When PayPal was in its formative stages, I was battling the process of getting a merchant account that would allow me to accept credit cards on my website. Holy mother of a wildebeest - that was a painful experience and since then when people ask about the ease of using PayPal to accept payments compared to taking credit cards, I had been advising going with PayPal. Had been, until I sat down and did some cost calculations.

Compare the costs of $10,000 worth of transactions using credit card processing and PayPal. This ecommerce processing account costs 2.09% of the transaction amount, which means $209 in transaction fees. PayPal is 2.5% (plus $.30 a transaction, but we will ignore that for the moment) for monthly transactions up to $10,000 - giving us a total cost of $250 a month. Over a year, the monthly difference of $250 - $209 = $41 x 12 = $492. Do I have your attention now?

The difference is even worse when you are dealing with a low margin, high volume sale - ouch! Thirty cents a transaction on a $10 item for $10,000 is another $300 in transaction costs a month - that is $3,600 a year!

A free merchant account might be a little more effort than getting PayPal set up, but the long-term costs that will continue to eat at your bottom line month after month. If you website needs to accept credit cards makes that extra time an investment that will yield a good return.