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Paypal has new fee structure (August 6, 2004)

Better for high-end sellers, not so good for small time sellers

     
4:28 pm on Jun 15, 2004 (gmt 0)

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[paypal.com...]

Monthly Volume Received in USD
$0-$3,000 2.9%+$0.30 USD
$3,000.01-$10,000 2.5%+$0.30 USD
$10,000.01-$100,000 2.2%+$0.30 USD
Above $100,000 1.9%+$0.30 USD

For international transactions, add 1.0% plus their respective transaction fees.

8:07 pm on June 15, 2004 (gmt 0)

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It's the same rate as before for the small time sellers. I can see why they are trying to lure larger sellers to them so they can freeze and take there money once it gets very high.

Certainly I do not see how anyone doing over $10,000 in monthly volume would want to use paypal as opposed to there own merchant account. Paypal is not even Insured or backed by a bank! And someone doing over 100k a month would trust there money in there hands? Yeah right!

8:11 pm on June 15, 2004 (gmt 0)

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still quite high compared to a merchant account. even when you've got 100K+ going through the books the rates for paypal are still to high for a high ticket / high volume seller, compared to a merchant account.

Though after speaking to a fellow member here at WebmasterWorld whom does alot of Paypal transactions, i can see it benefitting them where it counts - in the pocket.

8:17 pm on June 15, 2004 (gmt 0)

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Certain transactions convert much easier via paypal. Especially small transactions, impulse buys, and those related to eBay.
8:29 pm on June 15, 2004 (gmt 0)

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Well my last transfer doesn'T agree with that...
I had transferred paypal to paypal, about US$2000, PayPal took over $95. That's about 5%...

SN

9:03 pm on June 15, 2004 (gmt 0)

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> still quite high compared to a merchant account.

Really? What are you paying? I think it depends what your fixed costs for the merchant account is. I don't think a direct comparison is as easy since merchant account costs will be different for depending on the account you have. Personally, I don't see a big difference between Paypal and merchant account when you include monthly service fees and the cut the merchant processor takes with qualified, mid-qualified, and non-qualified rates.

> PayPal took over $95.

How did you figure $95? Even at 3.9% (regular internaional) it is still only $78. If a transaction that large, you might look into sending a wire transfer. If you trust the recipient, that will end up saving you more money in fees. You can also negotiate a lower price this way as well.

9:33 pm on June 15, 2004 (gmt 0)

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Visa / Mastercard 1.215% per transaction on merchant account (Amex is 2.95% - this is charged as a surcharge to the buy). Installation charge - no yearly charge. Maybe the rate is a special due to amounts and frequency, though it was fought for. My problem with Paypal's rates come August 6, 2004 are that they are set in bedrock - not necessarily great - say someone is selling either a lot of small items or less larger luxury / industrial based items!

Personally i think paypal should have set % rate's upto a point then get into the personal-company rates for high-turnover organisations. Another way of putting it - is if a company is trading serious money via c/c, then the amount they would pay with paypal may be better spent with a sourced e-comm solution!

11:17 pm on June 15, 2004 (gmt 0)

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Your rates are insanely low. The rates I was quoted for V/MC were in the los two percent. I don't think your rate is what most people are able to shop around for. I take it you gross more than a million USD per year.
3:22 am on June 16, 2004 (gmt 0)

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if you have any sort of presence on ebay and you dont use paypal you are crazy.

also, you should accept paypal through your website. many users consider this 'fun' money, and have problem spending it freely!

zack (not Shak)

ps - when are we going to see a forum dedicated to ebay on here!

3:22 am on June 16, 2004 (gmt 0)

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I take it you gross more than a million USD per year
I'd say more like 100's of millions . I was under the impression the wholesale rate given by Visa / Mastercard to processors was around 1.7%.

Added: I guess it's time for us to hit the negotiating table again with our processor.

3:59 am on June 16, 2004 (gmt 0)

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Caine's rates don't sound correct. Even Costco's "card present" rate is 1.6% + $0.21 while its internet rate is 2.10% + $0.28, which doesn't include American Express, Discover or gateway fees. I think if you really do a proper comparison, the rates are competitive. Further, large e-tailers such as Overstock and TigerDirect accept PayPal and new ones are coming on board...bhphotovideo.com just today.
4:30 am on June 16, 2004 (gmt 0)

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I offer paypal in our store and it equates to around 25% of our transactions. Hard not to accept it.

