To see Amway, MonaVie, and Herbalife side by side with AT&T, GoDaddy and Target is a wonderful step forward for network marketers everywhere. Not only does it bring our company names into the public eye; it legitimizes our business model through association with these major sports organizations.

But with this new exposure comes new responsibilities. We must now conduct our business with the legitimacy and integrity that such efforts by our parent companies demand, otherwise we undermine these efforts. Let us all take advantage of this opportunity to obliterate the negative perceptions of network marketing and portray it as the true business it is.

To start off, I talked to a number of traditional merchant account providers that cater to online transactions. They all offer the same services essentially: the ability to take credit card payments over the internet through a gateway. Most of these companies have monthly fees for maintaining the account and a monthly minimum of transaction fees.

The account maintenance fees will be called a “statement fee” (this provides a paper account statement) which averaged $10, and a gateway fee (which is the charge for the “gateway” to the actual system that runs the card) which averaged $15. So, right off the bat, it costs $25 per month on average just to have the account.

Then you have the actual per transaction fees. Merchant account providers will call that the “discount rate”. The best I could find for internet processors was 2.1% plus $0.25 per transaction. The average was 2.5% plus $0.25. And this rate could go as high as 4.9% depending upon the merchant account provider’s “risk assessment” of your particular business model.

Add to that the monthly minimum transaction fees the provider expects (which averaged $25 per month), and the end result is it will cost you $50 per month minimum to have a merchant account, and that will be charged whether or not you process any credit card transactions that month.

Then I took a look at PayPal. They have a number of different services for individuals to process credit card payments. Their discount rate is at worst 2.9% + $0.30 and at best 2.1% + $0.30. Now that is higher than the average merchant account, but there are no monthly fees.

So I set about to comparing these rates to see which is cheaper given monthly revenue and average transaction amount. These comparisons are based upon a discount rate of 2.9% + $0.30 for PayPal and 2.5% + $0.25 with a $25 monthly account fee and a minimum transaction fee total of $25 for a Merchant Account.

If you did just one transaction a month, it would have to be $6237.50 for PayPal to be more expensive. But few people are going to have just one transaction in that dollar range per month, particularly people selling $25 ebooks and monthly memberships of $49.99.

So, below are some charts which assume an average sale of $5, $25, and $100. The blue line is the total PayPal fee and the red is for the merchant account:

PayPal vs Merchant Account $5 Average Sale

PayPal vs Merchant Account $25 Average Sale

PayPal vs Merchant Account $100 Average Sale

As seen above, assuming your average sale is $5, you must be doing at least $2000 of credit card transactions per month for PayPal to be more expensive than a merchant account. And as your average sale amount goes up, so does the monthly volume necessary for PayPal’s fees to exceed those of a traditional merchant account.

But an interesting thing to note is that in all three examples, PayPal becomes more expensive once the total transaction fees get in the $150 to $200 range.

I have included the PayPal vs Merchant Account Fee Comparison spreadsheet I used to make these calculations. Just put in the discount rate, per transaction fee, and monthly account fee quoted to you and watch the graphs change to reflect your quote.

I wish you the best in your business.

Please leave a comment. I love a good discussion!

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