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For Online Merchants: PAYPAL IPN Versus CREDIT CARDS
Overview
Integrating with Paypal IPN is very similar
to integrating any other transaction engine like Verisign's
Payflowpro. Both require knowledge of
server side XML and provide the ability to automatically
credit the merchant's account in real-time.
We used Verisign as a guide
for comparing fees for merchant accounts with fees for Paypal
accounts.
The Merchant Account vs. Paypal
| Account Type |
Yearly Fixed Cost |
Transaction Limits |
Transaction Fees |
Discount Rate |
Easy to Obtain? |
| Merchant Account |
$249 setup + $59.95/monthly
_________
$968.40
|
Max of 1000 transactions per month |
$0.25 per transaction |
Discount rate is about
2-3% if you have good credit |
The application process is complex |
| Paypal Standard Business Account |
None |
None |
$0.30 per transaction |
2.9%* |
Just Sign Up |
| Paypal Merchant Account |
None |
None |
$0.30 per transaction |
2.2%* |
Still pretty easy,
visit Paypal.com |
* With the Paypal debit card merchants can earn an additional 1.5% cash back.
Interactive Paypal Fee Calculator
We prepared an interactive fee calculator for you. Enter the values from Paypal or from your bank to determine the yearly cost to your
business for a merchant account.
As an example,
click to compare the cost for a payment gateway with the cost of
Paypal IPN
using two simple assumptions.
The assumptions are:
• 100 transactions each month and
• the average order is $40 including tax and shipping
(click the calculate button to compute the fees)
Verisign Account
A Verisign merchant account has much higher
startup costs. There is also a relatively high
monthly fixed cost for this merchant
account. The fees for a merchant account
will run around $1,000 year
so long as there are less than 1,000 transactions/monthly,
not including per transaction
fees of .25, and something called a discount rate. The discount rate
is a percentage of each transaction, usually 2%-3% but sometimes higher.
Figuring out your discount rate is an involved process.
You have to fill out a long application and then practially haggle with the banks to
get the best rate. Verisign's fee schedule is
available here.
Paypal Account
By comparison, Paypal merchant accounts are easier to set up than most other
merchant accounts.
Paypal has no fixed costs
and offers a similar product with slightly higher transaction fees.
But this difference in transaction fees is only $.05 per transaction. With such a small difference,
Paypal is still a bargain up until around 1000 transactions per month.
At this point (1000+ transactions)
the Versign "per transaction fee" drops to $.10 per transaction and makes Verisign's
fee structure more appealing.
Paypal has always had a very fair deal going ever since they launched in
1998, and as of October 2002 they have
20 million
members. The Paypal
discount rate for business
can be obtained here.
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eBay Certified Application Developer