I can say the horror stories of the past get me a bit on edge when we're above 3K at a time in paypal. No problems with them whatsoever, BUT.... like posted not being backed by a bank is a shaky business practice in today's business.

4:32 am on June 16, 2004 (gmt 0)

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Well, one would assume they are backed by eBay...

Very interested in Caine's reply. I too would like to know how to get a 1.215% merchant account or even just to know one exists.

6:01 am on June 16, 2004 (gmt 0)

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Yes, please Caine, I'd love to know too. I'm paying 2.39 + 30 cent transaction fee. It was the best I could find for an online business. On top of that, in order for us to go over 160k per month they had to place 20k on hold for six months. I think when it comes to merchant accounts we are really at their mercy.
6:12 am on June 16, 2004 (gmt 0)

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As far as a merchant account is concerned, there's also the monthly charge just for the priviledge of having the account.

I guess it depends on what country you're in.

With reference to PayPal as fun money - absolutely. Many people sell on ebay, get paid in PayPal dollars, and then spend on ebay using that money.

[Added: Still, I think they charge too much for eBay transactions - I'd like to see some concession for eBay/PayPal specific transactions - either a reduction in eBay final fees or PayPal rates - the latter seems more feasible. It's hardly like they have overheads to consider in their negotiations with "each other" - or shouldn't at least.]

9:09 am on June 16, 2004 (gmt 0)

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just double checked the 1.215% is incorrect. (scared you all - no didn't have the paperwork to hand)

the rates are as follows:

Mastercard 1.560 %
Visa 1.560 %
AmEx 2.95 %
Debit Cards 0.2250 GBP per transaction (22 pence)

also a 15.00 a quarter rental

Thats it folks - so from my end - paypal is a more expensive option regardless of whatever level of business we are doing. Until Paypal can seriously compete with the above rates, its not in my companies interests to pursue it, also customers have problems (unfounded) with using the system still. Don't read into this wrong - i don't have any problems with using the system.

These are British rates, also we have had this account for several years and phone every year to hassle on their rates - lets put it this way it will be going down next year!

9:27 am on June 16, 2004 (gmt 0)

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The fees are going up though for some people. Used to be you only needed $1000/month to get the 2.2% rate.

This will make moving to our shiny new merchant account much more attractive :).

9:39 am on June 16, 2004 (gmt 0)

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caine - is that rates for a standard terminal, or is it an internet merchant account? (i.e. have you told them that you process internet transactions?).

It sounds like a 'normal' account and you should only accept telephone, fax and person present transactions. If you have not told them that you are accepting internet transactions and someone complains (i.e. a chargeback) and mentions they ordered online, your account will be cancelled and it is likely that you will be blacklisted from opening another merchant account.

If it is an internet merchant account, I am sure we would all be interested to know who it is, or maybe more importantly, how much is being put through this account to get those rates.

P.S. I worked for a company that got Visa and MC for 1.00% just a few years ago (plus monthly rental of 25, I think it was). But we could not process internet transactions on it.

9:42 am on June 16, 2004 (gmt 0)

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PCink,

this is terminal rates!

3:40 pm on June 16, 2004 (gmt 0)

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How does PayPal compare with merchant accounts with regards to chargebacks?
5:30 pm on June 16, 2004 (gmt 0)

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Certainly I do not see how anyone doing over $10,000 in monthly volume would want to use paypal as opposed to there own merchant account.

I can see it because I do it. 95% of our revenue comes from subscriptions (not porn) and we use Paypal for about 90% of those. Their subscription system is abosolutely great and it prevents us from having to worry about keeping credit card numbers on our server.

One thing to note is we withdraw everything but $100 from Paypal EVERY SINGLE DAY. I do not and doubt I ever will allow our Paypal balance to increase to more than $1,000 for any reason other than a really good day. There just isn't any insurance that the money will still be there vs. a bank.

edit:forgot the second o in absolutely and it got filtered.

6:16 pm on June 16, 2004 (gmt 0)

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I just added PayPal as an option to my checkout, and it seems to be a good thing. It now make up about 10% of orders and 20% of sales dollars. I have had a real merchant account since 1999 and had avoided accepting PayPal because of all the horror stories. I don't keep funds in the system though. I am very paranoid because I had my personal account frozen for a week while they did a "security review". Never had any explanation or apologies why, they just reactivated it after I went through a ton of hoops.
7:43 pm on June 16, 2004 (gmt 0)

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Just because you have had a bad experience with a freeze does not matter everyone else does.

