Merchant Account Comparison
Determine which merchant account is best for your business
Author: Jim Conners
Rating: 10.0
Results of our comparison
Now that we have established who we want to compare and how to compare them, let's see how they fared head-to-head. First we'll look at Company 1.
Company 1 has a high average ticket price ($200) and also does a high volume of transactions per month (400). The results of our comparison produced these results:| True Merchant Account | Paypal | Worldpay | 2Checkout | |
|---|---|---|---|---|
| Qualified Fees Per Month | 1760.00 | 1760.00 | 2360.00 | 4400.00 |
| Transaction Fees Per Month | 120.00 | 120.00 | 140.00 | 180.00 |
| Up Front Costs | 99.00 | 0.00 | 299.00 | 49.00 |
| Costs After 1st Month | 1905.00 | 1880.00 | 2535.00 | 4580.00 |
| Cost After 2 Months | 3909.00 | 3760.00 | 5369.00 | 9209.00 |
| Cost After 3 Months | 5814.00 | 5640.00 | 7904.00 | 13789.00 |
| Cost After 4 Months | 7719.00 | 7520.00 | 10439.00 | 18369.00 |
| Cost After 5 Months | 9624.00 | 9400.00 | 12974.00 | 22949.00 |
| Cost After 6 Months | 11529.00 | 11280.00 | 15509.00 | 27529.00 |
| Cost After 7 Months | 13434.00 | 13160.00 | 18044.00 | 32109.00 |
| Cost After 8 Months | 15339.00 | 15040.00 | 20579.00 | 36689.00 |
| Cost After 9 Months | 17244.00 | 16920.00 | 23114.00 | 41269.00 |
| Cost After 10 Months | 19149.00 | 18800.00 | 25649.00 | 45849.00 |
| Cost After 11 Months | 21054.00 | 20680.00 | 28184.00 | 50429.00 |
| Cost After 12 Months | 22959.00 | 22560.00 | 30719.00 | 55009.00 |
In this scenario the true merchant costs substantially less then two of the three third party processors. Only Paypal Basic charged slightly less. A merchant of this size would easily choose the true merchant account and gateway as the advantages a true merchant account and gateway offers versus Paypal Basic make the difference in price a non-factor. A merchant of this size would also be likely to receive a lower rate from a true merchant account provider further increasing their incentive to choose a true merchant account and gateway.
Company 2 has a high average ticket price ($200) but does a low number of transactions per month (5). The results of our comparison produced these results:
| True Merchant Account | Paypal | Worldpay | 2Checkout | |
|---|---|---|---|---|
| Qualified Fees Per Month | 22.00 | 29.00 | 29.50 | 55.00 |
| Transaction Fees Per Month | 1.50 | 1.50 | 1.75 | 2.25 |
| Up Front Costs | 99.00 | 0.00 | 299.00 | 49.00 |
| Costs After 1st Month | 48.50 | 30.50 | 66.25 | 57.25 |
| Cost After 2 Months | 196.00 | 61.00 | 431.50 | 163.50 |
| Cost After 3 Months | 244.50 | 91.50 | 497.75 | 220.75 |
| Cost After 4 Months | 293.00 | 122.00 | 564.00 | 278.00 |
| Cost After 5 Months | 341.50 | 152.50 | 630.25 | 335.25 |
| Cost After 6 Months | 390.00 | 183.00 | 696.50 | 392.50 |
| Cost After 7 Months | 438.50 | 213.50 | 762.75 | 449.75 |
| Cost After 8 Months | 487.00 | 244.00 | 829.00 | 507.00 |
| Cost After 9 Months | 535.50 | 274.50 | 895.25 | 564.25 |
| Cost After 10 Months | 584.00 | 305.00 | 961.50 | 621.50 |
| Cost After 11 Months | 632.50 | 335.50 | 1027.75 | 678.75 |
| Cost After 12 Months | 681.00 | 366.00 | 1094.00 | 736.00 |
In this scenario Paypal is clearly the best option for this merchant despite their higher fees. The true merchant account and gateway is only slightly better then 2CheckOut and if Worldpay didn't have such a high setup fee they would be a good choice as well. The simplicity offered by third party processors, with no gateway to integrate, makes them even more attractive to a merchant of this size. This fits the notion that third party providers are better for small merchants.
Company 3 has a low average ticket price ($15) but does a high volume of transactions per month (600). The results of our comparison produced these results:
| True Merchant Account | Paypal | Worldpay | 2Checkout | |
|---|---|---|---|---|
| Qualified Fees Per Month | 198.00 | 225.00 | 265.50 | 495.00 |
| Transaction Fees Per Month | 180.00 | 180.00 | 210.00 | 270.00 |
| Up Front Costs | 99.00 | 0.00 | 299.00 | 49.00 |
| Costs After 1st Month | 403.00 | 405.00 | 510.50 | 765.00 |
| Cost After 2 Months | 905.00 | 810.00 | 1320.00 | 1579.00 |
| Cost After 3 Months | 1308.00 | 1215.00 | 1830.50 | 2344.00 |
| Cost After 4 Months | 1711.00 | 1620.00 | 2341.00 | 3109.00 |
| Cost After 5 Months | 2114.00 | 2025.00 | 2851.50 | 3874.00 |
| Cost After 6 Months | 2517.00 | 2430.00 | 3362.00 | 4639.00 |
| Cost After 7 Months | 2920.00 | 2835.00 | 3872.50 | 5404.00 |
| Cost After 8 Months | 3323.00 | 3240.00 | 4383.00 | 6169.00 |
| Cost After 9 Months | 3726.00 | 3645.00 | 4893.50 | 6934.00 |
| Cost After 10 Months | 4129.00 | 4050.00 | 5404.00 | 7699.00 |
| Cost After 11 Months | 4532.00 | 4455.00 | 5914.50 | 8464.00 |
| Cost After 12 Months | 4935.00 | 4860.00 | 6425.00 | 9229.00 |
Despite this merchant's low ticket price they still do a substantial processing volume each month. Worldpay and 2CheckOut clearly have priced themselves out of the market with only Paypal Basic being an acceptable alternative to a true merchant account. Like mentioned previously, the advantages offered by the true merchant account and gateway more then offset the slight cost advantage offered by Paypal Basic.
