Merchant Account Reviews:
Online Payment Processing Revealed

Should I use Paypal or a Merchant Account to process credit cards on my website?

Great question!  And it is one that I have struggled with in the past, as well.  The answer is simple:  both.  But at the beginning, which one should you focus on?  Let's break them down briefly with a few pros and cons:

Advantages of Paypal:

• For merchants with accounts, very easy and quick to set-up
• For customers with accounts, very easy to make purchases

Disadvantages of Paypal:

• High transaction fees
• Limits on flexibility (though, they do have API capability)
• Can hurt conversion for customers without Paypal accounts
• Suspended accounts can affect your other businesses

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Advantages of a Merchant Account

• Lower rates and fees
• No need to have a third-party account (payments are made without a login)
• More flexibility with customer management and direct access to your own gateway
• Deep API capability (including custom payment pages)

Disadvantages of a Merchant Account

• Setting up an account may take a few weeks and a lot of paperwork
• Limited to credit card companies you sign up (and pay!) for
• Credit card transactions only (versus debiting options with Paypal)

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As you can see, both have their advantages and disadvantages.  In my opinion, conversion is key and providing your customers with the easiest way of making a payment is most important.  For those WITH Paypal accounts, that is the simplest way of buying.  For those WITHOUT Paypal accounts, the merchant solution is much easier.

The rates are usually a little bit cheaper working directly with the merchant banks, but there are usually higher initial monthly rates for having processing capability of credit cards such as American Express, Discover and even eChecks.  As your monthly sales increase, these monthly rates become less significant and you will find Paypal costing you much more money than a merchant account.

Further, the flexibility of creating custom sales pages and interactivity with your own brand and website is much more limiting with Paypal accounts.

This is all leading to the simple conclusion that for those just starting out, using Paypal is a great place to begin.  It is quick, easy and low risk.  In the meantime, you can start initiating your merchant account creation and integration and hopefully you can blend the two together into your website for the ultimate balance and flexibility for both your clients and yourself.