Q:
What online payment processing service is best? How do they work? What do they cost?
A:
There are two types of services for accepting credit cards online. There are services like Stripe and Paypal, which we will call Online Payment Processing Services (OPP Services), and then there are Payment Gateway services that work in tandem with Merchant Account services, which we will call Payment Gateway to Merchant Account Services (PGMA Services).
OPP Services process client credit cards for you and then deposit the funds into your bank account at a later date. All you need to do to get started is to create an account and fill out your business information. Everything required to accept and charge credit cards online is completed by the single service.
PGMA Services require you to accept payment information through your website and pass the information to the Payment Gateway. The Payment Gateway then makes sure the credit card is valid and has the appropriate funds for the transaction. After verification the Payment Gateway forwards the credit card information to the Merchant account, which charges the card and collects the money from the credit card company. If the credit card transaction is successful money is deposited directly into your bank account.
Service Costs
Paypal and Stripe Fees:
2.9% + $0.30 per transaction
Payment Gateway Fees:
$99 Setup Fee
$20 per month
$0.10 per transaction
$0.25 batch fee
The batch fee is charged each day that at least one transaction is processed.
Merchant Account Fees:
$99 Setup Fee
$10 per month
2-2.5% + $0.15 per transaction
Here are a few quick examples of what it would cost with the different services:
OPP Services:
Transactions: 20, Total In: $1000, Cost: $35, Earnings: $965
Transactions: 100, Total In: $5000, Cost: $150, Earnings: $4850
Transactions: 200, Total In: $10000, Cost: $300, Earnings: $9700
PGMA Services:*
Transactions: 20, Total In: $1000, Cost: ~$58, Earnings: ~$942
Transactions: 100, Total In: $5000, Cost: ~$147, Earnings: ~$4853
Transactions: 200, Total In: $10000, Cost: ~$264, Earnings: ~$9736
*These results were calculated using the lower transaction fee of 2%. If you’re merchant account fees are higher you may wish to recalculate. These values also ignore the setup fee costs that should be considered when calculating the total impact to your business.
OPP Services generally cost less for companies that make less than $5000/month of direct online transactions. This is not always the case, however. It depends on what services you are comparing and their particular rates. It also depends on your particular use case. For example it may be cheaper to go with a PGMA service if you are only running transactions of $1. If you feel your use case is special it is suggested that you do your own calculations to find out what service is cheaper for your situation.
Risk
Each service has their own level of risk. OPP Services are generally less risky to your company because the credit cards are submitted on their servers rather than your own. This reduces your setup costs and doesn’t require your server to be PCI compliant.
For PGMA Services the risks to your company are much higher and are shared with the other service companies. You are receiving payment information through your server, therefor you are required to have a SSL certificate ($80+ per year). You are also required to be PCI compliant, the costs of which can vary drastically depending on your particular server fees and business setup. Since the data is touching your server, if someone were to intercept, hi-jack or hack your server data you could be held liable for any fraudulent charges that could result from the attack.
Wrap-Up
I would suggest using an OPP Service over a PGMA Service for any small business. OPP Services cost less for smaller incomes, they are easy and quick to setup, and the potential risks are minimal to the business and to your clients.
Online Payments, What are My Options?
Q:
What online payment processing service is best? How do they work? What do they cost?
A:
There are two types of services for accepting credit cards online. There are services like Stripe and Paypal, which we will call Online Payment Processing Services (OPP Services), and then there are Payment Gateway services that work in tandem with Merchant Account services, which we will call Payment Gateway to Merchant Account Services (PGMA Services).
OPP Services process client credit cards for you and then deposit the funds into your bank account at a later date. All you need to do to get started is to create an account and fill out your business information. Everything required to accept and charge credit cards online is completed by the single service.
PGMA Services require you to accept payment information through your website and pass the information to the Payment Gateway. The Payment Gateway then makes sure the credit card is valid and has the appropriate funds for the transaction. After verification the Payment Gateway forwards the credit card information to the Merchant account, which charges the card and collects the money from the credit card company. If the credit card transaction is successful money is deposited directly into your bank account.
Service Costs
Paypal and Stripe Fees:
2.9% + $0.30 per transaction
Payment Gateway Fees:
$99 Setup Fee
$20 per month
$0.10 per transaction
$0.25 batch fee
The batch fee is charged each day that at least one transaction is processed.
Merchant Account Fees:
$99 Setup Fee
$10 per month
2-2.5% + $0.15 per transaction
Here are a few quick examples of what it would cost with the different services:
OPP Services:
Transactions: 20, Total In: $1000, Cost: $35, Earnings: $965
Transactions: 100, Total In: $5000, Cost: $150, Earnings: $4850
Transactions: 200, Total In: $10000, Cost: $300, Earnings: $9700
PGMA Services:*
Transactions: 20, Total In: $1000, Cost: ~$58, Earnings: ~$942
Transactions: 100, Total In: $5000, Cost: ~$147, Earnings: ~$4853
Transactions: 200, Total In: $10000, Cost: ~$264, Earnings: ~$9736
*These results were calculated using the lower transaction fee of 2%. If you’re merchant account fees are higher you may wish to recalculate. These values also ignore the setup fee costs that should be considered when calculating the total impact to your business.
OPP Services generally cost less for companies that make less than $5000/month of direct online transactions. This is not always the case, however. It depends on what services you are comparing and their particular rates. It also depends on your particular use case. For example it may be cheaper to go with a PGMA service if you are only running transactions of $1. If you feel your use case is special it is suggested that you do your own calculations to find out what service is cheaper for your situation.
Risk
Each service has their own level of risk. OPP Services are generally less risky to your company because the credit cards are submitted on their servers rather than your own. This reduces your setup costs and doesn’t require your server to be PCI compliant.
For PGMA Services the risks to your company are much higher and are shared with the other service companies. You are receiving payment information through your server, therefor you are required to have a SSL certificate ($80+ per year). You are also required to be PCI compliant, the costs of which can vary drastically depending on your particular server fees and business setup. Since the data is touching your server, if someone were to intercept, hi-jack or hack your server data you could be held liable for any fraudulent charges that could result from the attack.
Wrap-Up
I would suggest using an OPP Service over a PGMA Service for any small business. OPP Services cost less for smaller incomes, they are easy and quick to setup, and the potential risks are minimal to the business and to your clients.