Ecom and CCs

Paypal vs a Merchant Account

[ken_b]

I'm considering selling some products from my site.

I'm wondering if I really need to get a merchant account to be percieved as a proffessional, credible merchant, or if Paypal would be acceptable.

Paypal might be easier to set up. I haven't compared costs yet.

My target market is very comfortable with Paypal in general though, very comfortable.

But I still wonder if it would be better to use a regular merchant account.

Any words of wisdom from those who've "been there" would be appreciated.

[sun818]

Regardless of perception, if you use a shopping cart that supports Paypal Website Payment Pro, then getting access to direct credit card payments at $20 a month is a beautiful deal for someone starting out.

Merchant accounts have varying levels of documentation that is required, but they tend to make you jump through more hoops weeding out those that are not officially in business. For example, some merchant accounts require a business bank account. And in order to get that, you need to get a business license from City Hall which you present to your bank to open an account.

There are also lots of shady merchant account providers out there who will tell you anything over the phone, but actually have something completely different written down on paper. So, proceed cautiously, read EVERYTHING in the agreement, and ask for clarification on anything that is unclear, confusing, or different from what was initially presented to you.

[ken_b]

Thanks sun818. The business is already incorporated and has all the needed banks accounts etc. But I haven't tried to sell products off the site before.

[crak_bot]

I started one of my sites using only Paypal for orders. This was before it was as merchant friendly as it is now and It worked well for the early days. It only takes about ten minutes to generate the code and put it on your site so you could be up in a day depending on how many products you are selling.

I have since moved on to a merchant account for the that site but Paypal can definitely be a quick and easy way to get started.

[BeeDeeDubbleU]

I think public perception of Paypal may be changing. I am finding that more people are aware of it since it became part of eBay. On balance, there are probably far more people who know about Paypal than Worldpay for example. I believe that if prepare your online payments pages properly, and tell your punters how safe it is, you will do as well with Paypal as with any other provider.

[graeme_p]

Paypal with or without credit card payments? Payments via paypal only definitely means lost sales.

I constantly find myself unable to buy things becuase I do not ahve a Paypal account - and I am currently in a country where I can not open a paypal account.

[BeeDeeDubbleU]

In the major market places you don't have to have a Paypal account to make a purchase. If these are the markets you are targeting then this is not a problem.

[Corey Bryant]

[quote=sun818]There are also lots of shady merchant account providers out there who will tell you anything over the phone, but actually have something completely different written down on paper. So, proceed cautiously, read EVERYTHING in the agreement, and ask for clarification on anything that is unclear, confusing, or different from what was initially presented to you. [/quote]
It is actually not the MAPs but the agents. I talk to at least one person a day who was told that it would be no problem setting up a merchant account - and they have either been on the TMF list, opening up a dating website, or some other high risk business. Other agents have told them no problem. There is always a problem when you are trying to do this.

Communication is a key to the business. Keep those lines of communication opened. I have stressed this time and time again. You sign up to do $10,000 a month. You are actually asking to borrow about $60,000. And most MAPs will automatically sign you up with very easily with volume under $30,000 a month. Once you think you are going to hit that limit, call the merchant and let them know. Afterall, you would call you bank if you needed a credit line increase right?

With a merchant account, you have a bit more control over your money and it is usually deposited into your account within 24-48 hours.

If you are in the United States / Canada, anticipate more than $1,000 a month in volume, get a merchant account.

If you are doing something that might be hgh risk - like a dating, gambling, porn website - do not use your merchant account, get another provider and preferably a third party. This way if something happens to the this one, your mainstream business will not be affected.

-Corey

[ken_b]

Thanks for the comments folks.

If I used Paypal, I'd want to be able to take CCs from customers, as well as paypal payments from folks who have accounts. My understanding is that you don't need a Paypal account to pay via Paypal with a CC. But a huge number of people in my market shop ebay, so Paypal would be normal for most of them.

Most of these products would need to be customized for the buyer, so returns are an issue.

[Corey Bryant]

It depends on the type of Paypal account that you get Ken - so make sure you read thru your choices to pick the one that supports that

-Corey

[StickyNote]

PayPal can be a proper choice to give eCommerce a try, but it is not a professional way of running your online business, in my opinion.

They can and will freeze your account for as long as they want. If you complain they will tell you they are not a bank, they do not have to follow bank rules, and will suggest you re-read your user agreement. Two supervisors actually told me that.

After having an account with them for 3 years and a user rating of over 300, they froze my account due to a mistake on their part. After weeks of faxing papers to prove my identity, the only way I was able to get my funds was threatening to sue.

If you are relying on your website for more than extra spending money, being shut down for the better part of, let's say December, can wipe you out.

I have removed PayPal as a second payment choice on my website for 4 months and business is up 30% from same months last year.

If you rely on the money, get a real merchant account and leave PayPal for occasional eBay'ers.