Their world seller program does have its advantages :)

As for the volume numbers - I definately know a few who easily do $100,000 with PP in a week, much less in a month. They are defiantely going to be happy [as am I :)]

10:53 pm on June 16, 2004 (gmt 0)

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i have been using paypal for a long time, every month the transation is about $1000, but i am very satisfy with paypal. for people got this or that problem from paypal,i only think you did something wrong against their policy.

From my experience, paypal has very good rates until now even compare with merchant account, and also i didn't see anybody mentions the business licence, paypal doesn't need business licence, however most merchant accounts need business licence,SSN, more senstive info.

if you have business licence then get merchant accounts, or better choose paypal or 2checkout.

i hope some companies can offer lower rates than 2checkout, that will be a good competitor.

11:55 am on June 22, 2004 (gmt 0)

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>How does PayPal compare with merchant accounts
>with regards to chargebacks?

I have seen/found chargebacks to be significantly less with PayPal (50-75% less on large amnts of product sold through pp).

12:37 am on June 24, 2004 (gmt 0)

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> seen/found chargebacks to be significantly less

Brett, I think its a matter of time. As the acceptance of Paypal grows, I think the volume of fraud will increase with it.

9:08 am on June 28, 2004 (gmt 0)

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If you review PayPal and eBay 10-K's you'll actually see that fraud rates have trended down which makes sense since over time PayPal gets better and better at identifying fraud.
7:40 am on July 2, 2004 (gmt 0)

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I think we need to look at the new fee structure of PayPal as an increase in costs. PayPal has raised the bar of monthly sales to qualify for the 2.2% merchant rate from $1,000 to $10,000.

One reason for this increase is probably the lack of competition. Perhaps our loyalty to PayPal is part of the problem?

I've noticed that Yahoo! PayDirect has also added a $5.00 monthly fee to their rates, even though their Standared fee has dropped from 2.5% to 2.4%.

The more competition the better, either by having more than one third party processor on your website, or including a pre-paid card or regular merchant accounts?

I have found that there are more than 35 third party credit card processors that can potentially compete with PayPal and PayDirect or 2Chechout in different ways. There are also several resources on the web to help compare prices between third party processors and merchant accounts.

6:32 am on July 8, 2004 (gmt 0)

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How does PayPal compare with merchant accounts with regards to chargebacks?

My chargeback rate is exceptionally low. I can say, without question, that I have lost EVERY SINGLE paypal CHARGEBACK (buyer protection claims are different), regardless of the claim or my part in it. I can say, without question, that I have only lost ONE credit card chargeback and that was because that was COMPLETELY my fault.

It is my belief that paypal does not fight chargebacks on behalf of the merchant. Even though people tell you that without a signature, you automatically lose, that is not true as I can testify to winning all but one credit card chargeback.

therefore, I am firmly of the position that with paypal, you can only hope that the chargeback rate is low because you will not win a chargeback.

And, in case you are wondering, the defenses to all chargebacks were similar. And the documentation was similar. HOWEVER, paypal does not allow for such detailed responses as a merchant account does and even if they do, I have my sincere doubts about how that is presented to the merchant bank.

With the normal chargeback process

Customer files complaint with issuer-->issuer sends paperwork to merchant's bank--> merchant bank sends paperwork to merchant-->merchant replies to merchant bank--> merchant bank either accepts or rejects chargeback and notifies cardholder's issuing bank.

With paypal, WHO KNOWS what they do or how they present the paperwork to the merchant bank. I have paypal chargebacks that I KNOW I would have won if they were with a credit card. Even unrecognized charge chargebacks did not get reversed with emails/faxes from the customer saying that they did recognize the charge. I DEFINITELY would have won that with my merchant account.

And that is my experience.

9:55 pm on July 13, 2004 (gmt 0)

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[disclaimer: yes i *do* work for paypal]

this site has a good comparison of various merchant processors:
[merchantcompare.com...]

it doesn't have the new PayPal fees up yet, but even with the current rate schedule i think it shows PayPal fees are lower than most people realize for card-not-present (internet/telephone) rates. also, many people forget about the additional setup and monthly fees that are tacked on with other processors, or also the foreign exchange fees for international processing.

for folks doing very high volume (>$20-50K per month), it's possible there are a few alternatives that are cheaper, however with the new rates we're rolling out even there i think we're pretty darn competitive.

anyway, not that we're trying to compete only on price -- actually we offer a lot of other value-added services (integrated shipping with UPS/USPS, order tracking and reporting, eBay intergation) in addition to just payment processing.

- dave mcclure

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