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  1. #1
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    * Merchant accounts vs something like paypal or 2co

    Can somene explain the benefits of a merchant account over something like paypal.

    Would I just be paying a one time fee and thats it, or would I still have to pay transaction fees like with paypal?

    Will the interface be set up for me like with paypal, or am I on my own?

    I dont really understand how they work. Can some one run down the basics for me.

    Thanks.

  2. #2
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    Well there are different benefits to each. I usually recommend to people to have both Paypal & a merchant account or third party processor.

    As far as having your own merchant account, your name appears on the CC statement. (Paypal has this option as well). Usually though when you are processing thru a third party, their name appears.

    With a third party account, you cannot charge someone's credit card (you have no virtual terminal). Most processors give this to you for free.

    With a merchant account, you have online reports that are available to you. Usually you have some reports as well that you can get from the third party. Most of these are pretty standard.

    With a third party - you usually do not have a set-up costs. But the processing fees are a little more expensive because of the risks involved. I had done this a few months ago to compare some charges on 2CO with a merchant account. Using 20 transactions at $100 with 5.5% discoutn rate & $.45 transaction rate, the charges come to $119. Now if you are using a merchant account with 2.45% discount rate & $.30 transaction rate, that is a total of $55. And you usually have two charges a month on a merchant account - gateway & statement fee. So that brings you up to $75. You can see you would be saving about $44.00 that month.

    Most gateways also give you an API to capture the CC data on your secure website. So your layout stays the same. They also give your a secure URL just in case you need that as well. These are usually both free.

  3. #3
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    Okay, I see. Now, Paypal charges $0.30 per sale, plus between 2.2% and 2.9% of the whole transaction. This seems very reasonable. What merchant accounts are out there that can beat this rate?

  4. #4
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    Well I think CDG charges 2.3%. It depends on the banking relationships. of course, if you are processing a lot of money, say $500,000 a month, then you will get a much lower discount rate.

    But if you are processing under $1,000 a month, consider Paysystems, Paypal, or 2CO. It is usually not worth having a merchant account

  5. #5
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    Originally posted by coreybryant
    But if you are processing under $1,000 a month, consider Paysystems, Paypal, or 2CO. It is usually not worth having a merchant account
    Yeah, thats true, since you will end up paying more on the monthl fee's and extra's then making money. SO a 'True Merchant' account would not be wise.
    A 'Third Party Payment Processor' would do fine.

    www.mypaysystems is where you would need to go.

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  6. #6
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    In my case I do make less than 1000 a month. So you wouldnt recommend authorize.net then?

  7. #7
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    Originally posted by LANSTARR
    In my case I do make less than 1000 a month. So you wouldnt recommend authorize.net then?
    I don't think anybody would recommend you to get an authorize.net account.

    try www.2checkout.com or www.mypaysystems.com
    They have what you need.

    They both charge a onde-time setup fee of $49.00
    No monthly or yearly fee's.
    Last edited by cloudrck; 04-15-2004 at 02:04 PM.
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  8. #8
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    Thank you. I am staying with paypal!

  9. #9
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    I think it is simple actually.

    Question:

    Would you mind if you had to fill out a form at a supermarket to be able to use your credit card?

    That is what you are asking from your clients. That they sign up with PayPal to be able to pay you!

    I have first had experience with MANY merchants that started taking credit cards with their own account and their sales sky rocketed! Simple as that.

    You make it more difficult for people to pay you, you will lose business. People do not want to deal with another company just to buy your service/product.

    If you are in business to make a profit, then it is just one more business expense, something you have when you want to be in business.

    Curtis
    www.gotmerchant.com - THE free guide to accepting credit cards!

    www.gousms.com - Want to feel special? Find out what personal merchant services is all about!

  10. #10
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    Lanstarr, just in case: http://paypal.typepad.com/pdn/2004/0...p_not_req.html - try to get a Business or Premier account with Paypal. That way your customers do not have to be registered with paypal to pay you

  11. #11
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    Corey - Why isn't this on Paypal's servers but a third party?

