Merchant account vs Paypal

[godboma]

The sales on my website are rising and I am starting to think about getting a merchant account to accept credit cards. Right now I only take Paypal. I know that Paypal is the main choice of payment on eBay. But what about the rest of the world?

Most of my competitors do not accept Paypal. Actually I am about the only one who is accepting only Paypal. Someone said in another post that 75% of the sales on their website go through merchant account. It is hard to know how many sells I loose by not having a merchant account. More than 90% of my sells on the website are in Canada.

What is your ratio of transaction through merchant account vs Paypal on your website? Do you have any suggestions for a merchant account?

Thanks,

[pierrelebel]

Most individuals purchasing from a stranger (not an established name) will prefer to use PayPal for the implied protection, whether the purchase is made on eBay or elsewhere.

A merchant account will most likely cost you a bit more than PayPal if your volume is substantial.

You will need to find a provider who offers both Cdn$ and US$ (not all of them do). Then check all the small fees.

Is it worth it? You may have to "gamble" a few hundred dollars to find out by offering both services for three or six months and then analyse the results.

My sales are substantialand I continue to accept (prefer) personal cheques, money orders, Interac email money transfers (Canada only), and PayPal. While I may lose a few sales by not offering to accept credit card payments directly, I do not lose sleep over it.

[axe_n_gear_music]

Hi,
Yes to be competitive, I believe that you must offer Visa, Mastercard, and American Express. I offer this for my website for payment options, as well as on eBay. You will pay a percentage fee which varies from bank to bank, but the % is usually slightly less than what you pay per transaction with Paypal.

I provide a catchy, easy to remember toll free number for North America 1-877-266-5293 (1-877-COOL AXE) , and buyers either enter their payment info on the form during checkout, or they can just call in their cc number with exp. date, and then I run it by phone (I use TD Canada Trust). Just call your bank, and they will set you up. You'll be surprised as to how many eBay buyers will pay this way too, by calling you directly and giving you their cc number by phone.

Word of warning, though-
Once you are set up, be sure to be cautious- there are alot of scammers out there who prey on websites that take credit cards as payment. Any suspicious, or higher dollar amount orders, or orders going to riskier countries, etc - always remember to take a few minutes, and you can do a name and address verification by calling the number your bank will provide, which cross references the credit card holder's name with their address. (I caught a guy a few months ago trying to use a stolen credit card number- his shipping address was South Africa, and when I had the bank run his name and address verification, the card was in a different name, and was registered to someone in Miami!!)
I no longer accept cc payments from buyers outside of North America.

Also, at least in my case, you have to run the amount of the credit card sale in CAD only, so if you sell in USD like I do on eBay and my website, then you will have to calculate the exchange rate for the day that the sale took place and run it through in CAD. (I just use the Bank of Canada Website).

You would be surprised as to how many people hate Paypal or do not have an account, and will not sign up for one. If you are in the e-commerce biz, then the credit card option for your buyers is an absolute must. At least half or more of my website sales are processed by CC, and eBay sales are mostly Paypal.
And, like you, most of my website sales are within Canada.
Having that toll free number is nice too, especially for out of Province or US buyers- I just had a phone sale a few minutes ago from a guy in Texas who wanted to get more info on a certain instrument directly from me, and he paid by cc right on the phone. It took me two minutes to run his card, and thats it, another $700.00 sale!!

Hope this helps,
Cheers,
AXE

[godboma]

Hi Pierre,

Thank you for you inputs.

For now, my website is only CAN$. Like I said, most of my customers are Canadian and items are heavy so shipping to USA or buying from USA is not popular for that category (boardgames). Shipping oversea is not even offered

I had my first transaction with Interac Money Transfer this week. I am still waiting to receive the money since my bank does not support it. Is it something that is popular?

I also started surveys on forums dedicated to my catagory of products. I'll post the results when enough people answered it.

Thanks,

[godboma]

Thanks Axe for your comments. I like the idea of the phone number. I know about scammers and hackers. I had to change a few things in my web site because I was targeted by hackers at some point.

