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Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
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Friday, April 11, 2014

And the Winner Is...

Subjectively, I like PayPal’s high-rate, no-fee, no-contract approach better than WorldPay’s low-rate, high-fee, sign-away-your-soul model. The number of online complaints about WorldPay still bothers me. PayPal gets friendlier reviews – high rates are the chief complaint, and I’m getting pricing below their published rates. So PayPal has a subjective edge.

I prefer objective decisions, though, so I tried to quantify the expected costs under each bank. I won’t drive you away with the wall of numbers that “show my work.” I used these assumptions from Google Analytics and Quickbooks data: 

  • average transaction of $45, which is remarkably stable throughout the year;
  • average of 90 transactions a month from January through October, 165 in November, and 400 in December; 
  • 25% of my customers use PayPal, 30% use low-cost (“qualified”) credit cards, and 40% use high-cost cards (rewards cards). 
  • American Express is off in its own world and makes up 10% of my sales at most, so they aren’t a factor.

When I plugged those assumptions into each company’s discount rates, per-transaction fees, and monthly fees, I got these results:

  • Using WorldPay for credit cards and PayPal for PayPal should cost $1,895.09 combined.
  • Using PayPal for everything should cost $1,895.02 annually.

Seven cents apart? That’s just eerie.

An objective tie dumped me back to my subjective feelings, so I went with PayPal. I signed up on Wednesday. If that was a mistake, I can get out of it with no penalty.

Initial impression: I had assumed that, like every other merchant gateway, PayPal would process credit cards separately and deposit each day’s receipts to my checking account. Instead, every single transaction shows up as a PayPal sale and goes into my PayPal account balance. There is no way to see what payment method an individual customer used for a particular order. While that simplifies accounting and cash management, I’m not sure yet that I like it.

(Incidentally, I paid $2,617 last year for credit cards and PayPal combined. If my estimates were right I will save around $700 per year with either bank.) 


Another minor milestone: I passed Quickbooks order # 111111 this week. Sunshop blew past that mark months ago…but Quickbooks is closer to really being my 11,111th sale.


  1. I've read your last two blog posts with great interest. I try to keep credit card fees in mind when making purchases at small retailers that I value - locally I just use cash to save them the ~2% but I don't have that option when shopping online.

    Reading your posts it seems the best way to make sure my patronage benefits the retailer rather than large corporate banks is to use PayPal or a debit card. My rewards card may reward me but seems to cost the retailer more in fees than the debit card.

    Do I have that priority list right or is there another method that best minimizes bank fees for the retailer?

  2. It's hard to answer that because there is so much variation in pricing. Paypal was one of the most expensive processors before they dropped my rate from 2.9 to 2.2% + 30 cents. WorldPay was still much cheaper per transaction, but their monthly fee canceled out the savings at my sales volume. Somebody with significantly higher sales or a lot more transactions would have found that WorldPay's lower rates make up for their fees.

    In general, though: The costliest methods for merchants are rewards cards/corporate cards (which can cost us upwards of 4%), then PayPal, then American Express (both around 3%). Debit cards and plain-vanilla credit cards are cheapest at 2 to 2.5%.

    Under PayPal, though, those distinctions don't matter to me anymore. I pay a flat 2.2% plus 30 cents regardless of how you pay. Payment processing in 2012 cost me 4.2% of gross so this ought to be a noticeable improvement for me.


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