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| Determine
which merchant account is best for your business |
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| Results
of our comparison |
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Now
that we have established who we want to compare and how to compare
them, let's see how they fared head-to-head. First we'll look
at Company 1.
Company 1 has a high average ticket price ($200) and also does
a high volume of transactions per month (400). The results of
our comparison produced these results: |
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True Merchant Account |
Paypal |
Worldpay |
2Checkout |
| Qualified Fees Per
Month |
1760.00 |
1760.00 |
2360.00 |
4400.00 |
| Transaction Fees Per
Month |
120.00 |
120.00 |
140.00 |
180.00 |
| Up Front Costs |
99.00 |
0.00 |
299.00 |
49.00 |
| Costs After 1st Month |
1905.00 |
1880.00 |
2535.00 |
4580.00 |
| Cost After 2 Months |
3909.00 |
3760.00 |
5369.00 |
9209.00 |
| Cost After 3 Months |
5814.00 |
5640.00 |
7904.00 |
13789.00 |
| Cost After 4 Months |
7719.00 |
7520.00 |
10439.00 |
18369.00 |
| Cost After 5 Months |
9624.00 |
9400.00 |
12974.00 |
22949.00 |
| Cost After 6 Months |
11529.00 |
11280.00 |
15509.00 |
27529.00 |
| Cost After 7 Months |
13434.00 |
13160.00 |
18044.00 |
32109.00 |
| Cost After 8 Months |
15339.00 |
15040.00 |
20579.00 |
36689.00 |
| Cost After 9 Months |
17244.00 |
16920.00 |
23114.00 |
41269.00 |
| Cost After 10 Months |
19149.00 |
18800.00 |
25649.00 |
45849.00 |
| Cost After 11 Months |
21054.00 |
20680.00 |
28184.00 |
50429.00 |
| Cost After 12 Months |
22959.00 |
22560.00 |
30719.00 |
55009.00 |
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In
this scenario the true merchant costs substantially less then
two of the three third party processors. Only Paypal Basic charged
slightly less. A merchant of this size would easily choose the
true merchant account and gateway as the advantages a true merchant
account and gateway offers versus Paypal Basic make the difference
in price a non-factor. A merchant of this size would also be likely
to receive a lower rate from a true merchant account provider
further increasing their incentive to choose a true merchant account
and gateway.
Company 2 has a high average ticket price ($200) but does a
low number of transactions per month (5). The results of our
comparison produced these results:
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True Merchant Account |
Paypal |
Worldpay |
2Checkout |
| Qualified Fees Per
Month |
22.00 |
29.00 |
29.50 |
55.00 |
| Transaction Fees Per
Month |
1.50 |
1.50 |
1.75 |
2.25 |
| Up Front Costs |
99.00 |
0.00 |
299.00 |
49.00 |
| Costs After 1st Month |
48.50 |
30.50 |
66.25 |
57.25 |
| Cost After 2 Months |
196.00 |
61.00 |
431.50 |
163.50 |
| Cost After 3 Months |
244.50 |
91.50 |
497.75 |
220.75 |
| Cost After 4 Months |
293.00 |
122.00 |
564.00 |
278.00 |
| Cost After 5 Months |
341.50 |
152.50 |
630.25 |
335.25 |
| Cost After 6 Months |
390.00 |
183.00 |
696.50 |
392.50 |
| Cost After 7 Months |
438.50 |
213.50 |
762.75 |
449.75 |
| Cost After 8 Months |
487.00 |
244.00 |
829.00 |
507.00 |
| Cost After 9 Months |
535.50 |
274.50 |
895.25 |
564.25 |
| Cost After 10 Months |
584.00 |
305.00 |
961.50 |
621.50 |
| Cost After 11 Months |
632.50 |
335.50 |
1027.75 |
678.75 |
| Cost After 12 Months |
681.00 |
366.00 |
1094.00 |
736.00 |
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this scenario Paypal is clearly the best option for this merchant
despite their higher fees. The true merchant account and gateway
is only slightly better then 2CheckOut and if Worldpay didn't
have such a high setup fee they would be a good choice as well.
The simplicity offered by third party processors, with no gateway
to integrate, makes them even more attractive to a merchant of
this size. This fits the notion that third party providers are
better for small merchants.
Company 3 has a low average ticket
price ($15) but does a high volume of transactions per month (600).
The results of our comparison produced these results: |
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True Merchant Account |
Paypal |
Worldpay |
2Checkout |
| Qualified Fees Per
Month |
198.00 |
225.00 |
265.50 |
495.00 |
| Transaction Fees Per
Month |
180.00 |
180.00 |
210.00 |
270.00 |
| Up Front Costs |
99.00 |
0.00 |
299.00 |
49.00 |
| Costs After 1st Month |
403.00 |
405.00 |
510.50 |
765.00 |
| Cost After 2 Months |
905.00 |
810.00 |
1320.00 |
1579.00 |
| Cost After 3 Months |
1308.00 |
1215.00 |
1830.50 |
2344.00 |
| Cost After 4 Months |
1711.00 |
1620.00 |
2341.00 |
3109.00 |
| Cost After 5 Months |
2114.00 |
2025.00 |
2851.50 |
3874.00 |
| Cost After 6 Months |
2517.00 |
2430.00 |
3362.00 |
4639.00 |
| Cost After 7 Months |
2920.00 |
2835.00 |
3872.50 |
5404.00 |
| Cost After 8 Months |
3323.00 |
3240.00 |
4383.00 |
6169.00 |
| Cost After 9 Months |
3726.00 |
3645.00 |
4893.50 |
6934.00 |
| Cost After 10 Months |
4129.00 |
4050.00 |
5404.00 |
7699.00 |
| Cost After 11 Months |
4532.00 |
4455.00 |
5914.50 |
8464.00 |
| Cost After 12 Months |
4935.00 |
4860.00 |
6425.00 |
9229.00 |
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this merchant's low ticket price they still do a substantial processing
volume each month. Worldpay and 2CheckOut clearly have priced
themselves out of the market with only Paypal Basic being an acceptable
alternative to a true merchant account. Like mentioned previously,
the advantages offered by the true merchant account and gateway
more then offset the slight cost advantage offered by Paypal Basic.