[sun818]

I think it is worth mentioning again that you

use a shopping cart that supports Paypal Website Payment Pro

. When you use Website Payment Pro, you can accept credit cards directly without your customer being a Paypal member.

If you anticipate issues with returns and chargebacks, consider the chargeback fees. One chargeback on my merchant account sets me back $35. Paypal charges only $10.

[StickyNote]

And again, with PayPal, I never had a problem with ease of use, and my customers did not have to have a PayPal account to pay, which was another plus when I used PayPal on my website.

But I will restate that in my opinion is is not wise to rely on a third party payment company that does not feel that it has to abide by the rules of 'regular' merchant account providers.

In the U.S. at least, a legal reason needs to be given for freezing an account. PayPal does not feel it has to follow those rules- and does not. Be warned.

[jwolthuis]

Just to be clear, are you saying that a bank that suspects fraud cannot freeze the assets in that merchant account? ... only PayPal can freeze an account, and they do it regularly?

[sun818]

> StickyNote

I think your information is outdated at this point. I just went through a security audit with my merchant account where they held my funds for two weeks. In my past experience, Paypal used to do the same - but their policies allow them to only hold the specific transactions in question.

[StickyNote]

are you saying that a bank that suspects fraud cannot freeze the assets in that merchant account?

Hi jwolthuis.
No that is not what I am trying saying.
I have been using a bank merchant account for years and have had situations where account funds were held, but at least in the US there are laws governing the seizure, the release and disclosure of why fund are being froze.
From what two supervisors at PayPal told me, they do not feel they are held to those laws and will tell you that, suggesting that I re-read my service agreement. Twice after refusing to hang up I was sent to a department called 'escalations' where they said I had to be patient and they could not give me any info.
Previous to the last call to PayPal, I had looked up a law office that had successfully handled a previous class-action lawsuit against PayPal for not abiding by bank rules in the US, when the supervisor let me know there was nothing he could do, I told him that I was going to immediately call the lawyer as what PayPal was doing was illegal. He then said, 'Oh, well, it's not that much money, I can release your funds if that is what you want'.
No 'real' bank holding your funds will release them on suspicion of fraud regardless of what you say- they go by the rules, which is exactly what PayPal said that it does not do from the beginning.

they do it regularly

I cannot speak on the frenquency except to say that they seemed to had a protocol, a division they called 'escalations' to handle such things, and a week delay on processing each of 4 sets of faxes sent to them due, to their admission, to the heavy workload in that area.

Paypal used to do the same - but their policies allow them to only hold the specific transactions in question.

sun818,
The trouble I had with PayPal was fairly recent.
If you had a 'real' merchant account 'through' PayPal that could very well be a different issue.
PayPal has a process in which you can go through them and get a merchant account from a 'real' bank.
If you go through this process, then you are right, I would believe that the 'real' bank that actually sets up an account through the PayPal website would probably try to abide by the fair rules of banking.

[Brett_Tabke]

> In the U.S. at least, a legal reason needs to be
> given for freezing an account. PayPal does not
> feel it has to follow those rules- and does not. Be warned.

I do not believe that is true at all.

In 6 years here, dealing with thousands of webmasters and ecommerce pro's, I have yet to run into a single person who has had a paypal account closed for any reason whatsoever.

If you have, please send me your full name in stickymail and let me check into it.

[phantombookman]

Go merchant without doubt!
Have a PP option in your payment options so should someone prefer it they can indeed use it.

The main thrust of my business is actual online selling (not clicks etc) and nobody ever uses Paypal.
If you are selling goods most readily associated with ebay then it may be slightly different.

PP does lack professionalism, it has to by definition.

People will tell you different, but when did you last go to a 'serious' online retail outlet and find yourself in a PP shopping cart?

[StickyNote]

Hi Brett.

Thank you for your offer to help, but as you can see if you read all my long winded posts (sorry), I was able to deal with the matter by threatening to sue. I was and am OK because I had a merchant account from a 'real' bank.

<quote>I have yet to run into a single person who has had a paypal account closed for any reason whatsoever</quote>

Also you would notice that I did not ever say that PayPal closed the account, just the opposite, they 'froze' the account so that I was unable to close the account, or transact any business with the account.

<quote>I do not believe that is true at all</quote>

If what you do not believe is that PayPal does not feel it has to abide by the rules of a 'regular bank', that was PayPal's rep's statement, not mine. But of course, as you do not know me, you could feel that I am not telling the truth. Time constraints do not allow me to dig into the service agreement to see if what PP's reps told me was actually true.

I am NOT trying to say I hate PayPal, or PayPal is the horrible giant. As I said PayPal is easy to use, and can be a way to give ecommerce a try.

But it is my opinion that because of their policies, PayPal is not a good choice for ecommerce if you rely on you website as your means for living.

[ken_b]

Thanks for all the great comments. Right now I'm inclined to go for the merchant account.

[ispy]

Stay away from PayPal.

[BeeDeeDubbleU]

Well that's a big help :)