PayPal offers Personal and Business accounts. Both are free but one offers better rates, better tools and lower fees. Want to know more?
As a small business owner you’re looking for ways to cut costs and stay competitive. I run several web businesses and PayPal has been a godsend. While I still use Clickbank and eJunkie, I’ve switched to the Business account and started to see the benefits already.
Getting a PayPal Business Account
It takes about 20 minutes.
- Create a new account on PayPal.
- Select Business (far right of the screen). This is for Merchants (i.e. business owners) who use a company name.
- Click Get Started.
- Enter in the Business Account details. Remember to have your company name and VAT details ready.
Why Choose a PayPal Business Account?
In addition to accepting and receiving payments, you get:
- Accept Credit and Debit cards. Personal accounts can’t accept Debit cards.
- Multi-user access. Your team can all access the same account.
- Lower Fees For Receiving Payments
- Standard rate for receiving payments for goods and services is 3.4% + €0.35 EUR.
If you receive more than €2,500.00 EUR per month, you’re eligible to apply for PayPal’s Merchant Rate – which lowers your fees as your sales volume increases. Your fees can be as low as 1.9% + €0.35 EUR, based on your previous month’s sales volume.
Merchant Rate Fees
Once you start to use PayPal more frequently – and the amount of sales increase – the fees per transactions goes down. This is one argument for centralizing your ecommerce activities through PayPal rather than eJunkie or Clickbank, neither of which offer sliding scales for payments, i.e. lower fees for higher transaction fees.
€2,500.01 EUR – €10,000.00 EUR 2.9% + €0.35 EUR
€10,000.01 EUR – €50,000.00 EUR 2.7% + €0.35 EUR
€50,000.01 EUR – €100,000.00 EUR 2.4% + €0.35 EUR
> €100,000.00 EUR 1.9% + €0.35 EUR
Criteria for Merchant Accounts
The Merchant rate criteria is as follows:
- Merchant rate pricing approval is reserved for members in good standing (whose accounts are not currently under investigation) who meet the following criteria:
- Received more than €2,500.00 EUR in PayPal payments in the previous calendar month.
- Maintaining your merchant rate: After qualifying for merchant rate pricing, all members are expected to keep their PayPal account in good standing. Members may be downgraded to the Standard rate if a payment volume of more than €2,500.00 EUR is not maintained in the previous calendar month, or if they have unresolved chargebacks.
Note: You do not need to reapply for merchant rate pricing if payment volume drops below €2,500.00 EUR, unless your account is downgraded or if there are unresolved chargebacks.
Other Advantages To a Business Account
I have two accounts with PayPal: one Personal and one Business. I keep the Personal account for buying things on Ebay and/or paying for small items online.
Business account I use for business-related transactions has a few benefits:
- Trust – Showing that this is a Verified account increases trust with buyers. Next week I‘ll show you how to get your account verified.
- Customer Service – When things go wrong with transactions, for example, I have a query with a payment, the Customer Service from PayPal is very fast, usually within a few hours.
- Tax Records – having a dedicated account makes it easier to me to track payments and calculate the amount of tax to pay every year. In the past, it took forever to separate personal and business related transactions, especially small payments. Now, I use the reports functions and print out all the transaction or simply paste them into Excel.
- eBay Tools – the Business account (and Premier accounts) offer more advanced tools for integrating your epayments to eBay. In later tutorials, I’ll show you how to do this.
- Merchant Services – as with the eBay tools this offers more sophisticated tools for sending, receiving and integrating payments.
Transaction Fees for Cross-Border Currencies
There are fees for Cross-border transactions, for example, payments made by a Spanish customer to an American website. Likewise, there may be cross-border fees between two countries in the same continent, such as between Iceland and Spain as they use different currencies.
$0.00 USD – $3,000.00 USD – 3.9% + $0.30 USD
$3,000.01 USD – $10,000.00 USD (Merchant Rate qualification required) 3.5% + $0.30 USD
$10,000.01 USD – $100,000.00 USD (Merchant Rate qualification required)3.2% + $0.30 USD
> $100,000.00 USD (Merchant Rate qualification required) 2.9% + $0.30 USD
Fees for receiving eCheck payments will not exceed $5.00 USD per transaction.
If you plan to sell goods online, take a good look at what PayPal, eJunkie and Clickbank offer. These are the three big players in the market. There is no cost to sign-up with each, so your only investment is your time.
I’d suggest that you give special attention to PayPal, for a few reasons:
- It’s a trusted brand name. There was issues in the past but these have been ironed out. This will increase transactions and sales over
lesser known products. People are more comfortable with brands they know, even if the price is slightly higher.
- It integrates with eJunkie, Clickbank and other web merchants.
- From 2011 eBay will only accept payment through PayPal. We’ll look at how you can use eBay to sell goods in the coming weeks, so don’t close the door or think it’s not for you.
- The Invoice tools let you send out invoices to customers as orders come in.
- The Reporting tools let you break out sales figures and see which products are performing best.
- The Reminder tool let you send out an email to customer reminding them the payments are past due.
Ok, you get the idea, I guess. There are other features that, for me, put it head and shoulders above the competitions.
But what are the negatives about PayPal?
It does have drawbacks.
For example, you can setup a script to let customers download a digital product, such as an ebook. By setting up these scripts is not for
everyone. Again, I will show you how to do this. It’s not that hard and we’ll walk you thru the process.
This article outlined some of the reasons I use PayPal for my web businesses. I also use Clickbank and eJunkie. They all have their respective strengths and weaknesses.
What’s the main reason you use or DONT use PayPal?
Let us know below and we’ll discuss it in next week’s tutorial.