That is the other concern about credit card number: do we store the number in the customer profile or not? I think a lot of people like Paypal because they do not have to go and get the credit card to enter the numbers.

[axe_n_gear_music]

Also, Godboma, on your website, I notice that you do not have security on your checkout- ie, an SSL (Secure Socket Layer) certificate. Ask your host provider for more info. For example, when your buyer goes to check out, most know that they should look up at their browser to be sure that the http changes to https (s for "secure) before providing any personal info.

Here is a quote from my site, which may help explain it a bit better-
"An SSL Certificate provides hidden security for the ultimate in safe, easy and convenient Internet shopping. Once an Internet user enters a secure area such as our checkout, the shopping site’s SSL certificate enables the browser and Web server to build a secure, encrypted connection. The SSL “handshake” process, which establishes the secure session, takes place discreetly behind the scenes, ensuring an uninterrupted shopping experience for the consumer. A “padlock” icon in the browser’s status bar or the “https://” prefix in the URL are the visible indications that a secure session in progress. When you go to check out in our store, look for your browser to change from HTTP:// to HTTPS:// to indicate that you are in a secure connection. "

Cheers,
AXE

[pierrelebel]

"my bank does not support it"

ALL five big banks do.

[canadaspatchking]

Quick note... If you already use PayPal you may qualify for a merchant account with them and then you can implement either Payments Pro and/or Virtual Terminal which allows either your customer to enter their credit card information or they call you up with their CC number. The costs for this service is $35 CAD per month and you can accept both Canadian and US dollars. You'd have to weigh if this fee is worth it because they also charge slightly higher _per payment_ fees than just regular PayPal transactions.

There are a number a pros and cons to these services. But it gives you another option with a service you already use.

[axe_n_gear_music]

Pierre is correct, all 5 big banks do support email money transfer. I also offer this option to my Canadian buyers, (it seems like only one in a thousand pay this way for me, but because I offer the credit card option, I find that most people prefer that instead). But by far the easiest for me is credit card or Paypal payments. (even though you have to pay them a small fee for their service).

[pierrelebel]

"I also offer this option to my Canadian buyers, "

So far this month, I received two Interac payments (in Cdn$) from a buyer in Australia! Yes, Australia!

The chap has a Canadian bank account and uses it to send email transfers to Canadian sellers. Neat! Fee free! Risk free!

[godboma]

"my bank does not support it"

ALL five big banks do.

Guest who is my bank... National Bank of Canada does not support it. This is where have have my commercial account.

[godboma]

Also, Godboma, on your website, I notice that you do not have security on your checkout- ie, an SSL (Secure Socket Layer) certificate.

You are right, I was thinking that I did not need it since I do not process the payment on my site (it is done on Paypal). The personal info is also sensible information. I will have to review that.

Thanks,

[coxengines]

we use www.internetsecure.com

$35/month flat fee. Transaction fee of 29 cents +2.49% of payment.

No setup fee, no early cancellation fee and, most importantly no holdback. Also comes with a virtual terminal to plunk in CC's manually.

There is no need for an SSL certificate as the payments are processed on their site.

It would be unthinkable to run our other store without accepting credit cards (80% pay with CC). We did not go with Paypal's version as they imposed a holdback.

Bernie

[pierrelebel]

"$35/month flat fee. Transaction fee of 29 cents +2.49% of payment. '

That is a bit more than PayPal, is it not? Not to mention the cost and time associated with an 800 phone line to receive buyer's credit card information.

I am also curious about your American customers having to pay their credit card issuer 2% to 3% more than expected.

While you convert a US$100.00 transaction into Cdn$ using the Bank of Canada rate, the American buyers will be charged a conversion fee from Cdn$ to US$ by his American credit card issuer (typically 2.5%, sometimes more) resulting in a charge of US$102.50 to US$ 103.00.

Any complaints?

[recped]

What is your ratio of transaction through merchant account vs Paypal on your website? Do you have any suggestions for a merchant account?

From comments I've seen on the US Boards it would seem that sellers (off eBay) who offer PayPal or direct credit card still have a very high ratio of PayPal.