    Nice little feature, but I can still go on an on.

    Here is one.

    Contract - What legal rights do you have against PayPal? Yes, processors write the agreements to benefit them, but it does protect you to a point. They can only do what is in the contract, and since you signed it, they provided it, it is holdable in court.

    With PayPal, what did you sign? Nothing. So if they decide to hold your funds all of a sudden or not do what they should, what are you going to do? You don't have any legal action against them I do not believe.

    If you are in business to make money, why not do it right? Get your own account and have the freedom and power you should, don't cut corners or I'm afraid you will regret it later.

    Curtis
    www.gotmerchant.com - THE free guide to accepting credit cards!

    www.gousms.com - Want to feel special? Find out what personal merchant services is all about!

  12. #12
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    If you are in business to make money, why not do it right? Get your own account and have the freedom and power you should, don't cut corners or I'm afraid you will regret it later.
    Yeah, I agree, Paypal was designed for Ebay when it first came out. I've heard problems with legit hosts having problems. Thats the reason why most major providers like Servermatrix don't accept paypal, if they do, paypal will not be the only payment processor.
    It doesn't take get a 2checkout account

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  13. #13
    I don't subscribe to the *you need take in more than $1000* to have a Merchant Account like CDG Commerce work for you. If I had to start over, I wouldn't go with 2CheckOut first and then switch to CDG Commerce second.

    First question to ask yourself is are you going to take in more than $1000 a month? If the answer is yes then take the plunge and grab an account from CDG. No set up fee with them either. Trying to transfer clients from a 3rd party processor to a Merchant Account is time consuming and all your clients would have to sign up for your services all over again.

    Take the fees for the first year at some place like 2CheckOut (include their $50 start up fee) and then compare the costs with CDG. You'll most likely find that it is much less expensive and easier on your clients to sign up with CDG Commerce than going with a 3rd party processor first...
    Last edited by Mark_TVI; 04-15-2004 at 07:19 PM.

  14. #14
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    I agree with the merchant account. I'm just starting out, server just set up this week and main web site not finished, and I already signed up with cdg. My logic is like somebody else said, it's another business expense. I think there is an intangible benefit to people seeing you have a regular merchant style checkout. Appearances are important.

    Also like the authorize.net recurring billing. That's a $50 setup I think and $30/mo additional charge. A lot of people are encrypting a few hundred credit cards on their server and running batch charges every month. To save $30? Think of the potential of those numbers getting out if you get hacked. That would sure make your customers love you, Not! Just makes more sense to leave that to someone else. I see it as a $30/mo cc insurance policy.

  15. #15
    I'm switching all my sites from paypal to a merchant account. Paypal seems a bit moody and from what I have been reading, I don't think they will be around in 5 years.


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    Last edited by anon-e-mouse; 05-11-2004 at 09:49 PM.

  16. #16
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    I don't think they will be around in 5 years.
    Don't worry, they will still be around

  17. #17
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    Thanks for the kind words, TVI and Finley.

    In terms of PayPal... they will likely be around for a while, but like Curtis said - there is little to no dispute protection nor are they governed by a set of clearly specified rules and regulations.

    And as an interesting sidenote, PayPal is on the TMF/MATCH list. (In fact, I do not believe this status has changed since last year when I first found out that this was the case)

    Nonetheless, I think they will still be viable for the forseeable future.

    However, I still believe and agree 100% with TVI that any business that is serious about growing is better served setting up a solid billing system and their own direct merchant account rather than waiting until after they have thousands of dollars in sales locked into a 3rd party processing system.
    CDGcommerce.com - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
    We help merchants to eliminate gateway costs, reduce & mitigate fraud and achieve streamlined PCI compliance.
    Learn more today at http://www.cdgcommerce.com - we look forward to helping your business grow!

