paypal is the best payment processor and its fees is less compare to other 3rd party payment processors.
Yes, paypal fees are way too high. I used to sell $5 services on my site and paypal would take 10% of that. I think 10% is just way too much for small services like that. So I had to change it to 5.50 and made the users pay more instead, however, I get less transactions. I was going to move to authorize.net since their fees are way less, but then I am losing all the people who want to pay with paypal. I am still looking at implementing something like that where I will be asking if they want to pay with paypal or credit card and say that additional 10% will apply if they pay with paypal to cover paypal transaction fees. I wonder if it is legal to do that since I haven’t seen merchants charging extra for paying with paypal. Does anybody know?
Authorize.net is a gateway, you can’t just sign up for it. It doesn’t do anything without a merchant account attached to it.
The best rates you’re likely to get with a merchant account for ecommerce are around 2.2% + $0.30 per transaction. Plus $20 or so a month for the statement fee, plus $20 or so a month for the Authnet gateway.
With PayPal, you paid 2.9% + $0.30 on $5 = $0.445
With a merchant account, you pay 2.2% + $0.30 on $5 = $0.41
You save 3 cents and gain half a dozen types of fees PayPal doesn’t charge at all (non-qual downgrade fee, mid-qual downgrade fee, batch settlement fee, chargeback fee, AVS fee, …).
PayPal is a good deal for small online sellers.
I’m not going to say paypal is purely evil or purely benevolent, but the fact that you have to apply to get the lower rate that already qualify for is a very cheap tactic by paypal.
Paypal has a lot of pluses and minuses. They are definitely cheaper and easier to use for a startup than a merchant account. But, they can be a lot more draconian and customer service can be non-existent. You get what you pay for.
They’re just covering their behinds like any responsible corporation. You don’t need to provide much information to open up a PayPal account. If you’re going to be processing large volumes, they take the time to collect some more details about you that you may not have had to provide before. Higher volume means higher risk for PayPal (remember that they’re making all the credit card charges, they’re on the hook for chargebacks if you scam people and disappear). That’s all the application is for.
When I call, they answered immediately, no waiting or complicated phone menu, and the American on the other end of the line had the power to fix the issues I called about. E-mail support takes 2-3 days to get back to me on average, but they do respond, and the phone support is free… (btw, two clicks to get to this page, “Contact Us” -> “Speak to us”).
Sometimes I wonder if I’m reading about the same company
I have had similar responses to your for most of the communications that I have had with them here in Australia. There have only been one of times where I got an unhelpful response - on that occasion there was a chargeback on a sale of my Paypal IPN script and I suggested that they could easily tell if the buyer had actually intended to buy the script by checking to see if it was installed on their Paypal account. Apart from their refusal to do that all of my other communications with them have led to acceptable resolutions. I wonder if these people complaining about Paypal actually are dealing with some other company masquerading as Paypal. Surely they aren’t having problems with Paypal through trying unsuccessfully to cheat the system.
I do also agree that Paypal fees are quite high but I don’t have a choice since almost all online people are using Paypal for faster transactions.
I recently received $18 from a client. What I received is only $17, the fee is $1
I calculated why so I came up with $1 - $0.3 = $0.7 ; $0.7 / $18 = 3.9 %
So Paypal gets 3.9% + $0.30 everytime I received a payment on my Premier account.
Don’t forget they are a financial institution, where fine print is the Norm rather than the Exception.
Whether you compare them to a Bank or Credit Card co. I think they are lesser of the 2 evils.
I am not sure if you have gone through the mortgage process or not –
I am sure you must have some CCs (credit cards) that you carry in your wallet.
You might want to read the 20 + page fine prints + all the updates
that they keep sending you along with the statements.
Actually, with all CC rule changes (coming in from Obama) many banks
are even trying to preempt the rule by asking you agree their new rules now
(I just got one from CapitolOne today) - If call to opt out -
your card will be canceled - if you don’t take any action and use the card
after the deadline the new rule automatically goes into effect.
Bottom line is -
Get into the habit of reading the fine print and you will definitely be rewarded -
Remember, all the lawyers they have on retainer, have to earn their keep and
putting the fine print that works in the co.'s favor and against you – is exactly how they earn it.
“LIFE IS TOO SHORT LEARN TO ENJOY IT”
What are the alternatives? 