As for which merchant account, you should check with your bank first but the easiest and probably close to the cheapest is a merchant account through PayPal.

I used to have a fantastic merchant account but I dropped it recently, over the past 5 years or so while my discount rate is still great the various monthly charges, transaction fees, International fees, statement fees, account maintenance fees etc. etc. etc. made it very expensive unless I was doing a much greater volume of business.

The discount rate for PayPal merchant accounts isn't the best but it's far from the worst and they have practically no other charges unlike almost any other type of merchant account.

[femmefan1946]

We did not go with Paypal's version as they imposed a holdback

Does American Express still have a holdback? I seem to remember that we decided against Amex, way back when, because they only paid out after a couple of weeks of holding the payment.

[coxengines]

femme,

The holdback is initiated by the processor and has nothing to do with the credit card. It is a safeguard against us defaulting and they having to make good. Based on the paperwork I supplied them they considered us low-risk and waived the holdback, also referred to as RMRF (Rolling Merchant Reserve Fund).

pierre,

The price is the same as Paypal, sans the monthly fee. As I mentioned, we could NOT run the store without accepting credit cards. Almost all transactions are conducted without our intervention on line and, if we only offered PP as payment method, would forfeit about 80% of our business.

The 800 line costs $2.95/month + 7cents/minute. We get 3-4 calls a day and the monthly bill is about $30-40. With over 20k sales/month, a negligible cost. That aside, by the time a caller hangs up with me his/her credit card is carrying a nice $$ debit from us. I have been a salesperson all my life lol. I love ones that call (read: upsell).

Our merchant account is in USD and our store in USD, so no conversion fees. The ones that complain are Canadians but they only account for 2% of the business.

Bernie

[pierrelebel]

PayPal only charges 2.1% for sellers with $10,000 monthly volume.

[coxengines]

Yeah, I guess.

Unfortunately, we seem to steadily receive 8 to 9k/month on our PP account and about 2k/month on the other one and they are not combinable. The other 10k/month are via credit card.

The difference between 2.49 and 2.1% is not that much. My argument is that, if we don't accept credit cards on our site (shopping cart) we will not get the amount of business we have.

Imagine trying to buy something from Chapters or Amazon, etc and the only accepted for of payment is Paypal. Forget it! Our target audience are baby boomers to grave. Many struggle with computers; let alone Paypal.

Bernie

[axe_n_gear_music]

"While you convert a US$100.00 transaction into Cdn$ using the Bank of Canada rate, the American buyers will be charged a conversion fee from Cdn$ to US$ by his American credit card issuer (typically 2.5%, sometimes more) resulting in a charge of US$102.50 to US$ 103.00.

Any complaints?"

Never......I sell in USD, and process credit card payments in CAD (it only takes a minute to do the conversion, and that's the only way my bank will do it, and I am fine with that).
Not a problem, though, as I explain to all my US buyers while I have them on the phone, that they may see a slight difference on their CC statement, depending on their bank's exchange rates- in some cases, I charge them a few dollars less to help absorb the difference. I find that if you talk to your buyers personally and ease them through the process, they are very appreciative of the help that we give them. - Never ever had a complaint, and most are very happy to be able to speak to the seller (us) personally, toll free, plus be able to use the credit card of their choice.

Bernie is right, too on the "upsell" idea- In most cases my buyers are looking to buy a 4 or 5 hundred dollar item, and I end up selling them another 50-100 dollars worth of accessories while I have them on the phone. The cost of our toll free number cost is absolutely minimal when I figure in how much business it bring us. I could not imagine running a professional online business without a toll free number and accepting credit card payments.
I think it depends on your niche, too- if I was selling stamps, perhaps I would be less inclined to have or need a toll free number. - Selling instruments and hundreds of varying related items, I find that I have tons of people calling to ask in depth questions, verify availability, use their credit card instead of Paypal etc, etc. And when people have hundreds or even thousands of dollars at stake in an online purchase, they really do like the peace of mind, and more personal service that we can only provide via our toll free number. If our competition does not offer CC payment options or offer a toll freee number for customer service, then that is absolutely great for us!! 😉

Cheers,
AXE