  18. #18
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    If you need a payment option that 90% of the online buyers recognize and easily accept...
    If you are a small International seller that you want small fees,fast transactions and all the profit for you....
    If you dont want your local Tax authorities to heavily tax your Internet income....
    Then Paypal is almost the only way.
    Merchant accounts are ideal for US sellers that have a registered company and have enough margin to not care about credit card processing fees and taxes.
    Although International sellers create almost the half of Internet sales,Ebay,Paypal and many 3rd part Payment services are practically ignoring them.....as an Internatinal seller you have to deal with the mistrust of the (usually US) client and after you convince him that you are gonna send him what he paid for ...you have to start thinking how to get your money.
    If you are a US seller is OK...
    if you are an International seller ,even if you have a merchant account with online processing,your US clients will not easily trust you to give their credit card info...these are facts from my 10 years online sales experience.
    Paypal for most US buyers is still a kind of passport (garantee) that you are trustworthy and they can deal with you without fear.
    Before i sign up with Paypal I had numerous clients asking if i accept Paypal.....when i was telling them that I have many other options that are same easy,convenient,will not cost them a single cent...their answer was that as I am not registered with Paypal i would surelly not be quite a "respectable" seller....and were running away from my sales.
    I agree that Paypal gets quite dangerous sometimes (seller accounts being freezed) but buyers usually dont know that....
    Client is always right....

    I am on the process of creating a US based Bank account at the moment.I hope the whole thing will work.

  19. #19
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    Greekguy,

    Where are you getting this data from? I bet International only counts for a very small %. People want to buy domestically for various reasons. They are located in the US and they will stick that way.

    Actually, I do not know of many international companies that are succeed in huge success from US customers (few in CAN, but that's it).

    Curtis
    www.gotmerchant.com - THE free guide to accepting credit cards!

    www.gousms.com - Want to feel special? Find out what personal merchant services is all about!

  20. #20
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    Check Ebay to see how many International sellers....there are numerous sites out there offering hard to find antiques and collectibles,jewels,online Pharmacies e.t.c
    Everything that has small weight and high value can be shipped to US at a fraction of the price US online superstores offer it.
    Most Non European countries (Eastern Europe,Asia & Africa) have 1/10 of the shipping and handling costs that US sellers have.
    What I charge to a US client as shipping fee for a 4 pounds package is the same or less of what a US seller would charge him for a watch mailed in the mainland USA.
    Cheap labor,low prices,good quality and correctness is the key...if I am selling something at a price that no one could resist even the reluctant US buyer would make the move.

  21. #21
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    And will take how long to deliver? Two weeks?

    You need to do to some research then, as Ebay isn't the US Economy when it comes to online. There are billions spent online and ebay doesn't even make a dent. I'm sorry, but US companies make up the majority of US sales online.

    Curtis
    www.gotmerchant.com - THE free guide to accepting credit cards!

    www.gousms.com - Want to feel special? Find out what personal merchant services is all about!

  22. #22
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    You both have good points. Curtis is correct with respect to U.S. companies making up the majority of U.S. sales/processing volume online, and greekguy is correct in that there is a HUGE international market that exists out there.

    However, it is worth pointing out a few things. The main reasons WHY there aren't more options available FOR international merchants is:

    (1) Lack of good underwriting and risk/fraud management tools available in most non-U.S. countries.

    (2) The higher losses, fraud and risk that has existed in many foreign locations.

    (3) Banking, regulatory and Visa/MC restrictions which make it prohibitive for most companies to provide such services.

    (4) The monopolistic attitude held by many foreign banks... they don't want to share their market share with a U.S.-based ISO or with anyone else and they can thus charge a premium for processing in their domicile.

    It isn't that U.S. companies don't want to work with international merchants but for the reasons above, you don't see a proliferation of services FOR the non-U.S. market nor do you see the same low-rate structures and competitive programs.

