Should I use Paypal for my Credit Card Processing?

I work for an E-Commerce company and we currently take credit cards for payment through Wells Fargo and use as our gateway. We also take both Paypal and Google Checkout and at some point want to accept Amazon’s new payment system.
Paypal has been calling us and wants to talk to us about using their system to also take credit cards. I just would like to know if this is a good option. I did some research and from what I see online their rate is the same as for regular paypal payments, 2.9% + 30 cents per transaction. We are always looking for ways to save money but also it’s important that we have a good system that is reliable and safe and also that we have a good system for when chargebacks/disputes happen. One thing I like with Paypal’s system is there’s a flat fee where with a regular merchant account the fees get so confusing that it’s hard to figure out. Plus, we pay a $15/month gateway fee. We are a fast growing company and I think as we get larger a lot of these monthly fees plus gateway fees will become less of an issue. I realize there the discount rate is the base rate and there are interchange and other fees added on top for special cashback and rewards cards, etc.
We accept Visa, Mastercard, Discover Card, and American Express. I know we are charged a 22 cent per transaction fee for our American Express cards so that is paid through Wells Fargo but the discount rate of 3.15% I believe is paid through American Express and taken out of the total payment we get when someone uses American Express. Plus there is a $7.95 monthly fee for accepting American Express. If we take the amount on our most recent bill with no chargebacks that we processed minus American Express (it only has the .22 transaction fee on our Wells Fargo bill for each AmEx transaction) our fees come out to approximately 3.68% if we take the total processed minus AmEx to see what percentage our fees are charged in the month. This seems kind of high and I think part is the $31 monthly internet fee and the $25 monthly fee and this is not including the $15/monthly For reasons like this it appears Paypal could be quite a bit cheaper and definitely simpler but again as we grow in size I know these monthly fees are less of an issue. Also, currently about 60% of our transactions are credit card. 38% or so are Paypal where we get the lower rates and approximately 2% are Google Checkout which has the same rates as Paypal.

We looked at our merchant account information. We saw the following fees:
Our discount rate for credit cards is listed as 2.10% and non-pin debit as also 2.10%.
We were being charged a $10/month fee for paper statements but just had that removed so we can get statements online. This 10$/month fee was in the earlier math I did above to get the 3.68% rate.
Chargebacks are $25 each and we only have 2-3 per year.
We also have a monthly minimum processing fee of $25 per month I called Wells Fargo and I don’t know if they gave me the correct information. They explained this is charged monthly but anything under that we are charged less. I don’t quite know what this means. If anyone knows more about a monthly minimum processing fee let me know.
We also have a $31 fee for our internet processing that is monthly.
There is a $45 annual fee.
Or authorization fee is .20 per transaction
The AVS is .01 per attempt.

I would only want to switch to Paypal if it’s cheaper since I’m very happy with our current system with Wells Fargo and We use Wells Fargo for our banking and other needs and there’s a big advantage of staying with Wells Fargo. The last two years they have tried to raise our rates. Just now we got a notice about them going up to 2.4% for Credit and 2.15% for Non-Pin Debit. Last year we called them though and told them we had other merchant banks offering us lower rates and they lowered them back to 2.1%. We just received this 2nd notice so will make the same call soon. We really prefer to stay with our current system and even if Paypal was slightly cheaper we’d still stay but we want to also get opinions of using Paypal for credit card processing and if it’s significantly cheaper we’d consider it.

I have the following questions/concerns:

-When someone pays using a credit card through their system do they at any point have to leave the website or do they see anything that tells them that it’s a paypal credit card system?

-Would I be able to get rid of

-For anyone who has used them or heard about then, are they a good system to work with? Are they reliable for example?

-How about disputes? We have few chargebacks and I assume if there is one it is like a standard chargeback or maybe even a paypal dispute. Is there a charge for chargebacks like with a regular merchant bank and how well do chargebacks go when you have one?

-Would we still be able to accept all 4 major cards-Visa, MasterCard, Discover, and American Express?

-If we can take American Express is that handled separately such as how we have to do it now with a regular merchant bank? Will we have to pay the $7.50 monthly fee, etc?


Not sure what type of business you have, but personally, I’ve used PayPal for years without a problem. I like the fact that PayPal only charges per transaction, not a monthly fee. I also like that not all customers have to have a PayPal account to pay for items I sell.

Personally, I think you are paying too many monthly fees. Not sure why you have so many different sources for payments. One source that accepts the 4 major credit cards (and international payments, if you accept these) would be good enough I would think. With PayPal you can turn on/off acceptance of international payments.

Personally I wouldn’t change a system that works…

Just let people pay by credit card on Paypal ALSO if they wish.

Thank you for interesting post.

There are various ways to use PayPal: you can either send users to the PP site to make a basic transaction, or you can use a cart that connects with PP in the background so that users never see PP at all.

PP does have a bit of a dodgy reputation when it comes to handling disputes. If they get it into their brain that something is wrong (such as a surprising spike in your sales) they can, and do—apparently on a whim—lock your account for six months, without any comeback on your part. There are many reports of this silly behavior on the web. So make sure not to feature your product on Oprah, for example. The basic message is that, if you use PP, don’t rely on it exclusively.

I’ve been reading about Stripe, which looks like a nice alternative to PP (though only available in the US right now). I would probably use that instead of PP if I had the option.