Wednesday, July 6, 2011

PayPal Virtual Terminal?

PayPal allows you to accept credit cards over the phone using their "Virtual Terminal" service.   It does cost $30 a month to support, however.

If you run a business, you generally have to accept credit cards, unless you are selling Crack.  As a Registered Defense Contractor, I have to accept Government Credit Cards, and as such, I have a "Merchant Account" with Transfirst/ePaysecure.

I don't do a lot of credit card transactions - perhaps one a month, if that.  However, since some clients pay by credit card only, I need to have this capability.  At the present time, I pay $27 a month to Transfirst for the privilege of having a merchant account.   And of course, they nick me for a coupe of percentage points for each transaction.   For a $5000 Patent Application, this can be $125, which is a lot of money.   For a $2500 maintenance fee, which is just money passed through my hands, this could be $75, which is a big chunk of what I charge to pay the fee.

Checks are still the best and free form of payment, although they seem to spend an awful long time in the mail, at least according to my clients.

PayPal is another payment option, and I use it.    But it also takes a percentage, and some folks get weird about "using those online payment systems" and refuse to use it.  ("I don't want to sign up for some sort of service!" they say).

But PayPal also offers merchant accounts - for businesses.  This can augment your existing PayPal account, but it does require a monthly fee, and of course a credit card percentage fee:

What do I need to know ?

(Application review time: approx. 48 hours)
  1. Pricing
  2. Application Process
    • You'll receive an email in about 48 hours with your application status
  3. Fax information
Please note: Virtual Terminal is not available in U.S. territories. It is currently limited to the continental United States.

As you can see, this is not too dissimilar a deal than what I get from Transfirst, except the monthly fee is even higher.  So I will not likely be signing up for PayPal's Merchant Account anytime soon. 

One annoying thing I learned about merchant accounts is that you never know how much the fee is going to be (for a transaction) until they process it.   Some fees are quite high - 3% or more, depending on how much data you acquire from the card (which correlates to risk) whether the transaction is domestic or overseas, and even if the customer has a "frequent flyer miles" card.   As the merchant, we end up unwittingly paying for our customer's vaunted $99 flight to Duluth.

In a business with thin margins, this can be problematic.  For example, a client asks me to pay a maintenance fee of $2500 on their Patent.   This takes all of 20 minutes on the computer (and they can do it themselves!) but I have to charge an hour's time ($275) just to cover the hassle factor of nagging the client, reporting to the client, and of course, invoicing and processing their credit card (which all told, ends up taking more than an hour).  They pay by a credit card that charges me a 3% commission, and my profit margin is cut by a staggering 27%.

Throw in some currency conversion factors and you could end up working for free.

As I noted before, sending money from one place to another involves costs.   I recently paid some fees to the International Bureau of PCT in Switzerland, and paid by check, thinking I was being clever and avoiding wire transfer fees.   But to send a check overseas, by International Priority Mail, with tracking, costs $27 per package.


Seems you can't avoid these sort of hassles.  Whenever money changes hands, the banks want a little "taste" of the action - or someone does!