Can't Afford a Merchant Account? Use PayPal

By Stephen Bucaro

It is a great advantage to be able to take electronic payments at your Web site. A Merchant Account allows you to accept credit card payments over the Web. A Merchant Account requires you to deal with an Electronic Clearinghouse to handle the transactions and a sponsoring bank for deposit of the funds.

You will be required to pay the merchant service provider a percentage (discount rate) of each sale. For a small Web-based business this is usually about 4% to 6% of the total sale. You will also be required to pay a transaction fee of 30 to 40 cents for each transaction processed.

If the discount rate and transaction fees in a given month don’t add up to a certain minimum, usually around $25, you pay the minimum anyway. Then there is a batch fee for processing the sales at the end of each day and a monthly statement fee at the end of each month. A customer may request a charge-back, which will cost you $25 to $35 for each charge-back.

For a small Web-based business the cost of a Merchant Account is too high. Fortunately there is a more efficient method of accepting electronic payments on the Web. PayPal is a system for accepting payments without hassles of a Merchant Account.

To make a payment, your customer must have a PayPal account. It's free and easy to open a PayPal account and it's free for customers to send money. Over 150 million Web users already have a PayPal account. PayPal completes over three hundred thousand transactions per day.

To send money, your customer needs only your email address. The amount of the sale is deducted from either the customers PayPal account balance, or from the customers credit card or checking account - depending upon how they set up their PayPal account.

When a customer sends you money, your PayPal account will be credited and you will be notified by email that you have received a payment. You can then ship the product, or if it’s a downloadable product, for example software or an ebook, you can immediately email a password to the customer giving them access to the download.

PayPal Personal Accounts receive free payment if the customer sends funds from their PayPal account balance. If the customer pays with a credit card, you must upgrade to a Premier account before this payment will be credited to your account. With a Primier account the fees on credit card transactions are 2.9% + $0.30.

You can withdraw money from your account by having PayPal make an Electronic Funds Transfer to your checking account. PayPal does not charge for this service, but your bank might charge you a fee. You can also choose to receive a check. PayPal charges a $1.50 check fee. Allow 1 - 2 weeks to receive the check. Of course, since most Web-based businesses accept payment through PayPal, you can use the money in your account without ever making a withdrawal.

You create a PayPal account by filling out the registration form at www.paypal.com Your Tax ID Number is a number issued to incorporated businesses by the federal government. If you do not have a Tax ID Number for your business, simply enter your social security number. TPayPal will send you a message to verify the email address that you provide. Once you confirm your email address, your account is activated.

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