PAYPAL OR INTERNET MERCHANT ACCOUNT?

What Is Internet Merchant Account?

An Internet merchant account allows you to accept orders and credit card payments online.  You basically need credit card processing software (real time payment gateway or non-real time payment gateway) to accept credit card payments. Funds from the credit card company will be first transferred to your merchant account and then to your specified bank account.

What Is PayPal? Is It An Internet Merchant Account?

PayPal is considered to be a third party Internet merchant account. It is not under your name or your control. You have to become a member of PayPal and open an account with them. Anyone who wants to purchase something from your website must also become a member of PayPal. First, funds will be transferred from the customer’s bank account to his or her PayPal account. Then, it’ll be transferred from the customer’s PayPal account to your PayPal account. And finally, the funds will be transferred from your PayPal account to your designated bank account or you can choose to spend them using a debit card issued by PayPal or you can request a check.  

Should You Get PayPal Or Your Own Internet Merchant Account?

The first step to answering the above question is to compare the features of PayPal and an Internet merchant account. Below is the comparison of 2 main features:

Cost

• PayPal has no start-up fees or monthly fees. The main fees you will be charged are transaction fee (about $0.30 per transaction) and discount rate (about 2.9% of each transaction).
• With an Internet merchant account, you usually have to pay start-up fees, monthly fees, transaction fees and discount rates. On top of that, there are a whole lot of other fees and charges that your merchant account may come with.

Shopping Cart

• PayPal’s shopping cart is very basic. It doesn’t calculate shipping exactly but only approximately and it doesn’t calculate taxes at all.

• The merchant account offers you options of sophisticated shopping carts that calculate both taxes and shipping.
• The merchant account also allows you to customize the selling approach and ordering process to cater to your business and make the business transaction easier for both you and the customer.

Suggested Answer

• If you expect only about $600 to $700 of income generated by online transactions, it might be more profitable to stick to PayPal.
• However, if your expected income is larger than $5000, having your own merchant account might be more profitable.
• The population of online buyers are quite divided when it comes to the payment options provided by PayPal and an Internet merchant account. Some insist on paying by PayPal while others insist on having other options.
• Some gauge the credibility of the business based on whether you use PayPal or your own merchant account. Using only PayPal as your option may raise questions on the reliability and financial standing of your business.

Considering the above pointers, it might be a good idea to start with PayPal if yours is a small or new business. However if you do have the resources, opting to have both would probably be the best solution. That way, you can maintain the business of consumers who prefer to use PayPal without sacrificing to image of your business. You get to look good as a competent, credible business and provide more flexible payment options to your clientele.

Although getting the services of PayPal is pretty straightforward, getting your own merchant account requires lots of research. Remember to compare the costs, terms, solutions and customer services before settling on one. Although, the start-up costs of Internet merchant accounts are higher, they are affordable ones available in the market.