"Buddy", Can You Spare $.30 plus 2.2%?
Written: Jan 06 '01
|
Product Rating:
|
|
|
Pros: Fast, reliable, accurate, convenient service
Cons: It charges auctioneers and website marketers a fee, while YahooPay Direct will serve them for free.
|
|
|
| frazzledspice's Full Review: PayPal |
443 reviews have been written about PayPal's online payment service, but, as time has passed, the tone of these reviews has changed from "excited" to "angry", even "betrayed."
I chalk it up to semantics. PayPal tried to market itself as an auctioneer's friend when what it really wanted to be, all along, was his merchant processor.
And, in PayPal's early days, what a pal it was. It gave customers sign-up bonuses and $10 referral fees for each new customer they recommended. It allowed them to transfer and receive payments without ever paying transaction charges.
It carved itself a niche in the rapidly growing internet auction economy, becoming the payment vehicle of choice for most auction buyers and sellers.
As its button became a fixture on auction seller's pages, it lowered its sign-on and referral bonuses to $5.
A few months later, it announced that all PayPal customers who used the service for business purposes would have to sign up for new, fee-based business accounts. No one signed up.
The auctioneers' "pal" started coaxing, offering to cover posting fees at Ebay for a month for everyone signing up for the business accounts.
It didn't work.
The auctioneers' "pal" started laying guilt trips on its "buddies", saying that they were just plain wrong if they were using the site for business purposes under their personal accounts.
Few consciences were tweaked.
The auctioneers' "pal" started threatening, finally issuing an ultimatum that all customers who accepted $500 in payments that had been transferred in by credit card over a six-month period would be required to sign up for business or "premier" accounts.
It didn't work, or at least not quickly enough for PayPal.
Now everyone who receives $100 in payments transferred in via credit card in a one month period is required to sign up for a business or "premier" account.
PayPal's transition from auctioneers' pal to merchant processor is complete, even if its name remains somewhat misleading.
Pals don't charge pals merchant fees.
"Buddy", Can You Spare $.30 plus 2.2%?
Customers are never charged a fee for paying bills via PayPal.
Payment recipients whose activity level requires them to sign up for Premier accounts are charged fees according to the following scale:
Payments of $15 or less cost $.30, regardless of whether the payor funded the purchase via credit card, PayPal balance, or bank account.
Payments of $15 or more cost $.30 plus 1.6%, with a maximum charge of $5.00, if the payment is funded via a PayPal balance or bank account.
Payments of $15 or more cost $.30 plus 2.2% with no maximum charge if the payment is funded via credit card.
A daily sweep, transferring funds to a premier customer's bank account, can be made for $.35 a transaction.
PayPal encourages both business (Premier) and personal customers to keep money in their accounts by offering money market interest rates, currently 5.2%, on their account balances.
Business customers can place PayPal buttons both on auction sites, such as Ebay, and on their websites, and can accept credit card payments via PayPal on both.
Only Premier account holders can receive $5 referral fees for new members.
No Fair?
Bricks and mortar stores have to pay merchant fees to the bank which provides them with credit card acceptance capability.
And, despite these fees, merchant processing is a losing proposition for most banks, who make most of their income from the interest paid by balance-carrying customers.
In its early days, PayPal was hoping to cover the cost of accepting credit card transfers as a merchant through the interest it accrued on customer balances. Obviously, it didn't work.
Most auctioneers and website entrepreneurs will not make enough money on the 5.2% money market balance to offset their higher sales overhead, but it's unrealistic for them to expect PayPal to lose money servicing their accounts.
With the postage increases hitting on January 7, they have a small window of opportunity to pass a little bit of that overhead to their customers. They can adjust their shipping charges to cover the increased postage costs as well as some of their "merchant processing" expenses. Priority mail is going up from $3.20 to $3.50. If the auctioneer or website merchant raises shipping costs to $3.75, few customers will balk. After all, when they use PayPal to send payments, they save $.34 in postage and get their merchandise more quickly.
Our Family Has "His and Her" PayPal Accounts
I have a personal PayPal account, and it works well for me. I opened it when I joined Write for Cash, which pays writers for their articles via PayPal. I received one transfer a month from Write for Cash, based on the number of articles I'd written, and I promptly filed for an electronic transfer to my checking account. Because Write for Cash is not funding my payments via credit card, I don't have to sign up for a Premier account, regardless of how much I am paid.
My account balance earns 5.2% interest, and I received a $5.00 bonus for registering my bank account with PayPal.
My husband has just signed up for a PayPal Premier account, somewhat reluctantly. He is a book collector who buys and sells on Ebay. He spends as much as he sells, and his account balance never gets very high. This month, he went over the $100 per month limit, and was given the choice of refusing the last payment that had been authorized by credit card and demanding a check or money order, or signing up for the business account. After considerable grumbling, he signed up.
Despite the grumbling, he still feels there are advantages to using PayPal. As a buyer, he saves postage and occasional money order fees. His money is transferred immediately and he gets his purchase more quickly.
As a seller, he receives his money more quickly and doesn't have to worry about checks being returned for insufficient funds. He also feels that, because so many buyers like to use PayPal, they are more inclined to bid on auctions with PayPal buttons displayed.
PayPal's ability to send and accept funds internationally is an additional plus.
PayPal Has Lost One "Free" Rival and Gained Another
PayPlace, an online payment system competitor, has closed December 1.
But internet giant Yahoo has entered into the online payment market, offering a program, YahooPayDirect, which is free to both buyers and sellers (although it reserves the right to charge for its service in the future.)
YahooPayDirect, like PayPal, offers auction and website buttons, funding of accounts through credit cards or electronic bank transfers, and the ability to withdraw money from an account via electronic transfer requests. Members can send out group billings for items such as membership dues. It is not offering any signup referral bonuses, although all registrants are entered into a $30,000 sweepstakes.
It can't accept international payments, and does not offer interest on member accounts.
To compare YahooPayDirect to PayPal, you can access its website at:
http://www.paydirect.yahoo.com
Like Many Dot.Com's, PayPal Was a "Fair Weather Friend"
It's getting harder and harder for web surfers to find the perks, discounts, freebies, and giveaways that were so abundant on the net in its early, golden years.
PayPal's push for profitability has made it less "user-friendly". No longer a "pal", it's now out to share some of its members' revenues.
It still offers a valuable service to most of its customers, although it is up to them to decide whether that service is still a good value.
Hopefully, the entry of internet giant Yahoo into the online payment arena will restore some competition to the market and offer auction sellers and marketers a safe, viable alternative to their "fair-weather friend."
Recommended:
Yes
|
|
|
|
|
- Add to My Yahoo!: 
- Add to Google Homepage: 
© 1999-2009 Shopping.com, Inc.