Paypal, Google Checkout or Bank Terminal

When a person, group or small company opens a new business whether it’s online or a brick and mortar store they usually think about how they are going to display their products, customer service, sales, how to make the store look pretty and inviting, and how to attract customers. One of the last things they consider is payment processors.

The choices are a little intimidating to the new business person that has never been involved in the seller side of transactions. They look at the costs of a terminal and the monthly fixed charges from a bank which frightens them a little. Then they consider online options like Paypal, Google Checkout, Clickbank, or others. They usually have some experience with the first three as they may have used them as a customer.

They look at the charges which are not that much different from the bank, since they all charge a fixed “ticket” fee and a percentage of the transaction fee. Then they signup as a merchant and generally do not read the “Terms of Service” which are usually written by lawyers for lawyers.

On the surface these payment processors are not that different, but when you “raise the hood” they are as different as night is from day. Unfortunately, to “raise the hood” means that you have probably had a problem with a customer and the payment processor is involved. Before this happens to you let’s look at how Paypal and Google Checkout handle the problem, before, during and after the problem.

When you sign up as a merchant at Paypal or Google Checkout you agree to their “Terms of Service” which you should have read. The signup difference between the two is significant as Google Checkout allows you to place your “Refund / Return Policy” and a link to that policy within their system. This allows your policies to become part of the transaction. Paypal does not allow this and totally over rules your policies.

If you are selling goods especially tangible that have significant price points, you should want your “Refund / Return Policy” considered into the transaction. Most Paypal members are aware that Paypal will do a “chargeback” to the merchant at a drop of a hat. This is evidenced by many conversations in forums and some use this to commit fraud. When this happens you may get a product returned that is used, damaged and not saleable plus have the total loss of the transaction including shipping. This means that your business can no longer sell that item, can not return the item to the manufacturer, and has the total loss of the transaction plus shipping charges. For an established business that is not a serious problem, but for new business if the price is big enough it could cause devastating harm to the business.

Sure you could take the customer that committed fraud to court, but that requires litigation and an attorney in their geographic area. Plus the court costs, attorney fees, etc which do add up significantly and generally becomes cost prohibitive. You may even win a judgment in court, but collecting that judgment is another thing all together.

All of the payment processors are required to have a resolution department, but Paypal severely cripples the merchant as their system accepts only 2000 characters of input and they state “they will ask for other files if needed”. However they don’t ask and you are not allowed to send them files as their computer system rejects file attachments. Your only choice is to convert your documentation to another form like a pdf and host it on your site in a hidden folder, then supply this link to Paypal. They do retrieve the files, but rarely ever consider them or the information within them in the decision process. You are fighting an uphill battle with Paypal as they are pro customer.

There is one other major difference that needs to be considered, that is the transfer of monies on account. Google checkout transfers money to your bank automatically every 10 days as a new merchant until they have a track record and then will do it more frequently. Paypal has limits that new merchants are not allowed to withdraw over $500.00 every 30 days. When they change this is discretionary. Additionally any monies Paypal holds of merchants beyond this amount it is not known whether they are segregated or not and whether Paypal hypothecates these funds for any other income generation to Paypal, or any other use. Some would not consider this a problem, but if you are one of those please do your research on how the 240 year old company, MF Global failed and what it has cost their customers.

Before this happens to you, consider carefully how big of a loss your business can accept before it becomes a problem. Also consider whether you want your policies as a part of the transaction. Then make your decision of which payment processor is right for you.

JD Durham is a World Class Technician, an Automotive Hall of Fame honoree with 45 years experience in the automotive service and repair industry and a staff writer. Visit Straight Talk Automotive for scan tool obd2 diagnostic, and obd2 scan tool software at fantastic pricing.