Default HubSpot Blog

Current Articles | RSS Feed RSS Feed

Square Up and PayPal are Payment Aggregators | Benefits and Drawbacks

Posted by Alex Neir on Fri, October 19, 2012 @ 01:56 PM
Payment Aggregator
First let’s discuss what a payment aggregator is. A payment aggregator establishes a merchant account and then lets other businesses accept credit card payments and bank transfers on the aggregators account. The payment aggregator facilitates the credit card transaction or bank transfer on behalf of the business. The business is then paid by the aggregator for the completed transactions.

The benefit of using an aggregator’s account to facilitate electronic payments (Square Up or PayPal) include:

  1. Fewer requirements for establishing the account. Most aggregators require only simple contact information and rarely require any financial documentation or credit information.
  2. Simplicity of set up.  Most of the time the account can be applied for and set up immediately.
  3. Ease of use. Most aggregators have identified a niche market and have simplified their system to accommodate their target market. For example Square Up is ideal for low volume mobile merchants that want to achieve a swiped card rate. PayPal’s niche is low volume internet businesses that want a simplified payment processing solution for website stores.
  4. Cheap. Most aggregators pricing, for facilitating electronic payments, is less expensive than a traditional merchant account up to a certain volume level. At what volume should you switch off a Square Up account? At what volume should you switch off a PayPal account?

Drawback of using an aggregator’s account to facilitate electronic payments (Square Up or PayPal) include:

  1. Money is not your money. The business receives a payment from the aggregator. The funds collected from customer’s credit card transactions or bank transfers are the property of the aggregator. The aggregator then makes a payment, equal to the total received from all the transactions, back to the business. Less fees of course. Now these businesses would not be in business long if they withheld funds from businesses that use their account. But it is very important to know that if you violate your terms of agreement they can hold your funds indefinitely. You don’t own that money.
  2.  Expensive at higher volume levels. Once your monthly volume exceeds a predetermined level, the cost associated with using an payment aggregators service is more than a traditional merchant account. When using Square Up, once your volume exceeds $4,300 it is cheaper to establish your own merchant account. When using Paypal, once you exceed $2,000 a month you are better off with your own merchant account.
Click me

Tags: Merchant Account, Payment Aggregator, PayPal Comparison, Merchant Account better than Square Up, Square Credit Card Reader

What’s Best - PayPal, Square Up or a Merchant Account?

Posted by Alex Neir on Fri, July 29, 2011 @ 10:56 AM
Credit Card Processing Solutions

What’s Best - PayPal, Square Up or a Merchant Account?

Based on analysis completed over the last few months we have developed an easy to follow guide which will help your business determine the best credit card processing solution given your specific needs. Each credit card processing solution has strengths for specific situations.

When considering which credit card processing solution is the best it is important to start by asking 2 questions:

  1. Is your business conducting sales face to face or over the internet?
  2. What is the average credit card volume on a monthly basis?

With answers to these 2 questions we are able to guide you to the perfect credit card processing solution for your business.

Is your business conducting sales face to face or over the internet?

If you are conducting face to face sales it makes more sense to consider the Square Up solution or a merchant account. The reason, Square Up and a merchant account offer your business the ability to swipe the customer’s credit card. This function lowers the credit card processing rates dramatically. PayPal does not offer a swipe solution so it is not a good fit for face to face sales.

If you are conducting sales over the internet, you should consider PayPal or a Merchant Account. The reason, PayPal and a Merchant Account offer a payment gateway that can be used to connect your businesses website to a credit card processing platform. Square Up does not offer a payment gateway so it is not a good fit for internet based sales.

What is the average credit card volume on a monthly basis?

Now that we have determined the best solutions given the manner in which the sale is conducted, we will now look at the total monthly volume to narrow our selection even further.

For face to face sales with an average monthly sales volume below $4,300 the best solution is Square Up. Square Up’s fee structure is set up to be very cost effective for face to face sales under $4,300 a month. When the sales volume exceeds $4,300 a month then an actual Merchant Account becomes more cost effective than Square Up.

For internet sales with an average monthly sales volume below $2,000 the best solution is PayPal. PayPal’s fee structure is set up to be very cost effective for internet or ecommerce sites with sales under $2,000 a month. When the sales volume exceeds $2,000 a month then an actual Merchant Account becomes more cost effective than PayPal

Credit Card Processing Solutions2

Tags: PayPal Comparison, Credit Card Processing Solutions, Merchant Account better than Square Up

When is an Actual Merchant Account Better Than Square Up

Posted by Alex Neir on Thu, July 21, 2011 @ 12:44 PM
Merchant Account Better Than Square Up

When is an Actual Merchant Account better than Square Up

When is an Actual Merchant Account better than Square Up? The short answer, when your sales total more than $4,300 a month.

The Square Up mobile processing solution is a great deal for very small businesses that are transacting less than $4,300 a month. Square Up advertises no monthly fees with a qualified rate of 2.75% combined with a non-qualified rate of 3.50% and $0.15 per transaction. This account set up is very attractive especially for businesses that are mobile and have relatively small sales volume.

So when does it make sense to set up an actual merchant account? There are a few factors to consider.

  1. Square Up’s $1,000 weekly cap
  2. A merchant account is less expensive at a monthly sales volume above $4,300

Square Up’s $1,000 weekly cap – Square Up imposes a weekly cap of $1,000 in card-not-present sales. If the account exceeds the $1,000 cap all monies that exceed the $1,000 cap are held for 30 days.

A merchant account is less expensive at a monthly sales volume above $4,300 – When we look at the percentage of total cost for both an actual merchant account and Square Up account we see that the total cost for a merchant account drops below 2.75% when sales exceed $4,300 for the month.

 Merchant Account Better than Square UP

This analysis assumes the following:

  • Average sale amount of $25
  • Total monthly service fees for the merchant account total $19.00 a month
  • Total monthly service fees for Squared Up total $0.00 a month
  • Per transaction fee for the merchant account is $0.20
  • Per transaction fee for Squared Up is $0.00
  • Qualified rate for the merchant account is 1.49%
  • Qualified rate for Squared Up is 2.75%

Another important consideration when considering a switch from Squared Up to a merchant account is to make sure the new solution has the same mobile credit card processing capability.

If you are interested in how this information was compiled please drop me an email at alex@maxxmerchantservices.com 

Tags: Merchant Account, Merchant Account better than Square Up, Square Credit Card Reader