I am asked almost daily what is the best method to accept credit cards. Nearly everyone knows of Pay-Pal and there is always a 50/50 split when it comes to popularity.

Paypal became popular when E-bay attracted millions of individuals that wanted to buy and sell to each other. Since there really was not a good way to transfer funds without mailing checks Paypal provided a way that individuals could move some money into a "virtual account" and then exchange money for goods. Funding this account with credit cards was just ONE method you could fund your Paypal account. You could draft money directly from your checking account if you desired. My point is that Paypal was not originally intended to become a credit card merchant. Does Paypal try to make it easy to quickly create an account and use your credit card to make a payment? Sure they do... In fact they are now starting to compete with real credit card merchants by lowering their 4% transaction fee based on volume.

What is a "Merchant Account" ? A merchant account is what I would consider a business banking service of a sort.. You would contact a merchant (we like www.posprocessing.com) and fill out an application. Once approved you will receive something called a "Virtual Terminal". A virtual terminal is a web site that provides all the functionality of that little black box that you see on the counter of many stores. The only difference is you type in the credit card number instead of swipe the card.

True merchant accounts charge less per transaction.. Closer to 2.6% (don't quote me on that) but do have some charges that Paypal does not. For instance you may pay monthly fees to keep the account much like a bank account. You usually also pay a setup fee anywhere from $99.00 on up depending on what type of business you have.

My personal opinion is that a merchant account is the way to go. The biggest reason is that it requires less time from your customers. If a customer wants to buy your product and doesn't have a Paypal account then they will be forced to create one. This can be annoying. Most true merchant accounts can be integrated so that your customer never leaves your web site. This is also more comfortable for the customer.

Are there good points of Paypal? Yes, to be fair.. Most web sites can easily integrate Paypal to your web site and you can be running in a day or two. Also you don't have to pay setup fees or monthly fees to use Paypal.

Shane Merem
www.websiteforge.com
www.magnusoft.com
shane.merem@magnusoft.com