Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 5 down vote favorite
3

My revenue from my online business is getting lower over time and my credit card processing fees has approached 25% of my revenue. I am getting upset with all the fees the credit card companies and credit card processors impose on people. At some point I am thinking of dropping using my merchant account and just go with Paypal. I think my credit card processor charges for every attempt from my side to charge a credit card even if it's invalid. So basically someone at my online form can just sit and keep entering any card info and I get charged 40 cents for each attempt.

Does Paypal charge for successful transactions only?

share|improve this question

8 Answers

up vote 3 down vote

You might be just be dealing with the wrong processors. I never heard of anyone spending 25% of their revenue on CC fees. Paypal is a PITA, compared to a good processor.

share|improve this answer
The lower the revenue, the higher the fees ratio to your revenue as there are fixed costs. Does Paypal charge for unssuccessful credit card charges? – Tony_Henrich Mar 21 '10 at 16:25
up vote 3 down vote

Paypal is the easy choice when ecommerce businesses have low volume (<1,000). However, after that point, it's more cost effective to switch to a traditional merchant account provider.

Be wary though, make sure to only get interchange plus pricing (the fairest for business owners) and learn as much as you can.

The best way to get the best deal is to comparison shop. Our service TransFS.com is a great resource to comparison shop processors and get apples to apples bids from top-tier processors. Users save an average of 40% on processing costs.

Check it out: http://www.transfs.com

share|improve this answer
+1 I used the TransFS / FeeFighters solution and found a great processor. The service is free, so definitely worth checking out! – Tauren Jan 28 '11 at 8:26
up vote 2 down vote

25% is not reasonable. We're under 4%.

Check out authorize.net. When we switched to them a couple of years ago they were the best priced merchant services provider around. They have great service and saved us a couple of thousand dollars annually.

share|improve this answer
Yeah, but authorize isn't actually the merchant provider, are they? I I thought they are just the platform...you provide the processor. No? – Casey Mar 26 '10 at 1:20
They appear to work on a reseller model for the front end. We've been happy with e-online data. Other than getting statements from them, we do all our online admin and support questions directly with authorize.net web site and personnel. – Keith DeLong Mar 26 '10 at 15:40
up vote 1 down vote

If you're paying a fee of 25% for credit cards, that's remarkable. I've never heard of a rate that high.

At our company we use the merchant services company that CostCo offers for its executive members. That company is called Elavon. You can also go directly to Elavon but it is less expensive if you go to them via CostCo.

Elavon has been good to deal with and is distinctly less expensive than Bank of America, which we previously used for merchant banking services.

share|improve this answer
The fee is not 25%. I am paying 2.69% plus 40 cents. Nothing unusual. – Tony_Henrich Mar 21 '10 at 16:23
Glad to hear that! :) – tcolling Mar 22 '10 at 1:21
I'd say .40 is quite unusual. What's the name of your processor? – Casey Mar 26 '10 at 1:23
To clarify: I meant that I was "glad to hear" that the OP isn't paying 25%! – tcolling Mar 26 '10 at 2:05
up vote 1 down vote

The rate you pay your credit card company is based on a number of factors.

  1. The industry you are in.
  2. The average ticket price. (The average price of a single sale.)
  3. The number of refunds you process.
  4. The number of charge backs.
  5. The cards you offer.
  6. The number of intermediaries between you and Visa/MC. (If you get your merchant account through your bank, you will pay a higher rate than if you skip your bank and go straight to the credit card provider yourself.)

Unless you are charging unreasonably small amounts (say under $5.00), and are not in the porn market, there is no way your processing fees, including per transaction fees and statement fees, should approach 25%. (This assumes few charge backs, and few refunds.)

So if those criteria are being met, you need to find a new merchant account. If those criteria are the reason why your rate is 25%, switching to Paypal will not help. They will drop you once they discover you are not a "good" merchant.

share|improve this answer
up vote 1 down vote

Paypal only is not a good idea. You will greatly reduce the number of sales you make.

Did a google search for more information on payment processing fees and this is the first thing that came up.

http://credit-card-processing-review.toptenreviews.com/

Processing fees range from 2.14% to 2.27% and transaction fees are between $0.20 and $0.29 for online purchases.

Below are Paypals fees:

Purchase payments received (monthly)................. Fee per transaction

$0.00 USD - $3,000.00 USD................................... 2.9% + $0.30 USD

$3,000.01 USD - $10,000.00 USD ......................... 2.5% + $0.30 USD

$10,000.01 USD - $100,000.00 USD ..................... 2.2% + $0.30 USD

+$100,000.00 USD ................................................ 1.9% + $0.30 USD

None of the payment processors I've used (including Paypal) charge per transaction attempt only for successfully completed transactions.

Hope this helps.

share|improve this answer
Processing rates are typically a three-tier system: qualified (lowest), mid-qual, and non-qual. The discount rates of 2.14% to 2.27% are qualified rates. The qualified rates are usually the only rate advertised, which is somewhat deceiving. For example, my qualified rate is 2.19%, but I almost never see it. Most of my transactions fall into the mid-qual and non-qual tiers, which are my qualified rate plus 0.5% and 1% respectively. Additionally, mid- and non-qual usually carry an extra per transaction fee. – Clint Mar 21 '10 at 22:53
up vote 1 down vote

I'm surprised as well by the 25% rate, unless your product price is under a few dollars or you have a high risk product line.

share|improve this answer
up vote 1 down vote

PayPal is a bit quirky to implement (or at least it's been for us), at any rate it only charges successful transactions. Moreover, refunds are completely free.

We never used any other payment processor, but our sale volume is currently low. We will surely consider other methods as there are some customers (e.g. big corps) that do not have a PayPal account (no idea why, but that's it). Currently, we can handle them "manually" (e.g. wire transfer) but when the sales volume increases that becomes less manageable.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.