    With respect to why U.S. consumers are sometimes reluctant to purchase from a foreign vendor - yes, there can be a level of concern and I think the geographic distance is the big issue. People like to feel that if there is a problem, they could reach the vendor easily and if the vendor isn't even in their home country... they feel like if there would be a problem, they might be left in a lurch.

    Consumer purchasing is subject to the whims of the marketplace. Some people are so fickle that if they don't like the color scheme on a Web site, they may purchase somewhere else or they might be enticed by 'free shipping' even if a product is more expensive... it is sometimes hard to predict what will make a consumer click and buy vs. "click and bye" on a given sale.
    CDGcommerce.com - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
    We help merchants to eliminate gateway costs, reduce & mitigate fraud and achieve streamlined PCI compliance.
    Learn more today at http://www.cdgcommerce.com - we look forward to helping your business grow!

  23. #23
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    Hi,

    in fact I beleive the reason why it is so difficult for a non USA client to establish a direct Merchant ID in USA is the policy of VISA/MC themselves which goes for all US banks and processors in a way.

    Just so You'd understand if the whole thing is a bit new to You, I'll explain one term which I will mention further, Acquiring Bank is the Bank where You get Your Merchant Account (or Merchant ID as some call it).

    There is a known fact that in Europe and a few other regions VISA and MC try to create monopoly acquirers per each country.
    In other words if You take Netherlands for example You pretty much dont have any other choice in acquiring than InterPay Nederlands which is the monopoly acquiring bank there , an organization created by all major banks in Netherlands.

    There are a few others but they are so small that locals sometimes dont even know them.

    The same situation applies to a few other EU countries and there have been a scandal in Russia when VISA tried to make the biggest local acquiring company "UCS" to be the only acquirer and close the rest of them (about 8 or so) and local Russian banks have blocked this policy.

    The reason why the policy exists is cost of acquiring. If You take a Payment Service Provider (PSP) in the Internet, essentially all of them provide same services, which is credit card processing, however since part of the service is software for processing and the e-commerce is international and thus unique , PSPs have quite a few fields to compete in. Who has better software, who has better banks, policies and so on.

    When Acquiring Banks have virtually NOTHING to compete with, they only provide processing. So the only thing left for competition is naturally COSTS.

    Because of that in USA acquiring services are the cheapest in the world, it's just way too many acquirers doing business.

    What I think VISA and MC do is they try to protect other acquiring companies world wide from loosing all of their clientelle to US acquirers by making obstacles for a NON USA residents to use USA acquiring solutions.


    I'd also like to mention, which might be a bit wrong since I work myself for a PSP and we offer processing through direct Merchant Accounts only, that indeed it is not smart to use third party billers. At least in what is called in payment service providing "low risk" online e-commerce.

    If You do high risk (adult , gambling) obtaining a Merchant Account is a living hell to make the long story short. While in normal commerce getting an MID is not a problem. Including for EU region, we for example work with EU acquirers only.

    The idea is very simple as the rules of VISA/MC are very clear in relation to this subject: each merchants transactions must go through a direct Merchant ID. Of course say 5 years ago nobody gave a damn because getting a Merchant ID was difficult. Nowdays it's different.

    But aside from the rules, if You do business, there is probably nothing more important (with the exception of Your clients) than Your financial flows.

    How can You grow Your business if Your funds are held by someone else than You on someone's else bank account than Yours?

    Years ago in 1999 , I was not in PSP business by that time, I also thought that dealing with third party billers is no problem and ideed my first turnover , August 1999, was 36 dollars and ... 6 dollars refunds.

    However in four years our business went over half a million USD per month turnover in credit card processing of our own project alone. And the only thing which kept me from making that business better, taking more care of my clients, doing better sales and better promotions (our analysis says we can go three times in turnover easily) was constant ******** about all third party billers.

    Although, PayPal is a question, because a brand is a brand.

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