Merchant Account Comparison

Determine which merchant account is best for your business

 

Author: Jim Conners

Rating: 10.0

Pages: 1|2|3|4

Getting started

Sample data is needed before a successful comparison can be made. The fees to be used in the comparisons associated with having a true merchant account and gateway are:

• Setup Fee - How much do you have to pay to have your account established?


• Discount Rate – What percentage of the sale will the processor take?


• Transaction Fee – What flat fee will they charge us for each transaction?


• Monthly Fee – How much will it cost per month to have the merchant account open and ready to process transactions?


• Gateway Setup Fee – How much does it cost to have a gateway set up for you?


• Gateway Monthly Fee – How much will your gateway provider charge you each month to use their payment gateway services?

Now we know what to get in our quote from a true merchant provider. To do a proper comparison, only two more pieces of information are needed:

• Average Transactions per Month – How many transactions will you process each month?


• Average Ticket Size – Some sales may be large. Some sales may be small. But how much will the average customer spend on your website?

Who we will compare

There are plenty of third party processors out there to choose from. The third party processors to be compared against a true merchant account in this article are: Paypal Basic, 2CheckOut, and WorldPay.

The fees for the third party processors are fixed and thus no quote is necessary. As a result their fees are hard-coded into our calculator. They are listed here for your reference:

• 2CheckOut:

  Setup Fee: $49
  Discount Rate: 5.50%
  Transaction Fee: 45¢
  Monthly Fee: $0.00

• WorldPay:

  Setup Fee: $299.00
  Discount Rate: 2.95%
  Transaction Fee: 35¢
  Monthly Fee: $35.00

• Paypal Basic:

  Paypal has different rates depending on the monthly volume you do. As your monthly volume grows, Paypal rewards you by lowering your rates. There are four tiers available:

  • If your business' monthly volume is less then $3,000:

    Setup Fee: $0.00
    Discount Rate: 2.90%
    Transaction Fee: 30¢
    Monthly Fee: $0.00

  • If your business' monthly volume is greater then $3,000 but less then $10,000:

    Setup Fee: $0.00
    Discount Rate: 2.50%
    Transaction Fee: 30¢
    Monthly Fee: $0.00

  • If your business' monthly volume is greater then $10,000 but less then $100,000:

    Setup Fee: $0.00
    Discount Rate: 2.20%
    Transaction Fee: 30¢
    Monthly Fee: $0.00

  • If your business' monthly volume is greater then $100,000:

    Setup Fee: $0.00
    Discount Rate: 1.90%
    Transaction Fee: 30¢
    Monthly Fee: $0.00

True merchant account rates will vary by provider. Our fictitious company received a quote for a merchant account and gateway from Ficticious Merchant Services (a fictitious merchant services provider). The quote they each received is:

Setup Fee: $0.00
Discount Rate: 2.20%
Transaction Fee: 30¢
Monthly Fee: $10.00
Gateway Setup Fee: $99.00
Gateway Monthly Fee: $15.00

These rates are average and should represent the true merchant account industry well for our purposes.

To get an accurate comparison a representation of different kinds of merchants will be needed as not all merchants have the same needs. For our comparison five different merchants with various size average tickets and monthly volumes will be used. They will represent all size businesses from small ticket and low volume to high ticket and high volume. Here they are:

• Company 1 (High average ticket and high monthly volume)

  Average Ticket: $200
  Average Number of Transactions: 500

• Company 2 (High average ticket and low monthly volume)

  Average Ticket: $200
  Average Number of Transactions: 5

• Company 3 (Low average ticket and high monthly volume)

  Average Ticket: $15
  Average Number of Transactions: 600

• Company 4 (Low average ticket and low monthly volume)

  Average Ticket: $15
  Average Number of Transactions: 20

• Company 5 (Medium average ticket and medium monthly volume)

  Average Ticket: $45
  Average Number of Transactions: 220

These five companies represent five very different businesses in terms of process needs. Represented are a business that process large transactions and lots of them; a business that also has large transactions but sees far fewer of them; a company that has small transactions but processes many of them; a company that has small transactions and processes very few of them; and a company that has a medium size average ticket and a modest amount of sales.

Choosing An Account Type | 1 | 2 | 3 | 4 | Results of Our Comparison