Company 4 has a low average ticket price ($15) and does a low number of transactions per month (20). The results of our comparison produced these results:
| True Merchant Account | Paypal | Worldpay | 2Checkout | |
|---|---|---|---|---|
| Qualified Fees Per Month | 6.60 | 8.70 | 8.85 | 16.50 |
| Transaction Fees Per Month | 6.00 | 6.00 | 7.00 | 9.00 |
| Up Front Costs | 99.00 | 0.00 | 299.00 | 49.00 |
| Costs After 1st Month | 37.60 | 14.70 | 50.85 | 25.50 |
| Cost After 2 Months | 174.20 | 29.40 | 400.70 | 100.00 |
| Cost After 3 Months | 211.80 | 44.10 | 451.55 | 125.50 |
| Cost After 4 Months | 249.40 | 58.80 | 502.40 | 151.00 |
| Cost After 5 Months | 287.00 | 73.50 | 553.25 | 176.50 |
| Cost After 6 Months | 324.60 | 88.20 | 604.10 | 202.00 |
| Cost After 7 Months | 362.20 | 102.90 | 654.95 | 227.50 |
| Cost After 8 Months | 399.80 | 117.60 | 705.80 | 253.00 |
| Cost After 9 Months | 437.40 | 132.30 | 756.65 | 278.50 |
| Cost After 10 Months | 475.00 | 147.00 | 807.50 | 304.00 |
| Cost After 11 Months | 512.60 | 161.70 | 858.35 | 329.50 |
| Cost After 12 Months | 550.20 | 176.40 | 909.20 | 355.00 |
For a merchant this small Paypal Basic is always mentioned as the best choice and the results show why. Even 2Checkout's high rates are less costly when compared to a true merchant account and gateway. Combined with the simplicity third party processors offer a merchant this small does not even have to think about which choice is best for them.
Company 5 has an average ticket price that's neither high nor low ($45) and does a moderate number of transactions per month (200). The results of our comparison produced these results:
| True Merchant Account | Paypal | Worldpay | 2Checkout | |
|---|---|---|---|---|
| Qualified Fees Per Month | 115.50 | 131.25 | 154.88 | 288.75 |
| Transaction Fees Per Month | 45.00 | 45.00 | 52.50 | 67.50 |
| Up Front Costs | 99.00 | 0.00 | 299.00 | 49.00 |
| Costs After 1st Month | 185.50 | 176.25 | 242.38 | 356.25 |
| Cost After 2 Months | 470.00 | 352.50 | 783.76 | 761.50 |
| Cost After 3 Months | 655.50 | 528.75 | 1026.14 | 1117.75 |
| Cost After 4 Months | 841.00 | 705.00 | 1268.52 | 1474.00 |
| Cost After 5 Months | 1026.50 | 881.25 | 1510.90 | 1830.25 |
| Cost After 6 Months | 1212.00 | 1057.50 | 1753.28 | 2186.50 |
| Cost After 7 Months | 1397.50 | 1233.75 | 1995.66 | 2542.75 |
| Cost After 8 Months | 1583.00 | 1410.00 | 2238.04 | 2899.00 |
| Cost After 9 Months | 1768.50 | 1586.25 | 2480.42 | 3255.25 |
| Cost After 10 Months | 1954.00 | 1762.50 | 2722.80 | 3611.50 |
| Cost After 11 Months | 2139.50 | 1938.75 | 2965.18 | 3967.75 |
| Cost After 12 Months | 2325.00 | 2115.00 | 3207.56 | 4324.00 |
Company 5 is an average sized company in terms of monthly sales volume. No one company stands out in terms of costs although the true merchant account and gateway and Paypal Basic are the best choices. A merchant of this size would almost certainly choose the merchant account and gateway for the same reasons a large volume merchant would: total control and customization. This allows them to appear like a large company and hopefully grow into one.
Conclusion
Hopefully you now have a better idea of how a true merchant account and gateway differ from a third party processor. Although both ultimately allow you to accept credit card payments online, they do go about it in different ways with each having its own strengths and weaknesses.
One thing to point out is every business is different. Your long term and short term goals, market, and customer base will be unique to your business. I've used a lot of generalizations in this article and they may not apply to your business. Also be sure to consider all of the facets of accepting credit cards online. Don't just focus on price. Sometimes paying a few dollars more a month can mean improving your customers' shopping experience and the professional appearance of your business.
As always, take your time and explore all of your options. The more research you do into your processing the solution, the more likely you will find one that best suits your needs and at a great price.
Appendix
Want to do the same comparisons done in this article? Want to do your own comparison against Paypal, Worldpay, and 2CheckOut? You can use the same calculator used in this article. The rates of the third party processors are hard-coded into it. All you need to do is provide the true merchant account rates you wish to compare. Feel free to run the same comparisons and see the results for yourself. The fictitious company and merchant account info used in this article is included for your reference.
Even though Paypal Pro is not being considered in this article, it varies very little from Paypal standard. The only two cost differences are the elimination of the fourth tier for sites processing over $100,000 per month and the addition of a $20 per month fee. After one year this will result in an additional $240 being added to Paypal's total costs.
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