A. Dear
Edgar,
It is always best to offer as many possible payment options for customers
as possible. You want to get as many sales as you can, and the best way to
do this is to make sure that you make it easy for your customers to actually
buy and pay you.
It really depends on the type of product you are selling, your
anticipated sales volume, your resources, and your credit standing. Here are
some factors you may want to consider:
1. Your level of resources. If you do not have enough funds,
Paypal is the easiest way to accept credit cards online. Creating a business
account with Paypal is easy; all they need is your credit card and bank
account routing number for depositing the money in your Paypal account. You
will not pay anything else.
With a merchant account, you will have to figure out whether you want
payment processing to be done automatically or manually -- and either way,
you will be incurring additional expenses. If automatically, you will need a
payment processing gateway. Verisign Payflow services, for instance, costs
as much as $59.95 per month for maximum of 1,000 transactions plus set up
fee of $249. Plus, you still need SSL digital certificate to ensure secured
transaction, which can set you back anywhere from $199 for two years with
Thawte or $695 for two years with Verisign. If manually, you will purchase a
credit card payment processing terminal. Verifone Omni 3750, for example,
costs anywhere from $398 to $650.
2. Customer’s Preferred Mode of Payment. One thing to consider is
that not everyone has a Paypal account, and not everyone is willing to sign
up for one. If you don't have a merchant account, you will lose the sale of
majority of the people who do not have Paypal accounts. Unfortunately, there
is no data how many people actually abandon their shopping carts upon seeing
that only Paypal is offered for payment processing.
On the flipside, there would be some customers who have stagnant funds in
their Paypal account or those who simply prefer to use those Paypal funds
instead of cash or credit cards.
3. Fees. Using either option, one thing you cannot escape from,
and that is a fee. Both charge processing and other fees per transaction. If
you can get a good merchant account provider (especially from a bank),
transaction fees of Paypal is higher and it becomes more expensive to
process payments using Paypal. This is true especially if you are selling
high ticket items.
4. Types of product sold. Paypal alone is good if you are selling
on eBay, you are doing your online selling as a hobby, or you are selling
low-ticket items. If the items you are selling have price tags upward of
$1,000 or above, you may find fewer customers who will pay with Paypal.
(article continued below ...)
5. Fraud controls. The level of fraud typically
depends on the industry - some are more prone to fraud than others. Unless
you can put addons in your payment gateway (e.g. get Verified by Visa or
some other controls), Paypal takes care of this on their end. So with a
merchant account, the more fraud controls you put, the transaction costs
becomes higher and keeping it becomes more expensive.
6. Scams. You don't get victimized by phishing schemes with your
merchant account. There are tons of phishing emails on Paypal around, so it
is important not to click on any emails claiming to be from Paypal. If you
want to get information about your Paypal account, simply log into
Paypal.com.
I suggest give customers the option of using which is most convenient for
them -- both. If they want to use their credit card, then you have the
merchant account to process it. If they want to use their stagnant funds in
their Paypal account, then let them do it.
Then review how many of your customers actually use Paypal vs. merchant
account, and estimate the cost for each. If only 3% of your customers use
Paypal, then you can reconsider and use only your merchant account
About the PowerHomeBiz.com Guide:
Isabel Isidro is the
co-founder and VP-Managing Editor of PowerHomeBiz.com, an online magazine
for home business entrepreneurs that provides guidance on starting, running
and managing a home-based business.
The opinions expressed in this column are
those of the author, not of PowerHomeBiz.com.
Users
should not treat the Guide's response as legal, accounting, or
professional advice as all answers are intended to be general in
nature. Such advice can only be properly given by qualified
professionals who are fully aware of a user's specific geographical areas or circumstances, such
as
an attorney or accountant.
