Paypal has become the first stop for most businesses when they first start with E-Commerce. It is easy to join and its ease of use is of course appealing to a new business. All transactions are charged the same regardless of the card type. However, as your business increases, PayPal can become an extremely costly option, with many businesses being unaware of how much cheaper alternatives can be.

PayPal Calculator
Our partner Cardswitcher has launched their PayPal Calculator which give a comparison of the cost of using PayPal against a traditional Internet Merchant Account available on Cardswitcher, and an Elavon Merchant Account bought through SagePay. For a business with an annual card turnover of between £25k and £100k, typical savings on Cardswitcher are 35% to 60%.
To use the Calculator is simple, you just need to enter three pieces of information – your annual card turnover, average transaction value and the percentage of debt cards.

To access the Paypal calculator click here

There are some commonplace misunderstandings about merchant accounts
1) They are not easy to obtain and a lot of business are rejected. Paypal operates a “presumption of innocence”, limiting its risk by capping the volume of transactions rather than rejecting an application. This means that for start-ups PayPal’s acceptance rate is Higher. The providers of the Merchant Accounts perform more detailed credit checks and business reviews and like to see a trading track record before they provide a business with facilities. Established businesses find these requirements are far easier to fulfil, with acceptance are normally in the region of 95%.

2) Merchant accounts contain many hidden fees. It is correct that the pricing structure of Merchant Accounts is more complicated with different types of fees, but as demonstrated by Cardswitchers calculator, the overall fees are considerably lower in most cases. For example debit cards cost c.24p to process with a merchant Account (14p for the merchant account & 10p for the gateway payment) cost up to£1.90 using PayPal (£50 transaction at 3.4% plus 20p).

3) Merchant Accounts are difficult to set up and use as you require both a Merchant Account and a Payment Gateway to accept e-commerce payments. It is correct that PayPal sells this as one combined product whilst most providers sell these a two separate products. But the actually reality is that you have to do two sets of paperwork and ensure that the Merchant Account and Payment Gateway are compatible (which nearly all are). Cardswitcher believe that the additional hassle is so minimal that they recommend you buy a Payment Gateway and Merchant Account from different providers as this is even cheaper.

4) You can’t accept Paypal with a Merchant Account. Wrong, nearly all Payment Gateways Provide a PayPal Button to allow your customers to pay with Paypal rather than Credit or Debit Cards. They also normally include other payment methods which appeal to overseas customers such as JCB.