Wednesday, August 8, 2012

Doing the Numbers on Credit Card Processing

My contract with the oh-so-crappy credit card processor, TransFirst is expired! All I can say is "YAY!"  I had originally thought I would return to Costco Merchant Processing. They were exactly what they promised: fees clearly stated up front and never came up with "charges-charges" like TransFirst did! There were months where half my earnings went to that shyster company!

But in doing the math, I realize my business is not what it was when I started. And, I have more and more in-person sales at shows and classes than I did in the beginning. Yet, I cannot afford to have two "gateways" or merchant accounts.

I signed up for square and then realized that Paypal HERE is just a few pennies cheaper (and in my world, pennies MATTER!). Plus, I'm familiar with Paypal. The money is there immediately. But still, that 3.5% for my mail orders seems high!

I can pay a cheaper amount by diverting my web customers to paypal directly... 2.9% + .30 transaction fee... which on a $30 sale saves me 3 cents! Hardly worth paying a web-developer for!

But the fact that Costco "seemed" so much cheaper kept bugging me. When that happens there's nothing to do but sit down and do the math!

For comparison:

Costco  1.99% on keyed in transactions + 25 cents per transaction. Costco also has a monthly fee of $20.
Paypal Here 3.5% / keyed transaction + 15 cents per. No monthly fee.

I started with what I wish I made: 4K a month. I guestimated 80 transactions.  Using those numbers, Costco would cost 119.60 vs. Paypal Here's 152.00. But... I don't make anywhere near that!

So I put in 1750 and 70 transactions. Here the prices were close: Costco came out to 72.33  vs. Paypal's 71.25

I upped it a bit to 2000 a month and 70 transactions... and Paypal edges ahead to 80.50 vs. Costco's 77.30.

Now I know that somewhere between 1750 and 2K a month, I need to get a cheaper processor. While it's nice to have goals, I haven't seen that kind of dough in five years.  Anyone wanna buy a swiper??? ;-)


Mandee said...

I use square. I was going to switch you paypal, but the paypal reader app does not work on older iphones. So, until I get a new phone, I will keep my square.

Ariella Kirtley said...

Thanks for the comparison! I haven't started selling at shows yet, but I think I'm going to go with Paypal to start with at least. Perhaps if I start doing high-volume in person sales one day it will be worth it.

Bill Guest said...

maybe if I do some shows I can do this!

Linda Blatchford said...

I use ProPay at shows and on Artfire if people want it. It has an annual fee, but most people pay with PayPal.

I have Square and just got a new phone, so I might try that for shows. Not sure yet.

Lori Bergmann said...

I LOVE using the Square at all my local shows and so far, I haven't had any problems at all with it. I've heard about the new PayPal gizmo, but haven't seen or tried it out yet. Either way, don't forgot to factor in the extra sales you make when your customers hear they can use a credit card instead of whatever cash limit they have! ;-D

* said...

Unique Cozy Treasures- I love Square and usually Paypal works good. I don't think paypal has sent out their swipe app yet. Im still waiting for it to arrive.

MagicByLeah said...

Interesting break-down and comparison.
I build the processing fees into the cost of my item using my pricing calculator.
I have yet to apply for a CC accepter and reader, thanks for reminding me ;)

Dorene said...

I too use the square and it works well for me. It's always important to shop around.

IsabellesAttic said...

definitely a lot to thing about.

Anonymous said...

That's a lot of numbers, I hope you have worked out what is best for you and what works out intended.