Company 4 has a low average ticket
price ($15) and does a low number of transactions per month (20).
The results of our comparison produced these results: |
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True Merchant Account |
Paypal |
Worldpay |
2Checkout |
| Qualified Fees Per
Month |
6.60 |
8.70 |
8.85 |
16.50 |
| Transaction Fees Per
Month |
6.00 |
6.00 |
7.00 |
9.00 |
| Up Front Costs |
99.00 |
0.00 |
299.00 |
49.00 |
| Costs After 1st Month |
37.60 |
14.70 |
50.85 |
25.50 |
| Cost After 2 Months |
174.20 |
29.40 |
400.70 |
100.00 |
| Cost After 3 Months |
211.80 |
44.10 |
451.55 |
125.50 |
| Cost After 4 Months |
249.40 |
58.80 |
502.40 |
151.00 |
| Cost After 5 Months |
287.00 |
73.50 |
553.25 |
176.50 |
| Cost After 6 Months |
324.60 |
88.20 |
604.10 |
202.00 |
| Cost After 7 Months |
362.20 |
102.90 |
654.95 |
227.50 |
| Cost After 8 Months |
399.80 |
117.60 |
705.80 |
253.00 |
| Cost After 9 Months |
437.40 |
132.30 |
756.65 |
278.50 |
| Cost After 10 Months |
475.00 |
147.00 |
807.50 |
304.00 |
| Cost After 11 Months |
512.60 |
161.70 |
858.35 |
329.50 |
| Cost After 12 Months |
550.20 |
176.40 |
909.20 |
355.00 |
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a merchant this small Paypal Basic is always mentioned as the
best choice and the results show why. Even 2Checkout's high rates
are less costly when compared to a true merchant account and gateway.
Combined with the simplicity third party processors offer a merchant
this small does not even have to think about which choice is best
for them.
Company 5 has an average ticket
price that's neither high nor low ($45) and does a moderate number
of transactions per month (200). The results of our comparison
produced these results: |
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True Merchant Account |
Paypal |
Worldpay |
2Checkout |
| Qualified Fees Per
Month |
115.50 |
131.25 |
154.88 |
288.75 |
| Transaction Fees Per
Month |
45.00 |
45.00 |
52.50 |
67.50 |
| Up Front Costs |
99.00 |
0.00 |
299.00 |
49.00 |
| Costs After 1st Month |
185.50 |
176.25 |
242.38 |
356.25 |
| Cost After 2 Months |
470.00 |
352.50 |
783.76 |
761.50 |
| Cost After 3 Months |
655.50 |
528.75 |
1026.14 |
1117.75 |
| Cost After 4 Months |
841.00 |
705.00 |
1268.52 |
1474.00 |
| Cost After 5 Months |
1026.50 |
881.25 |
1510.90 |
1830.25 |
| Cost After 6 Months |
1212.00 |
1057.50 |
1753.28 |
2186.50 |
| Cost After 7 Months |
1397.50 |
1233.75 |
1995.66 |
2542.75 |
| Cost After 8 Months |
1583.00 |
1410.00 |
2238.04 |
2899.00 |
| Cost After 9 Months |
1768.50 |
1586.25 |
2480.42 |
3255.25 |
| Cost After 10 Months |
1954.00 |
1762.50 |
2722.80 |
3611.50 |
| Cost After 11 Months |
2139.50 |
1938.75 |
2965.18 |
3967.75 |
| Cost After 12 Months |
2325.00 |
2115.00 |
3207.56 |
4324.00 |
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| Conclusion
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| Hopefully
you now have a better idea of how a true merchant account and
gateway differ from a third party processor. Although both ultimately
allow you to accept credit card payments online, they do go about
it in different ways with each having its own strengths and weaknesses.
One thing to point out is every
business is different. Your long term and short term goals, market,
and customer base will be unique to your business. I've used a
lot of generalizations in this article and they may not apply
to your business. Also be sure to consider all of the facets of
accepting credit cards online. Don't just focus on price. Sometimes
paying a few dollars more a month can mean improving your customers'
shopping experience and the professional appearance of your business.
As always, take your time and
explore all of your options. The more research you do into your
processing the solution, the more likely you will find one that
best suits your needs and at a great price. |
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| Appendix
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Want
to do the same comparisons done in this article? Want to do your
own comparison against Paypal, Worldpay, and 2CheckOut? You can
use the same calculator used in this article. The rates of the
third party processors are hard-coded into it. All you need to
do is provide the true merchant account rates you wish to compare.
Feel free to run the same comparisons and see the results for
yourself. The fictitious company and merchant account info used
in this article is included for your reference.
Even though Paypal Pro is not being considered
in this article, it varies very little from Paypal standard.
The only two cost differences are the elimination of the fourth
tier for sites processing over $100,000 per month and the addition
of a $20 per month fee. After one year this will result in an
additional $240 being added to Paypal's total costs.
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Information
used with permission and provide by John
Conde |
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