High total credit card processor fees. Is going Paypal only good idea?


My revenue from my online business is getting lower over time and my credit card processing fees has approached 25% of my revenue. I am getting upset with all the fees the credit card companies and credit card processors impose on people.
At some point I am thinking of dropping using my merchant account and just go with Paypal.
I think my credit card processor charges for every attempt from my side to charge a credit card even if it's invalid. So basically someone at my online form can just sit and keep entering any card info and I get charged 40 cents for each attempt.

Does Paypal charge for successful transactions only?

Credit Cards

asked Mar 21 '10 at 13:46
Tony Henrich
85 points

7 Answers


You might be just be dealing with the wrong processors. I never heard of anyone spending 25% of their revenue on CC fees. Paypal is a PITA, compared to a good processor.

answered Mar 21 '10 at 15:43
Apollo Sinkevicius
3,323 points
  • The lower the revenue, the higher the fees ratio to your revenue as there are fixed costs. Does Paypal charge for unssuccessful credit card charges? – Tony Henrich 14 years ago


25% is not reasonable. We're under 4%.

Check out authorize.net. When we switched to them a couple of years ago they were the best priced merchant services provider around. They have great service and saved us a couple of thousand dollars annually.

answered Mar 23 '10 at 02:15
Keith De Long
5,091 points
  • Yeah, but authorize isn't actually the merchant provider, are they? I I thought they are just the platform...you provide the processor. No? – Casey 14 years ago
  • They appear to work on a reseller model for the front end. We've been happy with e-online data. Other than getting statements from them, we do all our online admin and support questions directly with authorize.net web site and personnel. – Keith De Long 14 years ago


I'm surprised as well by the 25% rate, unless your product price is under a few dollars or you have a high risk product line.

answered Mar 23 '10 at 09:54
61 points


PayPal is a bit quirky to implement (or at least it's been for us), at any rate it only charges successful transactions. Moreover, refunds are completely free.

We never used any other payment processor, but our sale volume is currently low. We will surely consider other methods as there are some customers (e.g. big corps) that do not have a PayPal account (no idea why, but that's it). Currently, we can handle them "manually" (e.g. wire transfer) but when the sales volume increases that becomes less manageable.

answered Mar 23 '10 at 16:06
655 points


If you're paying a fee of 25% for credit cards, that's remarkable. I've never heard of a rate that high.

At our company we use the merchant services company that CostCo offers for its executive members. That company is called Elavon. You can also go directly to Elavon but it is less expensive if you go to them via CostCo.

Elavon has been good to deal with and is distinctly less expensive than Bank of America, which we previously used for merchant banking services.

answered Mar 21 '10 at 22:54
433 points
  • The fee is not 25%. I am paying 2.69% plus 40 cents. Nothing unusual. – Tony Henrich 14 years ago
  • Glad to hear that! :) – Tcolling 14 years ago
  • I'd say .40 is quite unusual. What's the name of your processor? – Casey 14 years ago
  • To clarify: I meant that I was "glad to hear" that the OP isn't paying 25%! – Tcolling 14 years ago


The rate you pay your credit card company is based on a number of factors.

  1. The industry you are in.
  2. The average ticket price. (The average price of a single sale.)
  3. The number of refunds you process.
  4. The number of charge backs.
  5. The cards you offer.
  6. The number of intermediaries between you and Visa/MC. (If you get your merchant account through your bank, you will pay a higher rate than if you skip your bank and go straight to the credit card provider yourself.)

Unless you are charging unreasonably small amounts (say under $5.00), and are not in the porn market, there is no way your processing fees, including per transaction fees and statement fees, should approach 25%. (This assumes few charge backs, and few refunds.)

So if those criteria are being met, you need to find a new merchant account. If those criteria are the reason why your rate is 25%, switching to Paypal will not help. They will drop you once they discover you are not a "good" merchant.

answered Mar 22 '10 at 02:41
Gary E
12,510 points


Paypal only is not a good idea. You will greatly reduce the number of sales you make.

Did a google search for more information on payment processing fees and this is the first thing that came up.

http://credit-card-processing-review.toptenreviews.com/ Processing fees range from 2.14% to 2.27% and transaction fees are between $0.20 and $0.29 for online purchases.

Below are Paypals fees:

Purchase payments received (monthly)................. Fee per transaction

$0.00 USD - $3,000.00 USD................................... 2.9% + $0.30 USD

$3,000.01 USD - $10,000.00 USD ......................... 2.5% + $0.30 USD

$10,000.01 USD - $100,000.00 USD ..................... 2.2% + $0.30 USD

+$100,000.00 USD ................................................ 1.9% + $0.30 USD

None of the payment processors I've used (including Paypal) charge per transaction attempt only for successfully completed transactions.

Hope this helps.

answered Mar 22 '10 at 06:26
Bob Ross
119 points
  • Processing rates are typically a three-tier system: qualified (lowest), mid-qual, and non-qual. The discount rates of 2.14% to 2.27% are qualified rates. The qualified rates are usually the only rate advertised, which is somewhat deceiving. For example, my qualified rate is 2.19%, but I almost never see it. Most of my transactions fall into the mid-qual and non-qual tiers, which are my qualified rate plus 0.5% and 1% respectively. Additionally, mid- and non-qual usually carry an extra per transaction fee. – Clint 14 years ago

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