says in there site
        “No setup fees, no monthly fees, no minimum charges, no fees for validations or failed transactions, no fees for different card types (e.g. American Express, corporate cards, rewards cards), no fees for international cards, no card storage fees.

        here is a beautiful comparison between both for long term
        http://ecommerce.shopify.com/c/payments-shipping-fulfilment/t/comparison-of-shopify-payments-with-stripe-vs-paypal-pro-148923

        I think right now there is only one way to have benefit with paypal: first using magento because of compatibility, then sell to USA customers only, then make more than 3000$/month in sales, if we have this three points then yes “strip will end up being more expensive than PayPal in the long run. ”
        please correct me if I m wrong, this is my first research in this things I hope not to make some stupid noob errors for my first US client
        thanks for you answer

      2. I believe you just answered your own question. If you only ever plan on making under $3000 a month then it doesn’t matter:) Once you get more volume, it pays to get a merchant account with interchange rates.

      3. Your statements about PP Advanced are not accurate either. All of the major carts support PP Advanced with an addon.

      4. badrelmers says:

        thank you Steve

        I didn’t know that PP advanced exist in paid add-ons because I was searching only free lol, thanks again :)

        please can I integrate merchantplus with prestashop (using the authorize.net plugin that comes with prestashop) as you did with opencart here https://www.youtube.com/watch?v=aeE89wn8sgA , because merchantplus chat didn’t gave me any clear answer neither prestashop.
        I don’t want to use opencart because the owner (Daniel Kerr) is very bad person with very bad attitudes and the most dangerous is that the owner (Daniel) do not care of our security, look this bad history and how he treat and insult developers wanting to help him (read Daniel comments here)
        http://blog.visionsource.org/2010/01/28/opencart-csrf-vulnerability/
        http://www.techchattr.com/never-use-opencart
        opencart is one person developer now because the owner doesn’t accept developer help or advices…

        if the merchantplus integration is impossible do you know any other merchant account like merchantplus because I cant find any better merchant that can bet this 0.3% + $0.25 (30 $/month)

      5. Daniel deals with a lot of riff raff on a day to day basis. While he did not react that well in the comments of that post, the author of that article was totally off base citing completely inaccurate claims for the most part which clearly pissed him off. I would not take that as a representation of his character.

        The other article on security is from 2010. OpenCart has been one of the more secure carts out there. It is also coded in a very simple easy to understand manner which makes it easy to edit. Outside of one vulnerability that I can remember from version 1.4x, it’s been awesome.

      6. badrelmers says:

        Thanks for this clarification, I couldn’t decide by myself but just follow because they seemed to know what they are talking about, but now it s more clear for me (because it doesn’t make sense to have this bad reputation and vulnerabilities and still being the third or second used shopping cart in the world without any type of advertising,or maybe the first in the world if we exclude the huge Magento advertising budget).

        the good in opencart is that it comes with a lot of free payments methods and OP addons prices are very low compared with prestashop or magento.

        thanks Steve for your answers and time
        have a nice day and life :)

  11. badrelmers says:

    Skrill is a strong merchant account too
    better than stripe and paypal
    https://www.skrill.com/en-us/business/merchant-fees/
    no monthly fee and 2.90% + $0.29

    up to $ 3,000 2.90% $0.29
    $ 3,000.01 – $ 10,000 2.40% $0.29
    $ 10,000.01 – $ 100,000 2.00% $0.29
    more than $ 100,000 1.70% $0.29

    free plugin for prestashop
    paid plugin for opencart

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