PayPal vs Merchant Account/Payment Gateway
I've been around the ecommerce world quite a few times now, from the old days of Agora, to osCommerce, to Zen-Cart, Cube Cart and a dozen other derivatives. And eCommerce is great to play around with, but the bottom line is about making money. In order to make money, you've got to receive it, in the form of credit card processing.
If you have a brand new business and a brand new shopping cart, PayPal is probably the quickest and easiest way to accept credit card payments. Unfortunately, using PayPal exclusively adds a few additional pages to a customer's checkout, as they have to go through your checkout process and then are re-directed to PayPal's website, and they have to go through a couple more pages there to make payment. When considering the additional length PayPal adds to a checkout, and the slightly higher than industry standard PayPal charges per transaction, at some point it just makes more sense to get your own merchant accounts.
Given a choice between paying with PayPal, or paying with a credit card right on your website, customers will almost always choose to pay with a credit card on your site. In order to accept credit cards on your site, you'll need a traditional merchant accounts and payment gateway. The merchant account is like a special bank account that only collects the money from your transactions, and then once per day will deposit all the funds in your regular bank account. The payment gateway is the web API that connects your website to your merchant account. My personal favorite payment gateway is Authorize.net. Usually, when you open a merchant account with a bank, you can get a payment gateway for free, or at a discounted rate. Fees for a merchant account are usually about 2.25%-2.50% of the transaction price, plus around $0.25 per transaction. There's also a monthly fee of around $25-$30 per month for processing and clerical work. That comes in a little lower than PayPal's 2.9% processing, and if you are processing thousands of dollars per month, it can save you quite a bit of money, plus you won't lose customers to the additional length of the checkout process. Not to mention that being able to accept credit cards on your site just looks a little more professional.