Problem is that Paypal has almost become somewhat of a standard with customers online. Many people that are wary of making transactions online choose Paypal because they believe it’s the best “secure” alternative out there. Paypal supposedly takes care of buyers and that’s why customers feel so confident with their services, but the sellers are the ones that end up getting the short end of the stick. It used to be that people who don’t accept credit cards are shooting themselves in the foot, but now it’s approaching the point of if you don’t accept Paypal you’re pretty much limiting your opportunities as a seller.
And just for the record they overcharge like hell in retrospect…
That makes their fees quite low compared to many lower end merchant accounts. I have seen quotes for local merchant accounts that are the same as Paypal except for also changing a $30 monthly fee - plus they don’t offer any back end integration at that price.
Of course if you have a high volume of transactions you can get a much cheaper price (regardless of who you get the account from).
Yeah. They are much cheaper than any other there. Plus, I can only withdraw my funds easily with a very low fee of less than $2.
Alternatives? I do think that the alternatives they are saying are Alertpay, Liberty Reserve and others…
Stay away from paypal use a merchant account with a direct local merchat who has an online platform
If you do a comparison for a complete month with all charges included, you would probably find that the charges are competitive. You already pointed out the disadvantages of not using paypal. The reason your charges seem high is that your transactions are small. The flat fee portion of the fee is what is hurting you. You will find that the alternatives also have a flat fee portion. Otherwise they would get killed by sites trying to use them for $0.10 charges for viewing PDF documents.
You want your money. Paypal is the conduit. Are they not entitled to charge?
If you object to the charges, you can always eliminate credit card processing charges. Just make everyone pay by money order.
Then you can see if 100% of nothing is better than 90% of something.
The bottomline is that you are running a business for profit. Well so is paypal. Businesses should expect to be able to pay for the services they use in creating and selling their product.
eBay is a snake. They abuse their power all the time. eBay owns PayPal.
I haven’t had trouble with PayPal yet, but it doesn’t surprise me people have had complaints.
Once their competitors start to gain popularity, it will be the beginning of the end for them (probably). They need to start treating their customers fairly.
Back to “hidden fees”. Companies do this kind of crap all the time. It’s annoying as hell. Not all, but most. It always makes me feel good when a company hasn’t ripped me off and makes me want to buy more of their other products since I know they’re not looking to snake me in the back.
PayPal doesn’t have any hidden fees (I’d know, I paid them over $7000 in fees last year). Compare that to a merchant account from a bank which has half a dozen types of fees PayPal doesn’t charge (AVS fees, downgrade fees, batch fees, statement fees, chargeback fees, retrieval fees…). And PayPal even refunds their fees if you make a refund, where with a merchant account, you’re charged a second round of fees for making the refund.
PayPal hasn’t let me down either. I was making a general comment that many companies (like banks) charge hidden fees.
Still, I’m not very confident in PayPal since I consider eBay a greedy company. I don’t think they would have a problem with screwing me over if they had the opportunity to so.
Yeah - the cross border fees were a complete surprise to us, but generally, we see fewer chargebacks through PayPal.
Cross border fees are newly created fees by the Visa & MasterCard Associations and basically all payment processors began passing these fees onto merchants effective April 2009.
The wholesale cost of these fees are:
Cross border fee- Non USD .40%
Cross border fee- USD .30%
Visa International fee .40%
Regardless of the type of credit card presented, paypal charges a flat rate, even though they pay variable rates of interchange. The business proposition is to get enough lower interchange transactions to offset those that may be higher than the fees they charge. With the typical lowest business interchange rate of 1.03% + $.15 per transaction and an upper limit of maybe 2.9% + $.10 per transaction, paypal needs to keep the balance. Their model wouldn’t cover cross border fees that they must incur, thus they are passing them on just like everyone else. Since a transaction with a cross border fee is likely also to be on a higher interchange cost card (ie rewards card), they are adding on enough to cover expected costs and of course, profits!
Is paypal the best choice for payment processing? It depends on a lot of factors, but for very small businesses, under $3000/mth, it’s probably one of the best. I also think it should be in the mix for anyone accepting online payments since some people prefer paypal.
Chris
3D Merchant Services
Credit card processing for mid-large businesses only.