Should I Accept Credit Cards With PayPal or Square?
Ever since PayPal announced that they were entering the mobile credit card processing arena, we have been plagued by the question: Should I accept credit cards with PayPal or Square?
Before we get to our answer let us slow down and understand exactly what is about to happen. PayPal is a notorious online credit card processor with a rather shaky reputation. The processing arm of E-Bay has been know to freeze accounts and offer lousy customer service as it battles almost single handedly against online fraud.
PayPal has a recognition factor, and for better or worse, everyone knows the name of this player before their mobile reader is even available for sale. The irony of their entree into the market is that they want to help online retailers make the jump to offline credit card processing. How’s that for a switch?
While almost too confusing to think about, it is the first time that an online company has made a push back to an offline world but the market for mobile merchants is huge and Square has proven in under 3 years just how profitable it can be for merchant services provider.
Profits aside, let us assume that PayPal will enforce their offline Terms of Services a little more justly than their online enforcement has been. PayPal has always taken heat for their methods but accepting credit cards in the actual physical virtual world very different and will be treated as such.
Having said all this, should you choose PayPal over Square if you want to accept credit cards? The answer is a definitive maybe.
Square provides a great service and at 2.75% per swiped transaction it is a pretty fair deal. What this means is that a merchant pays 2.75% of the total purchase price of an item as a fee to Square for conducting the transaction. The transaction consists of swiping or typing in the customer credit card information, verifying it, contacting card provider and transferring the money from their providers account into your merchant account.
A traditionalmerchant account may have a lower per transaction percentage but they usually come with contracts and monthly charges which can eat into profits for a low volume merchant. A traditional merchant services provider becomes a better deal for business with a high sales volume. But until recently, low volume businesses had no option such as Square or PayPal.
So convenience and the ability to become a mobile business are the benefits of Square and PayPal in our argument. A traditional merchant account is out of the picture even though they are plenty of mobile options being offered already under proprietary brand names. I’m sure we will be hearing more from them in the future, especially when they start marketing to their current merchant services customers.
Beware Of The Fine Print
As with any offer out there, always beware of fine print. In the case of Square v. PayPal both have a low per transaction fee for swiped card and initially PayPal will be 0.05% lower. But this is only when a customer swipes their card through the reader attached to the merchant’s smart phone, or enters their PayPal information onto the merchants touch screen.
If the credit card cannot be swiped and must be manually input into the merchant phone, then both PayPal and Square will charge 3.5% + $0.15 per transaction. This may happen in the case of phone purchases or if a merchant must scan the card with the phone’s camera as opposed to swiping. The scan feature allows PayPal to accept checks and even cash.
This brings me to my definitive maybe answer. PayPal is launching their service with the ability to accept checks, cash and even do electronic invoicing in addition to accepting credit cards and to date, Square does not. But let’s be honest, if one company does it, then the other will not be far behind. The choice between the two will come down to customer service and consumer trust. PayPal is very well branded and has far reaching name recognition giving it a huge of advantage over Square regardless if they were first to market.
The real issue is the cost to the business compared to the benefit for the customer. Potentially paying up to 3.5% + $.15 can whittle away profits on low dollar items and also amount to huge merchant account bills for items priced in the hundreds of dollars. As a business owners you must decide if the freedom to do business anywhere and at any time is worth it.
Our opinion is a resounding yes. If you are able to expand your business and enter new markets because of your ability to accept credit cards on the go, then you can always shift gears and find a more cost effective merchant account to meet your needs.