As part of my free mini course on how to start an online store, I recommend 2 different credit processing services, Paypal Website Payments Pro and eMerchant.com which is an Authorize.net provider.
But the problem with recommending more than one option is that you still have to make a choice. And making the right decision largely depends on the nature of your business and the volume of payments that your shop processes.
The reason I decided to recommend more than one option is because both services have their pros and cons which I’m going to talk about in this article today. I’ve used both credit card processing solutions before so I’ll give you my breakdown and let you make the call.
Which One Is Cheaper?
The first and foremost criteria that most people use to select a credit card processor is price. But when it comes to credit card processing, the different fees are not always straightforward to calculate.
For example, some credit card processors charge you a registration fee, a monthly gateway fee, a statement fee as well as a percentage of your sales.
Some merchants allow you to apply your monthly gateway fee towards your discount rate fees. Some merchants provide a tiered discount rate depending on how much you sell.
There are many different ways to get charged depending on your sales volume and all of the numbers can get confusing depending on the scenario.
The reason I like eMerchant is because they are drastically cheaper, they offer transparent pricing and transaction fees that get cheaper as your business grows.
For example, there are no complicated rules on how you get charged.
You basically pay a flat percentage above the interchange rate which is the “wholesale rate” for credit card processing. Right now, I’m paying under 2.2%.
After researching many different credit card merchant account and gateways, the rates for eMerchant are very reasonable, the service is very dependable and they provide good support as well. Now let’s take a look at Paypal Website Payments Pro.
The fees for Paypal Website Payments Pro are fairly straightforward as well but the rates are more expensive and tiered depending on your sales volume.
- There’s a $30 monthly fee
- For a monthly sales volume of $0.00 USD – $3,000.00 USD, you get charged 2.9% + $0.30 USD
- For a monthly sales volume of $3,000.01 USD – $10,000.00 USD, you get charged 2.5% + $0.30 USD
- For a monthly sales volume >$10,000.01 USD, you get charged 2.2% + $0.30 USD
Update: Paypal removed all quantity discounts on credit card processing now so everyone pays 2.9%!
Overall, eMerchant is always going to be cheaper than Paypal Website Payments Pro.
Which One Is More Convenient?
Money is important but it’s not everything. When you sign up for eMerchant, you are more or less signing up for a vanilla merchant account and gateway.
In other words, you’ll be able to process credit cards but that’s about it. What’s nice about Paypal is that they offer additional features that are very convenient.
For example, your online store is probably going to accept regular Paypal in addition to credit cards. Paypal Website Payments Pro allows you to accept both Paypal standard payments and credit cards all through the same account.
This is really nice simply because you’ll have one less account to deal with. In other words, that’s one less account where you’ll have to transfer money out of and into your business checking every single month.
The other really nice thing about Paypal is that they offer an extremely convenient and easy to use one click shipping platform. Whenever someone makes a purchase from your shop, the address information can be sent directly to Paypal.
Then, using their multi-order shipping interface, you can quickly and easily ship all of your packages and print shipping labels from Paypal’s website. The best part is that all of the shipping fees are automatically deducted from your Paypal account.
If you run a small online store, that you means you don’t have to sign up for a 3rd party shipping platform like Shipstation.com. You don’t have to deal with downloading and uploading customer addresses to a separate shipping service. You can do everything without leaving Paypal’s website!
The Intangibles
Sounds pretty good right? But the one caveat with Paypal is that Paypal is not a true bank. With Authorize.net and your own merchant account and gateway, any money that you receive is automatically yours once it reaches your bank account and no one can easily take it away from you.
With Paypal however, they get to call the shots with your money and can place holds on your account whenever they feel like it. For example, let’s say that Paypal detects some abnormal charging patterns with your account.
Without any warning, they can freeze your assets and prevent you from accessing your funds. A full on fraud investigation can last for several months and during this period you will not be able to withdraw your money from your account.
While this has never happened to me (knock on wood), there are many websites out there such as www.paypalsucks.com that are filled with stories and complaints from Paypal users who have had their money frozen for long periods of time.
Which Should I Choose?
If you don’t care about the integrated shipping that Paypal offers and you don’t mind having yet another bank account, going with eMerchant is a no brainer.
However, if you hate maintaining a bunch of different accounts and want a nice, integrated way of shipping your orders, you should consider signing up for Paypal Website Payments Pro.
While it starts out more expensive, once you reach a monthly sales volume of greater than $10000, the difference in discount rate is not that big of a deal.
The other major thing you have to consider is whether you are comfortable with Paypal having full control over your funds. If you are even remotely worried about having your assets frozen, then avoid Paypal altogether.
Once again, this has never happened to me before but just be aware that it’s a possibility. Good luck with your decision!
