Credit Cards, Online Payments, Etc

[Spinner]

I have a bunch of different ways to process cards & payments and as I'm working on making my business official recently (DBA, licenses, etc) I thought it was about time to settle on one or two and dump the rest to simplify payment tracking. I figured I would share my findings with the chart and some additional information folks getting started will find helpful and some payment pros may learn from too.

First question is, is there a service that will do everything? Yes there is, but you pay for the convenience and sometimes additional services to get it all done. Most banks have Merchant Accounts that you can set up for payment processing via a card machine (gateway) and the internet. The machine allows for keying-in cards but to use the service at say a Craft Show, you need to provide power & an internet connection or take the info manually and enter it later. Online services allow for in-person, mobile and manual payments but lack the speed at which the money arrives in your account. Either way, there are trade-offs and figuring out which one suits your business needs is the key.

The attached chart compares the services, speed and fees charged by most major banks (costs can vary based on bank size and promotions as well as your history with them) compared to the three major online services, Paypal, Square and Propay. I did not take into account whether software like Quickbooks is already part of the business but that will effect how certain functions affect you. The green highlights indicate which platforms rank the best for that option/category.

Cheers,

Chris

CC_Processing.pdf

Edited January 24, 2012 by Spinner

[Spinner]

As for my personal choice, I went with a Paypal/Square combination. Overall the costs are cheaper for how I do business (primarily via phone or email) and I already had everything I needed between my computer and Android smartphone. Paypal allows me to invoice clients who use paypal and I have a Premier Advantage account that doesn't cost anything outside of transaction fees. Square is the back-up for those clients that don't like paypal and want to pay with a credit card. **TIP: if you decide to use Square, do not purchase a card reader from Radio Shack, etc. when you set up your account with Square via their website, they will send you a reader for free.

With the Paypal Premier account, I get access to invoicing, multi-order shipping (process batches instead of one at a time) and the Visa debit card that allows me to access the funds as soon as they clear. Square simply processes deposits to my personal checking account everyday that I have a transaction. So far the longest I have waited for funds to get to my bank out of the last 15 transactions was 38 hours and that was a transaction processed on a Saturday night. The main determining factor as to how long it takes is how often your bank retrieves ACH transactions from the ACH system. Larger banks do this on a daily basis whereas smaller banks may only do it every other day or so.

The main drawback to using two systems is tracking & invoicing. For Square transactions I have to generate my own invoices and then to track all my sales in the same place I need a good spreadsheet or something like Quickbooks.

When I figure that my bank (Wells Fargo) quoted me $675 in account related fees (annual, set-up, monthly and card terminal lease) and only save me approximately $2.80 per transaction, the math came out that I would have to make 241 sales this year just to break even compared to Paypal/Square.

What about website integration? Well, paypal has it's nifty little "buy me" buttons that are really easy to set-up and Square doesn't work with the web. So what happens when a client visits your site and sees paypal buttons as the only buying option? A few unofficial studies have shown that about 12% either don't like Paypal or don't know how to use it. This could mean a lost sale if they aren't in the mood to call you or it's in the wee hours of the morning when you're sleeping. An easy solution is something like Mal's E-Commerce shopping cart. The premium version is only $8/month and even if the only payment option you use it Paypal, Mal's masks the Paypal info so your client sees a normal shopping cart and enters his/her credit card like normal.

In case folks want to check things out, here are the links to the services/vendors I mentioned above:

Paypal: http://www.paypal.com

Square: http://www.squareup.com

Propay: http://propay.com

Mal's e-Commerce: http://www.mals-e.com/

[CGish]

Chris,

Thanks for sharing - information like this is the result of a lot of research. Hope your business continues to grow.

Cody

[radar67]

Chris,

Thanks for sharing - information like this is the result of a lot of research. Hope your business continues to grow.

Cody

Quickbooks Premier is an excellent software package for tracking all business transactions.

[CGish]

Quickbooks Premier is an excellent software package for tracking all business transactions.

Quickbooks is a good option. Another alternative, if you are cash-strapped and willing to learn a little bit is GNUCash.

[Spinner]

Thanks Cody, best of luck to you as well!

When I figure that my bank (Wells Fargo) quoted me $675 in account related fees (annual, set-up, monthly and card terminal lease) and only save me approximately $2.80 per transaction, the math came out that I would have to make 241 sales this year just to break even compared to Paypal/Square.

One thing I forgot to highlight in my analysis of the spreadsheet can be very important in regards to fees. I have noticed recently since using Square that about 10% of my clients use Discover or American Express for payment. For those folks using a bank for processing, be sure to ask about the additional fees for those cards. Mastercard and Visa transactions may have lower fees but banks generally charge a premium to accept Discover & AMEX. In the case of Wells Fargo, notice that the fee jumps from $0.25 + 2.1% up to $0.56 + 3.5%. And then to top it off, if the card presented (any of the 4 types) is a rewards card (airline miles, cashback, etc.) they tack on up to an additional 1.5%! This means that an AMEX or Discover Rewards card would have a fee of $0.56 + 5% and a Visa or MC Rewards card has a fee of $0.25 + 3.6%! How many people do you know that don't have some type of rewards program on their credit cards? Now take a look at the fee schedule again and you'll realize that on most transactions, you're likely paying more in transaction fees as well as account fees by going with a bank than any of the other options.

Now for those that may think this is just a big subversive rant against big banking, think again. My day job is working for a major bank/brokerage firm so it behooves me to let people pay their fees. I also believe that folks should be educated about what they are paying and why, especially my friends and craft compadres.

Cheers,

Chris