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Do I Need a Merchant Account?

Do I Need a Merchant Account?
That's a good question. Most serious businesses accept credit cards, however, if you're just starting out, you may want to consider other options like a third party processor like paypal standard, for example.

Here's a good rule of thumb:

If you earn at least $2,500 per month from your website it is more cost effective to have your own merchant account than to go with a third-party processor.

(For off-line accounts the break-even point is closer to $1,500.)

Example: Sales of $2,500 from 75 transactions - that's the tipping point when a merchant account becomes more cost-effective than a third-party processor like paypal.

Online Solutions:

Paypal standard
2.9% of $2,500 = $72.50 ----> if $3,000 = $87.00
$0.30 x 75 = $22.50
Total fees $95.00 ----> $109.50

Merchant account
2.25% of $2,500 = $56.25 ----> if $3,000 = $67.50
$0.25 x 75 = $18.75
Gateway = $10
Statement = $10
Total fees $95.00 ---> $106.25

By the examples above, you can see how the more sales you have, the less you pay with your own merchant account.

Mobile solutions for use on the road:

PayWARE Mobile Gateway - iPhone (swipe only)
$14.95/mo (for one phone, add $10 for each addtl)
1.79% x $2500 = $44.75
$2,500 x $0.10 = $25
$6.95/mo PCI compliance
Total fees $91.65
(Plus one time set-up fee of $69.95)

PAyWARE vs Square:
You can see a comparison of cost, based on your average sale amount and your estimated monthly volume and some good info regarding security here:
feefighters.com/square-vs-verifone


Same example with Square:

Square - all swiped
2.75% of $2,500 = $68.75
Total fees $68.75

Square - half swiped
2.75% of $1,250 = $34.38
3.5% of $1,250 = $43.75
$0.15 x 37 = $5.55
Total fees $83.69



 

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