Default HubSpot Blog

Current Articles | RSS Feed RSS Feed

Good rate on a merchant account? Your average sale will tell you.

Posted by Alex Neir on Tue, September 28, 2010 @ 02:32 PM

A common question often asked is “What’s a good rate on a merchant account?” The question seems simple and straight forward but in actuality depends greatly upon the average sale amount of the merchant.

The reason for the dependency has to do with the way in which merchant account rates are applied. There are two components that make up the charge total for each transaction completed by the merchant. The first component is a percentage charge and the second is a fixed per transaction fee.

Both the percentage amount and per transaction fee can be negotiated with your merchant service provider. Knowing your average sale amount gives you the ability to determine which component of the charge total is most important in keeping your costs down.

Let’s look at an example to see how a merchant’s average sale affects their total processing costs. In the examples listed below the sales volume for the month is $10,000.

What's a good rate on a mercahnt account

What’s a good rate on a Merchant Account?

Analysis of these two graphs tell us a couple of things. If your business has a low average ticket then savings are most abundant through lowering your per transaction cost. On the other side, as your average ticket grows (great than around $80) savings are going to be greatest through a reduction in the percentage component of your overall rate.

Knowing how your average ticket amount affects your total processing cost is helpful when considering a merchant services proposal. This is a very good example of why shopping for the lowest advertised rate will not always result in the lowest processing costs.

Tags: Payment Processing, Good Rate On a Merchant Account

Business capital without a loan? A cash advance may be the answer!

Posted by Alex Neir on Tue, September 21, 2010 @ 02:42 PM
merchant credit card acash advance

The lending community has tightened up considerably in the last few years making it extremely difficult to access additional business capital unless your business has large cash reserves.  Wouldn’t it be nice if you could leverage your sales to secure an advance of cash instead of relying on traditional lending guidelines and requirements?

A merchant credit card cash advance provides working capital for your business secured by a portion of your future credit card receipts. The guidelines for a merchant credit card cash advance approval differ from a traditional loan as a merchant credit card cash advance is approved based on the history of receipts not on credit and collateral. These facts make it much easier for a small to medium sized business to attain the capitol necessary to grow the business.

Traditional underwriting requirements for a merchant credit card cash advance are as follows:

  • 500 FICO score or better
  • $5000/ month minimum processing
  • Average retail ticket less then $600
  • 15 batches / month
  • Bankruptcies discharged for at least 1 year
  • In business for at lease one year

Additional benefits include:

  • Advance is invisible: Advance does not show through the credit reporting agencies as a loan or line of credit
  • Large advance amounts: Up to $250,000
  • Repayment is automatic: A fixed percent of each future sale is directly debited
  • You don’t pay unless you get paid!

 Interested in getting pre-approved for a merchant credit card cash advance? Our underwriting is fast and easy!

Tags: Merchant Cash Advance, Merchant Credit Card Cash Advance, Cash Advance

When is a merchant account better than PayPal?

Posted by Alex Neir on Tue, September 14, 2010 @ 03:28 PM

When is a merchant account better than PayPal?

When is a merchant account better than PayPal
This is a common question that most businesses struggle with when deciding to add payment processing to a web site. When should a PayPal account be utilized and when does it make sense to move to a merchant account?

First we need to look at the typical charges associated with a PayPal account and merchant account. To accept payments over the internet you need a payment gateway and a payment processing account. The payment gateway’s job is to capture the cardholder information from the business website, encrypt it and send it to the payment processing account.  The payment processing account then authorizes, settles and deposits the funds into the business bank account. PayPal combines these services into one fee structure. The typical payment processor will split the two charges out. Both are represented below.


Set-Up Fee

Monthly Fee


Transaction Fee

Merchant Acct















Now when examining these costs they don’t have much relevance unless we look at the costs as a percentage of sales. I have calculated the cost (as a percentage of sales) at various monthly sales volumes with a sales price of $25.

When is a merchant account better than PayPal

After analysis the answer to our question “When is a merchant account better than PayPal?” becomes clear:

  • On paper, PayPal looks to be a very cost effective solution and certainly is if you’re monthly sales volume is below $2,000 a month.
  • A merchant account is better than PayPal when your monthly sales volume exceeds $2,000 a month

Now our analysis up to this point has been an examination of direct purchase costs.  We need to also look at the cost savings in terms of ease of use and time.


  • PayPal has a delay in depositing sales into the business bank account and can place a hold on the money at any time without notification
  • PayPal does not allow access to card holder information including the credit card number
  • PayPal’s shopping cart is vey basic and can not handle shipping charges with any sophistication and offers no tax calculation.

Merchant Account

  • The payment gateway allows integration with most commercially available shopping carts. This allows your business the freedom to select a shopping cart that has the right features and functionality for your check out process
  • Allows your business to tailor the ordering approach to your customers, therefor maximizing sales
  • Allows for taxes and shipping to be calculated based on business rules
  • Allows complete control of customer information for entry into a marketing and sales database
  • Disclosure of the card holder’s information including the ability to edit the credit card number for easier refunds and chargeback investigation
  • Offers more freedom to manage your business

In conclusion, a merchant account is better than PayPal if your business if transacting more than $2,000 a month in sales. In addition a merchant account is a better solution if you require more flexibility and freedom to tailor the shopping experience to your specific business needs.

Time to open a merchant account? Download our free guide to avoid costly mistakes.

Tags: Payment Gateway, Maxx Payment Gateway, PayPal Comparison, Payment Processing