I have a small business, and I have always accepted credit cards using Bank of America as my card processor. Lately, the combination of a low volume of CC transactions and about $37 in minimum monthly fees (not counting the 2.6% transaction fee) has meant that I’ve been paying between 10-20% in fees to accept CCs. This is unacceptable.
I just got off the phone with BofA, and they’ve agree to lower the fees slightly, but I’m looking for alternatives. I’ll probably get around to looking at other CC processors, but I was wondering about another possibility.
I have a Paypal account, so customers can pay me either through their own Paypal accounts, or with their credit cards. For those transactions I pay about 3% fee. No other charges.
I could simply stop accepting cards completely, and refer all my CC customers to Paypal, but I frequently get calls from people who say they couldn’t get Paypal to work for them. I have tried finding out exactly how and why, but I haven’t found a consistent reason. Suffice it to say that a significant percentage of my customers can’t successfully use Paypal to pay by credit card.
So I thought, why not take their CC info as I always have, but instead of processing through BofA, just enter it into Paypal myself?
It that legit? Legal? If not, why not? Would Paypal see all these transactions from different cards coming from my IP address and suspect some kind of fraud? Even if there are no complaints from my customers?
I suppose I could try reading all the fine print of my Paypal contract, but I was hoping someone here might know off the top of their head.
I can’t answer if it’s legal or a violation of the TOS for Paypal. But I can tell you that I, for one (and likely many others) would be uncomfortable with any business writing down my credit card info in such a way as they may be able to use it later.
Or leave it exposed (say in a notebook that’s visible behind the register) where some unscrupulous crook could swipe it. Using a BofA (or other bank) provided credit card machine eliminates that, there’s (theoretically) no unsecured information lying around.
10-20% seems really, really high. But you said you’re bumping into minimum fees so I’m guessing you’re doing a very, very small amount of business. For example, I’m guessing just the monthly statement charge is counting pretty heavily into your 10-20%. I use BofA to process credit cards and pay about 3%, but, without giving exact numbers, pay several thousand dollars a month in fees.
Also, I don’t see why you can’t use Paypal, but you might also want to look into Square. They’re both pretty similar, but Square was setup for business and Paypal sort of added the business oriented stuff later on. Both of them will give you card swipers for your phone or tablet for free, I’m not sure how they work or if they work for keying a ‘not present’ card in.
You need to call BofA, Chase, Paymentech, USBank, your personal/business bank and sit down with them and find out who can help you.
You need to have someone set you up with a program designed for a very small business (what, under 5K per year) so you’ll get better rates. Then, you need to make a note to yourself to call up and do a ‘rate review’ every six months to keep the rates from creeping up on their own.
I publish a business newsletter. My customers are already giving me this information by mail, e-mail, phone, etc. I never see their actual credit cards. And as long as I’m processing it through BofA, I have to follow all the PCI rules, which are quite onerous for a small business.
ETA: Since I don’t see the credit cards, I don’t have a swiper. I enter their info into a software package that sends it to the processor.
(FYI: I have no employees and run the business from my home, so the odds of an “unscrupulous crook” getting hold of customers’ CC info is virtually nil, in my case.)
I get the majority of my payments by check. I happened to notice this issue with the last statement: I accepted one $400 payment by credit card in the month, and was hit with $75 in fees, mostly the monthly minimums.
Thanks for reminding me of Square. I hadn’t thought of them in this connection, since, as I said, I never have the customer’s actual card. But they may have a way of handling it.
I think there are a number of sites like Square which were originally set up for mobile credit card processing which work fine. For example Intuit’s Gopayment:
They have no monthly fees. Keyed transactions (where you don’t have the customer’s actual card) are 3.4% plus $.25 for each transaction.
Just for the sake of comparing apples to apples, everyone, including the major credit card processors, charge more for keying a card in over swiping it. It introduces more risk and more chance of a chargeback that the processor will have to deal with.
in fact, it your business is primarily online, you should offer ALL those options simultaneously and let the customers choose how they want to pay you.
Another recommendation for square. It’s simple and works. I don’t normally take credit card payments but keep a square around just in case the customer needs that option.
I looked into this recently and for a small business with relatively low volume, but where you want something more than just a smartphone to handle very occasional/portable payments), my takeaway was that Dharma Merchant Services looked to be the one to go with. But I haven’t had to pull the trigger yet, so I can’t speak from actual experience. Though, I’d love to hear anyone who has had experience with them, or has found something better.
I bought an item on ebay recently and paid via a direct transfer from my account to theirs. The guy explained that he had an account with a zero balance set up for just these transactions. As soon as he saw the money in his account, he transferred it and dispatched the goods.
We have new systems coming online that will allow direct transfers between accounts via a smart phone app. This is what will replace cheques in the not too distant future.
I hadn’t heard of Square, but I came to warn against using PayPal for business transactions. Their rules are muddled and as you mention, people have a hard time figuring them out. They’re like the bare bones/wild west of payment systems, and you get what you pay for.
I pay all my vendor bills and royalties by direct deposit ($15/month plus $1/transaction), and all my distributors pay me by direct deposit. No checks. No paypal. I agree with bob++ that it’s the wave of the future.
Square is very easy to use. It posts as quick as an bank trans (for me, anyways) because I set it to go to my bank account. I get charged 2.75% for swipes, and 3.5% + $0.15 for keypad trans. Other than the initial cost of the reader, which I got back as a credit on a promotion, there were no other fees.
Checking on it as a new subscriber, I see that they just send out the reader for free now. Probably did then, too, but I made my decision when I saw it that day at Staples. I got full credit for the price I spent.
There is also a feedback/customer resolution type service offered for $10 a month.
I accept PayPal on my websites. Very easy to create a payment button.
In almost a decade of online and electronic transactions, I’ve only had one major problem. And that was a case of fraud that was not anyone’s fault but the criminal. My bank took care of everything for me and I eventually wasn’t out any money at all, except for my cost of that transaction’s product.
FYI, to answer the OP’s question directly, yes, you can take orders using credit card transactions over the phone (or via snail mail) and enter them into PayPal. Look into the Paypal Virtual Terminal, which you get when you become a PayPal Pro member. However, it’s a $30 fee per month. The fees per transaction are “slightly higher” than normal but I doubt it’s 10%.
Not saying I recommend this option–I just wanted to make sure the PayPal-specific question was answered somewhere in the thread.
another vote for square. I use the hell out of it, it can also be installed on multiple devices, just sign in with the same pwd and each one deposits to the same account
I use paypal exactly like this, no problem. HOWEVER I would advise you to make your account a business instead of personal account, and give paypal whatever documentation they ask for and remove all limits from your account(SS# and DL or PP scans etc). If you don’t do this there is a high probability of your account being locked arbitrarily. Once you have a business account with no limits and all documents on file at paypal you won’t have a problem.
