When I first started my ecommerce business, the word, “e-commerce” had a dash in it. It was 1998. I came straight out of the dot-com with nothing but online experience.
A few years later, after everybody had most of their wounds healed up nicely, Paypal became the go-to credit card sales processing solution for the second wave of online stores. I still use Paypal for many of my own ecommerce stores. But then, I started consulting with brick and mortar stores. I was shocked.
I found out that they were being charged 20-40% less than Paypal was charging me. They were using a Merchant Account / Processing Service.
Paypal Charges More than Merchant Services Do
So I called Paypal. I asked why I was being charged so much more than my clients. Paypal was charging me something like 3.5% commission per sale with a $0.33 minimum. On some of my $0.99 ebooks and mp3s, I was left with $0.66 after Paypal took their cut. That’s 33%. Paypal put me on hold for 74 minutes.
Turns out that if you didn’t come from the retail B&M world and your Etsy store or EBay store just started taking off, at a certain point, getting a merchant account can save you thousands of dollars a month. Even if you’re not selling a ton, saving a few hundred dollars a month is as good as your merchant account buying you a BMW.
Do the math. If you’re profit margin is 50% and your operating costs are an additional 20%, after you pay your own salary, your business may only be left with a 10% net profit margin. Saving just 1% on your credit card processing fees is a whopping 10% more money to reinvest into growing your business.
Besides, if you work with a company that’s smaller than the giant that Paypal is, you’ll be able to develop a strong relationship and even get additional benefits like Business Loans and Merchant Cash Advances — something Paypal doesn’t offer.
And no, I’m not affiliated with the company I’ve linked to above. I just thought they looked useful to you.