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

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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.

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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, eMerchant, a credit card processor that I recommend, will allow you to process credit cards at a flat rate above the interchange rate. As a result, I pay under 2.2% in transaction fees. In comparison, PayPal charges 2.9% which can make a difference if you process a volume of payments everyday.

Right now eMerchant charges a $30 monthly fee. Let’s say the difference in monthly fees between eMerchant and Paypal Advanced is $25. If you process more than $3333 worth of transactions, then eMerchant 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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