Dotty Scott explains when to switch from PayPal or Stripe to a merchant processor, typically once you're doing $2,500 a month. Watch for hidden fees that can creep up to 5.5% and check your statements monthly to catch them.
Are you a solopreneur, a small business owner who just doesn't understand the whole concept of merchant processing? I've been there. No one to explain it to you because no one ever explained it to, to you in simple form. So because I have done lots of in-person networking when I started my business over 15 to 20 years ago. I know lots of merchant processor brokers, and that just simply means that they represent several companies. I've always asked them, when is the ideal time for a small business owner to get a real merchant processor? Because according to them, like PayPal and Stripe and those, they're not real. And the consensus is when the business is consistently doing $2,500 per month, every single month. That's when it will behoof you, price-wise, to start shopping. If you're a super small business and people pay you in cash, people pay you in checks, you don't have everything online, and you do minimal credit card processing. Use PayPal, Stripe, Google Pay, Venmo, Zelle, any of those kinds of things. Um, once you either have a subscription service or you're consistently over that $2,500 per month mark, then you want to look into a real merchant processor. And there's hundreds, if not thousands. Of them out there. Here's the thing. When you're going with one of these online places, they charge you anywhere from 3 to 4% of your price of your product. And that's their fee. A real merchant processor has a lot more fees. So they will say, oh, we'll get that percentage down to between 1 and 2%, depending on the type of cards that are used. They'll tell you that debit cards are, I think, cheaper to use. The reward cards have a higher fee associated with them. All of these different things. So the average is going to be somewhere around 2%, which sounds cheaper than what PayPal and Google Pay and all these others are charging you. But what they don't tell you is they have an annual PCI compliance fee. They have a whole bunch of other per-transaction fees and a bunch of other fees that have these weird names. You don't even know what they are, but they apply. And so when you add all those up, that's why they're telling you, you need to be doing at least $2,500 to even break even on the differences in the fees. So. It's one of those things that's pretty sketch as far as I'm concerned. However, as a business owner, you have to have the ability to take cards, especially this day and age. There's a few contractors I know that don't, but for the most part, you pretty much have to, especially if you're doing business online. Last year, 95%, I believe the total was. Of my customers paid me with a credit card. So it's not optional anymore. Now, the other thing you want to watch out for is even though you're in a contract with them, they're not really in a contract with you. Hmm. Like Comcast and all these other companies. They want to raise their fees, they can, even though you can't get out of your contract with them. I was with a company, I won't tell you which one. For many years, probably 8-ish years. And I started between that 1% and 2%. Okay. When I did my math at the end of the year last year, uh, so 2023, that was all the way up to 5.5% that I was paying out of every transaction to have the ability to take credit cards. As a small business, 5.5% of all of my transactions, it adds up to a lot of money that should be in my pocket. So even though you sign up for a deal at 1 to 2%, keep an eye on it because they will sneak it up on you and you won't even know it. And this particular company didn't even send me an itemized list, what the transactions were, anything like that. I've since switched and I'm really happy that I have, but I'm still going to, I've learned my lesson. I'm still going to monitor every month. And then if it starts creeping up again, I'm going to be more proactive about being on the phone and asking them, hey, what's going on? Can we fix this? I hope you've learned something from this that you can use in your own business. For more just general business tips like this, go ahead and subscribe and you'll be notified whenever I post a new video.
