PayPal vs Your Own Merchant Account

Ginger HollowellCredit Card Processing/ Merchant ServicesLeave a Comment

PayPal vs Your Own Merchant Account

If you own a business, your customers must be able to pay for your goods or services using credit cards. To enable you to accept credit cards, you will need a merchant account, or you can opt to use a third-party processing service such as PayPal.

PayPal is what is called aggregate processor, which means they lump all their merchants into one merchant account. One benefit is that they do not charge individual merchants PCI fees, because none of their individual merchants have an individual merchant account. On the other side, having PCI compliance with your own merchant account is a benefit for a merchant, helping to prevent hacking, which unfortunately is becoming more common.

PayPal was originally designed for online processing. One disadvantage to using PayPal is that the customer has to leave the merchant’s webpage to go to PayPal to enter a transaction, and many times, cannot find their way back easily. The back button simply does not work between different web sites. If you have a merchant account, customers never leave your website when they are making a purchase. Plus, when they get their credit card bill, the name of your company will show up on the bill.

Another drawback to PayPal is that there is no monthly reporting of individual transactions, deposits or fees. It is challenging to track your business that way. Also, there is no ability of the merchant to inquire about individual transactions. Think how more valuable it is for a business to be able to see transactions live online as they occur, search for a particular card number or amount because a customer has a question, or be able to reconcile immediately if your batch does not match your deposit at your bank.

Additionally PayPal deducts the discount rate and transaction fee with each deposit, making reconciliation with a bank account statement nearly impossible and hugely time consuming because the net deposit on your bank account does not match the sale amount. Ouch!

PayPal’s fees are standardized with a high flat rate! There is no negotiating for a better deal. PayPal’s pricing is simple to understand and simple to predict credit card fees for the month or year, however, if you are processing higher volumes than $2,500 per month, you should certainly consider getting your own merchant account because the savings can be significant!  And yes, you can negotiate on these rates and fees.

PayPal lacks customer service which can negatively impact your business. Their push is for simplicity for small businesses who don’t run a lot of transactions, and therefore don’t need much support. But having your own merchant account with a service and support department can be hugely valuable when servicing your own clients. After all, when you do have concerns about deposits of your hard earned money, you want service NOW!

Other PayPal Drawbacks:

  • Funds are not directly deposited into your business account, but rather, deposited into a PayPal account.
  • PayPal is not a bank, therefore isn’t required to follow federal banking regulations.
  • Funds are not always made immediately available. The money is deposited into your PayPal account where it remains until you request a transfer to your bank account. The transfer process takes up to seven days.

More Merchant Account Advantages:

  • A merchant account offers increased security and better money management.
  • A merchant account provides a higher level of customer service.
  • Funds are deposited faster directly into your bank account.

At Electronic Money Company, we thoroughly analyze each client account to better understand where we can truly save you money. We work with each client to get the best rate possible. Most importantly, we differ from the other processors out there in that we do not believe in raising our rates and fees. The rate you start out with, stays with you for the life of our relationship. We want to keep our merchants for life!  

We ease the confusion and pain of merchant services from the beginning through the life of your business. In other words, we aim to be the best merchant services provider, period! Call 505-296-2847, and let’s start a conversation. Start your merchant account with Electronic Money Company today!